Home Owners to Lawmakers: Do More to Help Housing
The government isn’t doing enough to help home owners at risk of default, foreclosure, and underwater on their homes, a majority of Americans say in the Home Horizons 2012 study, a survey conducted by Yahoo! Real Estate of 1,500 current and aspiring home owners.
Fifty-one percent of home owners say the government needs to pass more legislation to help home owners who are at risk of losing their house. About two-thirds of Americans surveyed say the government needs to offer more assistance like low-cost loans to help home owners more.
Four out of five adults polled say the 2012 presidential election will have a small or large influence on the housing market, with 43 percent predicting it will have a large impact. However, one-third of those surveyed doubt either party — Republican or Democrat — will have either a positive or negative impact on the real estate market.
“A large-scale government policy that’s going to fix all of this — no one has seen such a thing,” Stan Humphries, chief economist at Zillow, told Yahoo! Real Estate. “Stabilization in home prices and then a slow upward movement in prices to work down negative equity — that’s a multiyear affair.”
Source: “Yahoo! Study: Home Owners Want Political Action,” Yahoo! Real Estate (Dec. 12, 2011)
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Court: Owner Never had Legal Ownership of Foreclosure
The Supreme Court in Massachusetts ruled that a home owner who had purchase a home in foreclosure did not have legal ownership of the property because the bank failed to properly process the title when originally foreclosing on it.
“The decision by the Supreme Judicial Court casts a cloud over the legal ownership of any properties in Massachusetts where banks didn’t properly convey title when foreclosing,” The Wall Street Journal notes in an article about the case. “The problem has gained attention nationwide because of banks’ use of ‘robo-signing’ and other dubious practices that may have broken chains of title on foreclosures.”
The court’s ruling follows on the heels of an earlier court decision that had voided a foreclosure after banks couldn’t prove they owned the mortgage when it started the foreclosure process. The most recent “ruling took that decision one step further by finding that sales of bank-owned properties with clouded title were invalid, even after an unwitting third-party buyer later bought the bank-owned property,” The Wall Street Journal notes.
The case centered on a home purchase by Francis Bevilacquain 2006 of a foreclosure in Haverhill, Mass.
Any home owner who bought a home with a “tainted foreclosure in their chain [of title] is going to have to do something to give clean title” whenever selling or refinancing the home, Jeffrey Loeb, Bevilacqua’s attorney, told The Wall Street Journal. “That’s actually what’s scary. Most people don’t know they have this problem.”
Source: “State Rules on Foreclosure,” The Wall Street Journal (Oct. 19, 2011)
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Where Is Foreclosure Inventory the Highest?
Chicago has now emerged as the city with the nation’s largest inventory of foreclosed homes, taking the spot that has traditionally belonged to Miami, Los Angeles, and Phoenix since the housing crisis began, according to RealtyTrac.
Chicago now ranks first among the nation’s 20 largest metro areas for foreclosure inventories.
So what’s going on in Chicago to make it suddenly claim the title as No. 1? Housing experts say it’s from several factors, including foreclosure backlogs in courts and some have even blamed it on the stubbornness of banks there to lower prices far below the value of mortgage loans, which are causing homes to sit empty and linger on the market.
According to RealtyTrac, foreclosed properties are selling at a much slower pace in Chicago than other metro areas too (except for New York). In the first five months of the year, 4,004 foreclosed homes in Phoenix were sold each month. However, for comparison, in Chicago, there were only 1,697 foreclosed home sales during that time, and 762 in New York.
What’s more, Chicago’s inventory of foreclosed properties is also falling more slowly than other cities, which is taking its toll on home prices there, experts say.
The Top 3
According to RealtyTrac May 2011 data, here are the top three cities with the highest foreclosure inventories:
1. Chicago: 118,776 homes owned by bank or were in the process foreclosure
2. Los Angeles: 86,745
3. New York City: 84,600
Source: “Biggest Stock of Foreclosed Homes: Right Here,” The New York Times (July 8, 2011)
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Banks Face Foreclosure Practices Deadline
The Office of the Comptroller of the Currency has given all banks until Sept. 30 to conduct a self-assessment of its foreclosure practices.
The “self-assessment” request first came in consent orders given to 14 of the nation’s largest banks in April over a settlement into questionable foreclosure practices that had surfaced last fall. The consent orders called for mortgage servicers to hire a third party to review its foreclosure files to determine if home owners were harmed directly from any errors, sloppy, or incomplete paperwork.
The mortgage servicers include banking giants Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, among others. But the OCC now says that any bank that falls under its supervision, even those that did not sign the consent orders, must complete the self-assessment by Sept. 30, too.
“Banks that identify weaknesses in their foreclosure processes through the self-assessment should take immediate corrective action,” the OCC said. “Banks should determine if the weaknesses resulted in any financial harm to borrowers and provide remediation where appropriate.” The OCC says it will review the self-assessments and the corrective actions taken, as well as also make any determinations of financial harm to home owners.
Source: “OCC Directs Banks to Internally Assess Foreclosure Practices by Sept. 30,” HousingWire (June 30, 2011)
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Foreclosures Scored on Appreciation Potential
RealtyTrac, a foreclosure data resource, and SmartZip, an investment analytics company, are teaming up to offer HomeScore ratings for foreclosure properties.
The HomeScores allow buyers a different to size up bank-owned properties by providing information on the foreclosed home’s potential for above average price appreciation and below average costs. For example, properties that receive scores of 35 or above are considered good-to-excellent investments.
“This enables shoppers to get an independent assessment of the long-term value of foreclosures,” says Avi Gupta, SmartZip’s vice president of research and marketing. “Shoppers can also easily compare properties against each other, since HomeScore is a relative rating on a scale of 1 to 100.”
The scores will appear in the listing search results at RealtyTrac, and site visitors will also have the option of even sorting foreclosed property results based on HomeScore ranges.
Source: “RealtyTrac Teams Up With SmartZip,” Inman News (April 25, 2011)
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Banks Get Failing Grade in Foreclosure Handling
Banks continue to receive backlash for their handling of a flood of foreclosures across the country. A new report released this week by federal regulators finds that banks failed to do a good job in handling foreclosures and sometimes evicted home owners when they clearly should not have.
The problems were “significant and pervasive” and added up to “a pattern of misconduct and negligence,” according to the Federal Reserve. The Fed says it soon plans to announce monetary penalties against mortgage servicers.
The report revealed several cases “in which foreclosures should not have proceeded due to an intervening event or condition,” such as families in bankruptcy or home owners who were eligible for a loan modification or even in the process of doing a loan modification.
The report also noted that banks had inadequate and poorly-trained staffs and improperly submitted paperwork to the courts.
In response to the report, several mortgage servicers signed a consent agreement this week, agreeing to changes that include new oversight procedures of foreclosures and reimbursing home owners who were wrongly foreclosed upon. One of the servicers signing the agreement, JPMorgan Chase, says it would add up to 3,000 employees to meet the new regulatory procedures.
“The banks are going to have to do substantial work, bear substantial expense, to fix the problem,” says John Walsh, the acting comptroller of the currency.
About two million households are in foreclosure, and several million home owners have already lost their home to foreclosure.
More Penalties Coming
The banks still face punishment and settlement talks with other agencies. The state attorneys general are conducting their own probe into shoddy foreclosure procedures and working with the Obama administration to overhaul the foreclosure process to prevent future abuses.
Source: “Report Criticizes Banks for Handling of Mortgages,” The New York Times (April 14, 2011)
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Couple Accuses Bank of ‘Breaking and Entering’
A couple is accusing banking giant Chase of locking them out of their home and removing their personal property before a foreclosure was finalized.
Banks across the country have faced similar accusations. Lenders have argued they have the right to “secure” vacant properties they’ll soon own, but lawyers say it’s trespassing or breaking and entering when home owners still own the title of the property and the banks don’t yet.
In this most recent case, the Florida couple says they arrived home one night to find the locks had been changed and a sign posted on the window that said the home was being managed by Chase Home LLC. The couple, who said the house was to be sold in a foreclosure sale in a few weeks, say the bank didn’t give them a warning or notice of eviction.
The couple has accused the company’s representatives of removing the home’s appliances and the air conditioning unit as well as some of their personal belongings. Chase says the stove, refrigerator, and air conditioning unit were already missing when their representatives entered the house.
The couple’s mortgage has been in default since 2007, but court cases have prolonged the foreclosure since the couple filed for Chapter 7 bankruptcy in 2009.
Chase spokeswoman Nancy Norris says that Chase authorized “a vendor” to change the locks on the home after it “determined” the house was vacant.
“Before the property was secured we confirmed that the home was empty,” Norris told the Miami Daily Business Review. “The utilities were turned off … we took photographs on the day we secured the property and the home was in disarray.”
Source: “Chase Accused of ‘Breaking and Entering’ Couple’s Home; Banks Claim They Have Duty to ‘Secure’ Collateral,” Miami Daily Business Review (March 24, 2011)
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Celebrities Face Foreclosure Too
The rich and famous are finding they aren’t immune to foreclosure. In the last six months, actor Nicolas Cage, baseball legend Julius “Dr.J” Erving, and hip-hop artist Chamillionaire have gone through foreclosure proceedings, Reuters News reports.
Morgan Brennan of Forbes.com says strategic defaults are becoming more common among celebrities–that’s when a party walks away from a home because of its big loss in value, even though they have enough money to pay the mortgage.
That’s what Erving did. He said his Utah mansion was drastically underwater and so he stopped making his mortgage payments last fall on the home.
“All price points have been hit by the foreclosure crisis,” Brennan told Reuters News. “The rich and famous have not been excluded from that. There are a handful of people in the luxury real estate category that are experiencing foreclosures as well.”
Source: “Rich and Famous Also Face Foreclosures,” Reuters News (Feb. 24, 2011)
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Finding New Homes for Pets in Foreclosure
In the housing downturn, many home owners have not only had to leave their homes behind, but also their pets. In foreclosed properties, more pets are being found locked in basements, garages, or in backyards.
A new program, No Paws Left Behind, recently announced its 1,000th foreclosure animal rescue. The program rescues abandoned animals — everything from dogs and cats to llamas and pot-bellied pigs — and places them in “no kill” shelters until foster care can be arranged.
“Sadly, the current housing crisis has severely affected countless home owners creating a trickle down negative effect on helpless animals,” says Cheryl Lang, the founder of The No Paws Left Behind program and also CEO of Integrated Mortgage Solutions, a provider of REO property inspections. “During routine housing inspections, we frequently discover animals left behind in deplorable conditions with no food and at times inadequate shelter.”
Lang says they receive more than 20 calls a week across the nation regarding abandoned pets found in foreclosure properties.
Source: “National Non-Profit Committed to Helping the Silent Victims of America’s Foreclosure Crisis Hits Major Milestone,” PRNewswire.com (Jan. 10, 2011)
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Attorney Breaks Into Homes for Evicted Clients
Attorney Michael Pines fights foreclosures for his evicted clients in a very unconventional way. He advises his evicted clients to hire a locksmith and enter the vacant house illegally. The clients then squat in their homes while he defends their legal right to possession.
The lawyer admits to breaking into homes at least a half-dozen times on behalf of clients. And he’s gotten into plenty of trouble for his advice: Pines has been fined by a San Diego judge, arrested in Newport Beach, Calif., and threatened with contempt of court — and jail — in Ventura County, Calif.
But Pines says violating the law is necessary to force courts to examine how banks are doing business with distressed home owners.
Pines recently voiced his approach at entering the foreclosed home in open court at a hearing for his clients Jim and Danielle Earl, who had been evicted from their six-bedroom home.
“I’m going back there,” Pines declared in court. “And I hope I get arrested.”
George Lefcoe, a USC real estate law professor, says Pines violates professional ethics in advising clients to break the law. “What (his clients) are doing on his advice is not only going to prove costly to them and completely futile, it could lead to dangerous altercations with the true owners and law enforcement officers,” Lefcoe told the Chicago Tribune in an article about Pines.
Pines has been a lawyer for more than 30 years and has had his own foreclosure troubles. At least six of his properties are in foreclosure, and he owes banks more than $2 million. He filed for bankruptcy protection.
“I filed bankruptcy myself because I stopped paying,” Pines said. “I followed my own advice. I said I’m not going to let the banks steal from me.”
Source: “Foreclosure Hero or Villain? Attorney Who Was Baseball Star’s Lawyer Will Break Into Homes for Desperate Clients,” The Chicago Tribune (Jan. 31, 2011)
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Banks Lose Pivotal Foreclosure Case
A recent decision by the Massachusetts Supreme Judicial Court is expected to have sweeping implications for the nation’s banking industry when it comes to how they’ve approved foreclosures and may even invalidate thousands of foreclosures across the country.
The court, in affirming a lower court’s ruling, invalidated two mortgage foreclosure sales because the banks failed to prove the home owners actually owed the mortgages at the time of foreclosure.
In recent months, the industry has been under fire across the country for using “robo signing” to review foreclosure affidavits, a process in which low-level employees went through hundreds of foreclosure affidavits a day without verifying any of the documents. Such blanket procedures have hurt the banks’ ability to prove that they owned the mortgages.
In the Massachusetts case, the court found that the banks — who were not the original mortgagee — failed to show that they held the mortgages at the time of foreclosure, which called into question whether the foreclosure sale was valid.
“There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure,” wrote Justice Robert Cordy about the court’s decision. “Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order.”
Attorney Paul Collier III, who represents Antonio Ibanez, one of the home owners in the case, said the ruling stands to affect thousands of mortgages across the country.
“For home owners and foreclosures in general, it means that any mortgage foreclosure which was initiated by a securitized trust at a time when the trust had not obtained a mortgage assignment which gave it the lawful right to do so is void,” Collier told the Associated Press. “Those home owners, like Mr. Ibanez, still own the property.”
Source: “Highest Massachusetts Court Rules Against 2 Big Banks in Pivotal Mortgage Foreclosure Case,” Associated Press (Jan. 7, 2011)
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Foreclosure Inventory Rises, Rate Drops
The November Mortgage Monitor report released by Lender Processing Services shows that while the number of bank-owned homes continues to drop as loan servicers delay foreclosures in the wake of government investigations, delinquent loans are increasing.
Nearly 2.2 million loans are 90 days or more past due but are not yet in foreclosure. The report also shows that among the one-third of loans that are 90 days or more delinquent, borrowers have not made a payment in a year.
Foreclosure inventories also continued to rise for the fifth straight month as foreclosures continued and sales declined. The inventory of foreclosed properties consisting of jumbo loans was seven times higher than it was in January 2008, and six times higher for agency prime loans.
Other results from the report include:
· Total U.S. loan delinquency rate: 9.02 percent
· Total U.S. foreclosure inventory rate: 4.08 percent
· Total U.S. non-current loan rate: 13.10 percent
· States with most non-current loans: Florida, Nevada, Mississippi, Georgia, New Jersey
· States with fewest non-current loans: North Dakota, South Dakota, Alaska, Wyoming, Montana
Source: Lender Processing Services (12/27/2010)
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Big Banks Fixing Foreclosure Processes
Bank of America and J.P. Morgan Chase told the Senate Banking Committee on Tuesday that they were making changes in their foreclosure processes after reviews found areas that needed improvement.
Barbara DeSoer, president of Bank of America’s home loan business, said the company has set up a new form for creating foreclosure affidavits.These are documents that summarize the facts of a foreclosure case such as a borrower’s name and total amount owed.
Those documents, she said, “will be individually reviewed by the signer” and notarized. The company, she said is “carefully restarting” the foreclosure process.
The Congressional Oversight Panel, however, warned in a report Tuesday that the foreclosure document problems “may have concealed much deeper problems in the mortgage market that could potentially threaten financial stability.”
A Treasury spokesmen disputed that claim, saying that 11 federal agencies are investigating the issue and they don’t believe it represents a threat to the U.S. financial system.
Source: Associated Press, Alan Zibel (11/16/2010)
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Foreclosure Delays Provide an Underground Stimulus
The delays in the foreclosure process are giving what some people are calling a “stealth stimulus” to defaulting home owners who continue to live – or even rent out – their homes.
The subsidy is worth about $2.6 billion a month, according to an analysis by the Wall Street Journal. That’s about 0.25 percent of U.S. personal income and equivalent to what top earners receive from the Bush-era tax breaks.
Some defaulters are banking the money in hopes they will get a mortgage mortification, but most are just using the money for things like food, car payments, etc. Others are renting the properties out and making a few dollars.
Source: The Wall Street Journal, Mark Whitehouse (11/01/2010)
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Wells Fargo Says It Will Refile 55,000 Cases
Wells Fargo said Wednesday that it had made paperwork mistakes and it plans to refile foreclosure documents in 55,000 cases by mid-November, but the company said the mistakes were technical and it doesn’t plan to halt foreclosures.
Unlike other major lenders, Wells Fargo had previously refused to suspend foreclosures. It continued to maintain that the errors were inconsequential. “We don’t believe that there are instances in which the foreclosures would not have occurred otherwise,” said Teri Schrettenbrunner, a Wells Fargo spokeswoman.
In depositions, two Wells Fargo employees have said they signed large numbers of documents daily without verifying their accuracy.
Source; The Associated Press, Alan Zibel (10/27/2010)
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U.S. to Lenders: No Moratorium, But Fix Mess
The Federal Housing Finance Agency has responded to the foreclosure document crisis with a policy statement ordering lenders to ensure that paperwork is properly reviewed and signed.
For documents that do not meet the standards, lenders must collaborate with local lawyers to resolve any problems.
The policy statement dovetails with the Obama administration’s opposition to a nationwide foreclosure freeze due to concern that it would jeopardize the economy.
Source: Washington Post (10/14/10)
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Home Repos Set Record in September
REOs and repossessions set a record in the third quarter, online foreclosure marketer RealtyTrac said Thursday.
In September, repos hit 102,134, topping 100,000 for the first time. There were 347,420 total foreclosure filings in September, 3 percent higher than August and 1 percent higher than a year earlier.
During the third quarter, there were 930,437 foreclosure filings, up 4 percent compared to the second quarter, but 1 percent lower than the third quarter of 2009.
Nevada had the highest foreclosure rate for the forty-fifth straight month, followed by Arizona, Florida, California, and Idaho.
Source: Reuters News, Corbett B. Daly (10/14/2010)
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Foreclosure, REO Home Prices Rise
Average sale prices for homes in foreclosure and those owned by banks rose 1.6 percent in the second quarter compared to the first quarter and 6.1 percent year over year, according to RealtyTrac, a foreclosure marketing service.
The average price of these homes in the second quarter was $174,198 nationwide, but was significantly higher in California where the average price, according to RealtyTrac, was $256,833. These prices reflected homes sold by lenders or by homeowners who had received at least one notice of default.
About 24 percent of all properties sold in the second quarter were REOs and foreclosures. Their prices were on average 26 percent lower than those of homes not in foreclosure, RealtyTrac reported.
RealtyTrac Senior Vice President Rick Sharga projected that it would be the end of 2013 before the housing marked works its way through the foreclosure inventory.
Source: Los Angeles Times, Alejandro Lazo and Daily Finance, Hugh Collins (09/30/2010)
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CoreLogic Predicts Days On Market Could Double
The majority of the 3.3 million delinquent mortgages will end in foreclosure and that will drive down prices before year-end, CoreLogic analysts said Thursday.
CoreLogic also predicted that the additional inventory of foreclosed homes could double the time to sell from the current 11-month average.
“Given that the tax credit simply pulled demand forward, the distressed share is expected to rise … during the fall, when non-distressed seasonal sales begin to decline,” analysts said.
Source: Reuters News (09/16/2010)
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Foreclosure Hurts Values More Than Bankruptcy
Foreclosure reduces the value of a home by 27 percent on average, according to a new study from Harvard University and the Massachusetts Institute of Technology.
Other kinds of forced sales have less dramatic impacts, the study found.
An estate sale after an owner’s death reduces the price of the home by only 5 percent to 7 percent. A bankruptcy filing cuts the value by an average 3 percent.
Foreclosure discounts are especially large in neighborhoods that are low-priced already, researchers point out, apparently because of concerns over vandalism.
Source: The Wall Street Journal, Nick Timiraos (07/26/2010)
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More People Are Choosing to Rent
More than 76 percent of people say they would prefer to rent a home than buy one, up 5 percent from 2009, according to this year’s survey from the National Apartment Association.
The survey also calculated that 60 percent of renters plan to continue renting in 2011, with only 12 percent planning to buy a home in the next year.
Some 64 percent of renters cited having no responsibility for major repairs or maintenance as the primary reason they prefer to rent, followed by 33 percent who cited not being impacted by an unpredictable real estate market or susceptible to foreclosure.
Source: National Apartment Association (05/24/2010)
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Will Housing Feel a ‘Saw-Tooth’ Effect?
Some housing experts are predicting what one calls a “saw-tooth bottom” to the housing market driven by a shadow inventory that may include up to 4.5 million properties.
This issue isn’t just bank-owned homes that aren’t yet on the market, but sellers who would like to sell but fear they can’t. “These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there’s a hint of good news,” says Leslie Appleton-Young, chief economist for the California Association of REALTORS®.
This rush to sell drives prices back down — hence, the “saw-tooth” description.
Stan Humphries, chief economist for Zillow.com, describes the potential problem this way: “Prices go up; inventory rises, which sends prices down again. That plays out for three to five years of no appreciation. … Without price appreciation, it leaves more home owners in negative equity. That’s toxic. Any setback, like a job loss, they go into foreclosure.”
Source: CNNMoney.com, Les Christie (05/17/2010)
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Fannie Adds Incentive to Avoid Foreclosure
Beginning in July, Fannie Mae will allow financially troubled home owners to complete a “deed in lieu of foreclosure” or a short sale and be eligible to apply for a new Fannie-backed mortgage in two years.
Currently, borrowers who have completed a deed-in-lieu must wait four years to apply for a loan that Fannie will purchase. Home buyers who go through foreclosure must wait five years.
All these waiting periods can be reduced further, if the potential buyer can show extenuating circumstances. “We are beginning to think about post-recession, how you address borrowers who became unemployed through no fault of their own … and now deserve the right to re-enter the housing-finance system,” said Federal Housing Association Commissioner David Stevens.
Source: The Wall Street Journal, Nick Timiraos (04/26/2010)
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More Wealthy Home Owners Face Foreclosure
Houses costing more than $5 million will be part of the next foreclosure boom, according to a study by RealtyTrac for The Wall Street Journal.
In 2009, 1,312 homes costing more than $5 million faced foreclosure auctions. In February 2010 alone, 352 homes were on the auction block.
First American CoreLogic tracks 1,700 homes nationwide that have mortgages greater than $4 million. Of those, 14.8 percent were 90 days or more past due as of Jan. 31. That is almost double the 8.7 percent of homes with lesser mortgages that were similarly past due.
These pricey properties are difficult to sell because there are fewer buyers and financing is hard to get, but there’s a psychological element to the problem too. “It’s very, very difficult for these [home owners] to believe they’ve had such a severe reversal of fortune,” says Maggie Navarro, an associate with Coldwell Banker Old Pasadena in Southern California.
Source: The Wall Street Journal, Craig Karmin and James R. Hagerty (04/09/2010)
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Half of Modified Home Loans are in Default
More than 51 percent of all borrowers whose mortgage loans were modified in the first quarter of 2009 defaulted again by the end of the year, reported the Office of the Comptroller of the Currency and the Office of Thrift Supervision in a joint report.
Modifications are “clearly not working well and it’s not a surprise,” said Sam Khater, a senior economist at research firm First American CoreLogic. “It’s pointless to rewrite these loans because they’re underwater.”
Nearly 4.5 million foreclosure filings are expected in 2010, according to RealtyTrac, a seller of default data.
Source: Bloomberg, John Gittelsohn (03/25/2010)
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Foreclosure Inventory Is Increasing
The inventory of foreclosed homes that banks are sitting on is rising, threatening to push home prices down further in some parts of the country.
Analysts at Barclays Capital estimated that banks and mortgage investors held about 645,800 foreclosed homes in January, up 4.6 percent from December. That is down significantly from the peak of 845,000 in November 2008.
States with the largest number of foreclosures are Florida, Arizona, Nevada, California, and Michigan.
Source: The Wall Street Journal, James R. Hagerty (03/19/2010)
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Banks Pressed to Write Down Second Liens
Many homeowners are seeking to sell homes in short-sale deals, but banks are reluctant to approve them, pushing these distressed homeowners into foreclosure. Now lawmakers are stepping in to apply pressure to encourage banks to eliminate the most obvious stumbling block – second mortgages.
U.S. Rep Barney Frank, chair of the House Financial Services Committee, recently wrote a letter to the four largest U.S. banks urging them to write down second mortgages. Frank wrote that while second loans often have little value, “because accounting rules allow holders of these seconds to carry the loans at artificially high values, many refuse to acknowledge the losses and write down the loans.”
While most first mortgages are now held by Fannie Mae and Freddie Mac or other investors in mortgage securities, about $766.7 billion in second liens are held by commercial banks, savings banks, and credit unions.
Source: The Wall Street Journal, James R. Hagerty (03/08/2010)
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Foreclosed Borrowers May Get Loans Again
Will people who currently face foreclosure or short sales or who walk away from their underwater properties ever be able to get financing to buy another home down the road?
Banks haven’t been very forthcoming on this issue. However, knowledgeable observers of the situation say that while it may take some time, the situation will right itself for most people.
Because bankrupt borrowers have eliminated their debts, they should “constitute attractive fodder for mortgage lenders,” says University of Michigan law professor John Pottow, whose specialty is bankruptcy.
As home prices and the mortgage market stabilize, lenders will be motivated to lend to people who previously had financial troubles if they look like they can pay the next time around, says Alan Riegler, a consultant with CCG Catalyst, which advises banks.
“The lender who figures out how to do more of this case-by-case stuff cost-effectively is going to end up ahead of the pack,” Riegler says.
Source: Inman News, Matt Carter (03/05/2010)
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Treasury Proposes Plan to Help Borrowers
The U.S. Treasury Department is considering a plan to improve the chance that distressed home owners will get help from federal programs.
Among other things, Treasury proposes to give borrowers 30 days to respond when they are denied a loan modification under the Home Affordable Modification Program (HAMP). During that time, the lender couldn’t auction off the property or even put it up for sale.
The proposal would demand that lenders consider all requests and even contact all borrowers who are 60 days delinquent to determine if they qualify for HAMP. Their contact efforts would have to include multiple telephone and written notices. Lenders would also be required to certify in writing that the borrower isn’t eligible.
Lenders say these guidelines would further slow the foreclosure process past the year that it takes now.
A Treasury spokesperson says the guidelines are only in the proposal stage and haven’t been approved.
Source: The Wall Street Journal, James R. Hagerty, and Associated Press, Alan Zibel (02/22/2010
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Foreclosure Prevention Has Aided 116,000
The federal foreclosure prevention program has helped about 12 percent of borrowers who applied for help since the plans were announced a year ago, the Treasury Department says.
About 1 million borrowers initiated the application process, and as of January, about 116,000 home owners–12 percent–had their loans modified. But administration officials say another 76,000 applications have been approved and are awaiting signatures.
Another 830,500 home owners are currently in a trial modification review period during which banks make sure payments are feasible for the borrower and ensure the qualifications of the assistance program are met.
For those who qualify, the Home Affordable Modification Program brings monthly loan payments down to 31 percent of home owners’ pre-tax income.
Nearly 60,500 people have been denied permanent modifications.
Source: CNNMoney, Tami Luhby (02/17/2010) and USA TODAY, Stephanie Armour (02/17/2010)
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Luxury Homes in Foreclosure Go to Auction
An increasing number of homes with multi-million dollar price tags are going into foreclosure and that’s driving desperate owners to sell at auction.
In 2009, 18,817 properties worth at least $1 million faced foreclosure. That’s up 162 percent from 2008, reported foreclosure marketer RealtyTrac.
Prices of $1 million-plus properties are down about 25 percent since 2007 with an increasing number of desperate home owners choosing auction sales over waiting for years for the right buyer to come along.
“Any home owner selling in this economy is on the market because they have to be,” says John Brian Losh, CEO of LuxuryRealEstate.com, a Web site that specializes in high-end properties. “If they’re frustrated and they can’t figure out why they haven’t gotten any offers, they might think an auction will generate some interest.”
Source: Forbes, Francesca Levy (02/11/2010)
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More Home Owners Walk Away
A growing number of home owners in Arizona, California, Florida, and Nevada—where prices have fallen the most—are walking away from their properties.
They are leaving the deal behind not because they can’t pay but because they don’t want to. A study by researchers at Northwestern University and the University of Chicago concludes that as many as 25 percent of defaults are driven by strategy, not necessity.
If many other people follow suit, “It’s going to be really difficult to prevent a cascade effect,” says Paola Sapienza, a professor of finance at Northwestern.
Brent White, an associate law professor at the University of Arizona, points to actions by banks themselves to avoid staying in bad business deals as an example of why homeowners should make a decision “unclouded by unnecessary guilt or shame.”
For instance, on Thursday, financial services firm Morgan Stanley announced that it is turning five San Francisco office buildings back over to its lender two years after it purchased them when the market was at its priciest. The buildings are estimated to be worth about half of what Morgan Stanley paid.
“This isn’t a default or foreclosure situation,” spokeswoman Alyson Barnes told Bloomberg News. “We are going to give them the properties to get out of the loan obligation.”
Morgan Stanley is apparently current on the loan, so this is what is known as a “strategic default.”
Some might ask: If strategic defaults are OK for banks, why aren’t they OK for ordinary homeowners?
Source: The Wall Street Journal, James R. Hagerty and Nick Timiraos (12/17/2009) and Bloomberg, Emily Friedlander (12/17/2009)
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Treasury Urges Banks to Fix Foreclosure Problem
Unemployed Americans need more help escaping foreclosure, Assistant Treasury Secretary Michael Barr said Thursday.
“We are looking at a wide range of tools to help people who are unemployed,” Barr said. “We need to look at a process, if we come to this point, that is fair to everyone, that is cost effective, that protects the taxpayers and that gives responsible home owners a chance to stay in their homes.”
Barr said it was the responsibility of the banks to get their troubled borrowers into modification plans. “We are examining their performance every day … soon to be twice a day,” he said.
Source: Reuters News (12/03/2009)
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Distressed Sales Remain a Concern
Twenty-nine percent of recent buyers purchased a home in foreclosure or through a short sale, according to the latest REALTORS® Confidence Index. REALTORS® who participated in the survey are also concerned about a growing number of foreclosures and the hurdles buyers face in short sales.
The RCI is a key indicator of housing market strength based on a monthly survey of more than 50,000 REALTORS®; in a typical month there are more than 3,000 usable responses. Practitioners are asked about their expectations for home sales, prices, and market conditions; they also share their insights regarding buyer preferences and financing options and how those factors are influencing real estate markets nationwide.
“REALTORS® are on the front lines with buyers and sellers in today’s market and have valuable insights into real estate trends,” NATIONAL ASSOCIATION OF REALTORS® President Charles McMillan said. “The volume of distressed sales that our members are reporting underscores the importance of the recent tax credit extension. By putting cash in the hands of financially healthy home buyers, the credit will continue to help draw down inventory and stabilize home prices to encourage a strong and sustainable housing recovery.” Full details..
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Distressed Sales Remain a Concern
Twenty-nine percent of recent buyers purchased a home in foreclosure or through a short sale, according to the latest REALTORS® Confidence Index. REALTORS® who participated in the survey are also concerned about a growing number of foreclosures and the hurdles buyers face in short sales. The RCI is a key indicator of housing market strength [...]
Owners Still Try to Price Homes High
Real estate practitioners in the heart of foreclosure hotspots are talking turkey about pricing to their clients.
“I don’t sugar-coat anything. I don’t tell people what they want to hear. I tell them what they have to hear,” says Mike Aubrey, an associate with RE/MAX Metropolitan Realty in North Potomac, Md.
“[Setting the initial price too high] is not only a waste of time, but you stigmatize your property,” says Joe Manausa, president of Century 21 First Realty in Tallahassee. “People wonder why nobody bought it, why it’s been on the market so long.”
In fact, setting a price too high is “downright willful negligence,” Manausa declares.
Source: Inman News, Mary Umberger (10/14/2009)
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Buying a Foreclosure Is No Picnic
Buyers seeking a foreclosed property should realize that not every foreclosure is a good deal.
Urge would-be buyers of foreclosures to have the property thoroughly inspected, says Dan Steward, president of the Tampa-based inspection firm, Pillar to Post. Lenders are not held to the same disclosure requirements as sellers.
Steward says damage isn’t always obvious. While it doesn’t take an expert to see that a toilet has been ripped out, it does require someone with knowledge to know that ripping it out damaged a pipe 20 feet down the line.
The best way for the buyer to get the property is to follow the bank’s instructions closely, says Ryan Melvin, co-owner of More Realty Group in Las Vegas, which specializes in foreclosures.
Another quirk that sometimes surprises buyers of real-estate-owned properties, or REOs, is the scrutiny that banks place on the buyers’ credit, even though they are using a different lender.
Source: The Wall Street Journal, Amy Hoak
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Examine Paperwork Prior to foreclosure
A Florida real estate consulting company specializing in mortgage forensic research, warns homeowners near or in foreclosure that legal violations are increasingly common in complex mortgages and urges them to examine their paperwork carefully.
Consumer Mortgage Audit Center, many of whose members are also members of the American College of Forensic Examiners Institute, works with attorneys nationwide to help them identify mortgage violations and instances of predatory lending that can offer options to save homeowners from foreclosure.
CMAC urges homeowners facing foreclosure to:
* Compare their HUD-1 document, which buyers get at settlement outlining most costs, with the same lender’s good-faith estimate. If the figures on the HUD-1 and the good faith estimate are different, this may signal that there is a problem.
* To further investigate the issue, the homeowners should consider consulting an attorney who handles foreclosure defense cases. Most foreclosure attorneys don’t charge for an initial consultation.
Source: Consumer Mortgage Audit Center
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Some Foreclosure Buyers Feel Guilty
Foreclosure guilt is affecting some people who can afford to buy low-cost properties even though friends and family haven’t been so lucky.
As Anya Sanko who bought a foreclosure in Las Vegas says, there’s a hard-to-shake worry that “you’re capitalizing off of somebody else’s misfortune.”
Some people dismiss this as unwarranted drama, but Santa Fe psychologist Sylvia Lafair thinks that “there is a guilt of survivorship that is real.”
Lafair has provided counseling for real estate practitioners who say clients express this concern.
Lafair recommends that people ease their pain by doing something kind for those less fortunate. “My recommendation is that when you’re moving, take (your) old stuff and say, ‘Do I really need this?’ and give it to a shelter or the Salvation Army. One way to balance the guilt is to do something to be gracious,” she says.
Source: USA Today, Steve Friess
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Why Rent When Buying is Cheaper?
The foreclosure crisis has knocked down prices so much in some parts of the country that it’s cheaper or only slightly more expensive to own than it is to rent. BusinessWeek, with help from research firm Reis, calculated ownership costs assuming a fixed-rate, 30-year mortgage for 100 percent of the purchase price with no down [...]
Countrywide Offers Help to Former Customers
Bank of America, which acquired Countrywide Financial Corp., one of the most active of the subprime lenders, has begun issuing checks to its borrowers who are eligible for foreclosure assistance under an agreement with attorneys general in 40 states.
Borrowers most likely to be eligible for assistance must have experienced a foreclosure, short sale, or deed-in-lieu of foreclosure after taking out a Countrywide mortgage.
Rust Consulting, a third-party administrator, is managing the program, and notifying and paying eligible customers.
Source: Reuters News, Steve Eder
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Faulty Appraisals Harming Housing and the Economy
Twenty-six percent of builders are seeing signed sales contracts fall through the cracks because appraisals on their homes are coming in below the contract sales price, according to a nationwide survey conducted by NAHB. “Home builders are increasingly concerned that inappropriate appraisal practices are needlessly driving down home values. This, in turn, is slowing new [...]
Court halts thousands of foreclosure sales
COLUMBIA — South Carolina’s highest court on Tuesday temporarily stopped thousands of pending foreclosure sales in the state to give homeowners more time to take advantage of a new federal program to help them refinance mortgages.
The injunction – which mortgage experts said appeared to be the nation’s first court-ordered stop for an entire state – prevents judges in South Carolina from finalizing foreclosure sales on properties guaranteed by Freddie Mac, Fannie Mae or any other mortgage company that has signed on to a federal assistance program.
RealtyTrac Inc., a foreclosure listing firm, says the ruling could affect 5,000 S.C. homes facing foreclosure.
The ruling was in response to a request from a Columbia attorney representing Fannie Mae, who had argued that it was necessary to keep homeowners who might be eligible for federal assistance from being shut out of the process.
“Absent the injunction, mortgagors eligible for relief … could be denied their right to participate because their property was sold at the foreclosure sale,” lawyer Ronald Scott wrote in his three-page motion. “This qualifies as irreparable injury for which the court should provide redress in the form of a temporary injunction.”
Fannie Mae said the ruling was necessary because of a South Carolina law meant to ensure that foreclosures sales are conducted in a timely fashion. Under the law, judges can cancel a foreclosure case and start over if the sale is delayed for too long.
The company argues that South Carolina’s law gives lenders an incentive to speed up foreclosure cases because of the threat the process could be restarted, which would cost lenders more money. More Details
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Some homeowners see giving up as best option
In decision balancing stress and credit score, an Atlanta couple walks away.
Teresa Bondora and her family abandoned their two-story brick home in Atlanta rather than fall behind on their mortgage and $30,000 worth of home renovation debt.
The decision was tough for Bondora, a home-schooling curriculum developer raised to believe that preserving good credit and paying bills on-time were key adult responsibilities.
“I was willing to walk away and live with someone else while we get out of debt,” Bondora says. “I’m not worried about anything anymore.”
Bondora isn’t the only homeowner making an about-face in her approach to the stigma of foreclosure; if anything, homeowners like her see that efforts to prevent foreclosure may make them more financially vulnerable than succumbing to it and starting anew.
Despite new refinancing and loan modification programs made available under the Obama administration, mortgage experts say that many homeowners still face difficult choices in the short run. The latest options may not affect the market for a few more quarters, they say.
When the real estate market first showed signs of weakness in fall 2006 — right when the Bondoras listed their home for $170,000 — the family faced tough circumstances. They watched at least a dozen seemingly qualified buyers fail to secure financing, and as Bondora’s husband, a contractor, began to see work evaporate. Full Story.
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Buyers Say Foreclosure Deals Taking Too Long!
Banks are quickly accepting bids and writing contracts for foreclosed homes, but buyers are complaining that settlements are taking too long.
Real estate pros say purchasing a bank-owned property is different than dealing with a regular home owner, considering that banks have to check claims on the property and problems can arise at closing. Plus, in some states, banks also need court approval of the foreclosure.
Although banks are swamped by the record number of foreclosures, the bank-owned homes will have to be sold to help stabilize residential prices and boost the housing market.
Source: Washington Post, Dina ElBoghdady (04/13/09)
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Tread Carefully When Making a Low-Ball Offer.
These days, it’s easier to make a low-ball offer than it used to be, but still it’s important to be smart. Here are some things that a real estate practitioner and would-be buyer should consider when contemplating such an offer:
? Use foreclosures as comps carefully. Look realistically at the prices foreclosures in the neighborhood brought. Foreclosures aren’t good comps if the homes were stripped of appliances, pipes, HVAC, etc.
? Examine details of short sales critically. How many liens were there against low-selling short sales? If there were no secondary liens, the lender had considerable flexibility.
? Establish realistic time frames. Even in the best of circumstances, foreclosure takes a long time. Will the seller play the waiting game? How long have houses whose owners have equity stayed on the market? Is the buyer in a hurry?
If your buyer makes a low-ball offer, the bank probably won’t be in any rush to take it. They’ll likely just keep soliciting offers without coming back with a counter. Ultimately, the property is likely to sell for a higher price and, chances are, you and your buyer won’t know it until the deal is done.
Source: ThinkGlinck, Ilyce R. Glink (03/30/2009)
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How Will Foreclosure Affect Credit Scores?
The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.
FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.
”It just seems obvious that a foreclosure in 2008 or 2009 doesn’t have as much information value as a foreclosure five years ago,” he says. ”To the extent that foreclosure doesn’t predict future behavior as much as it did in the past, you’d expect that the FICO algorithm would change to adjust for that.”
One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.
BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ”How to Lend to the Newly Credit Impaired.”
Source: The New York Times, Ron Lieber (03/14/2009)
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