10 States Hit Hardest by Foreclosures
For the 59th month in a row, Nevada continues to have the highest foreclosure rate in the country — despite a new law that took effect in October that changed the state’s foreclosure process and was expected to curtail foreclosures there.
Although foreclosures were down 43 percent year-over-year in Nevada, its foreclosure rate still remained higher than any other state.
The following are the top 10 states with the highest foreclosure rates in the country in November, according to RealtyTrac data.
Nevada: 1 in every 175 home received a foreclosure filing in November
California: 1 in every 211 homes
Arizona: 1 in every 256 homes
Utah: 1 in every 290 (This state saw a 74 percent increase in November from October in foreclosure activity.)
Georgia: 1 in every 330 homes
Michigan: 1 in every 330 homes
Florida: 1 in every 358 homes
Illinois: 1 in every 427 homes
Ohio: 1 in every 500 homes
South Carolina: 1 in every 517 (This is the first time South Carolina has made it into the top 10 for foreclosure activity since RealtyTrac began tracking in 2005.)
Source: RealtyTrac
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6 Cities Where Foreclosures Are Soaring
Some housing markets are still battling high numbers of foreclosures that are continuing to put downward pressure on overall housing prices. Many of the cities facing the highest spikes in foreclosure are facing high unemployment rates, underwater borrowers, and low median family income.
24/7 Wall St., using data from RealtyTrac, found that the following cities saw the biggest increases in foreclosures by 30 percent or more between the second and third quarters of 2011:
1. Albuquerque, N.M.
Quarterly increase in foreclosures: +151%
Number of foreclosures in third quarter of 2011: 1,358
Percentage that home values have dropped from peak: -14.9%
2. Boston-Cambridge-Quincy, Mass.
Quarterly increase in foreclosures: +67%
Number of foreclosures in third quarter of 2011: 2,003
Percentage that home values have dropped from peak: -15.8%
3. Sarasota-Bradenton-Venice, Fla.
Quarterly increase in foreclosures: +57%
Number of foreclosures in third quarter of 2011: 1,673
Percentage that home values have dropped from peak: -51.4%
4. Cincinnati-Middleton, Ohio-Ky.-Ind.
Quarterly increase in foreclosures: +55%
Number of foreclosures in third quarter of 2011: 1,956
Percentage that home values have dropped from peak: -15.9%
5. Jacksonville, Fla.
Quarterly increase in foreclosures: +49%
Number of foreclosures in third quarter of 2011: 2,559
Percentage that home values have dropped from peak: -39.3%
6. Palm Bay-Melbourne-Titusville, Fla.
Quarterly increase in foreclosures: +44%
Number of foreclosures in third quarter of 2011: 1,039
Percentage that home values have dropped from peak: -53.4%
Find out what other cities are facing high foreclosure increases.
Source: “10 Cities Getting Slammed by Foreclosures,” 24/7 Wall St. (Nov. 11, 2011)
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Foreclosures on Rise Again, More Trouble for Home Values?
Foreclosure starts are reversing course and are back on the rise, which is expected to continue to put downward pressure on home prices, a new report released Monday from Fitch Ratings says. With a jump in the inventory of distressed homes, Fitch predicts home prices to dive another 10 percent nationally before stabilizing.
Foreclosures on delinquent loans have nearly doubled compared to this time last year, when a robo-signing scandal temporarily brought foreclosures to a standstill in many parts of the country.
According to Fitch’s most recent report, foreclosure starts on severely delinquent loans have jumped more than 10 percent in a month. In fact, the spike is nearing the average rate of 14 percent that was seen between 2000 and 2010, according to Fitch’s RMBS (residential mortgage-backed security) Performance Metric.
Foreclosure initiation rates on borrowers who haven’t made a mortgage payment in more than six months also have nearly doubled in the last five months.
“Rising foreclosure start rates are likely a sign that servicers are playing catch-up on actions that have been delayed over the past year,” Diane Pendley, Fitch managing director, said in the report. “Mortgage servicers now generally feel they have implemented the corrective actions that they determined were needed.”
Source: Fitch Ratings; “Rising Foreclosure Rates to Impact Home Prices, Fitch Says,” HousingWire (Nov. 7, 2011); and “Fitch Ratings Says Foreclosure Rate of 10 Percent is Almost Twice as High as Last Year’s Level,” Associated Press (Nov. 7, 2011)
Resolution Seeks Temporary Stop to Foreclosures
In trying to slow the flood of foreclosures plaguing markets across the country, Rep. Marcy Kaptur, D-Ohio, proposed a House resolution that calls for a temporary national foreclosure moratorium.
The resolution, which was submitted to the House Financial Services Committee last week, called on President Obama to declare a “national residential mortgage foreclosure emergency.” It called on individual states to enact the moratorium, HousingWire reports.
In 2010, mortgage servicers filed 2.9 million foreclosures, according to RealtyTrac. What’s more, the current estimates by housing experts is that the shadow inventory of looming foreclosures that haven’t yet hit the market could be as high as 4 million homes.
“The government should be trying to speed foreclosures, not stop them,” Arnold Kling, economist at George Mason University and former economist at Freddie Mac told HousingWire. “Postponing foreclosures may simply be putting off the inevitable market bottom. We need to remove barriers to foreclosures.”
Housing experts say they don’t expect the House Financial Services Committee to approve the proposal.
Source: “House Resolution Advocates Temporary Foreclosure Moratorium,” HousingWire (July 11, 2011)
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Gov’t in Talks to Rent Out Foreclosures
The Obama administration is considering a plan that would take foreclosed homes off the market and rent them out–in a move aimed at clearing the glut of unsold foreclosed homes and preventing home values from falling any more, The Wall Street Journal reports.
The talks come at a time when national rents are on the rise and home prices have been falling. By taking advantage of these higher rents, lenders would be able to cover the costs of holding the properties until the homes can be resold once the market stabilizes, and maybe even make a profit on it later, experts note.
Nationally, sales of distressed homes, which are often sold at steep discounts, continue to pull down home values. Removing some of the high number of foreclosed homes for sale is “worth looking at,” Federal Reserve Chairman Ben Bernanke said last week in testimony to Congress.
Just reducing Fannie Mae and Freddie Mac’s foreclosed property sales from its current rate of 50,000 each month to 30,000 could lessen total distressed sales by one-third and help avoid a further 3 percent to 5 percent decline in home prices, analysts at Credit Suisse estimate.
However, turning foreclosed homes into rentals could place lenders and the government in an unknown role of playing landlord.
Another idea being tossed around, according to The Wall Street Journal: Federal officials selling thousands of foreclosed properties to private investors who would agree to rent them out, and who could then work with property management firms and handle the day-to-day tenant demands.
Source: “Uncle Sam Weighs Landlord Role to Ease Housing Slump,” The Wall Street Journal (July 22, 2011)
1 Million Foreclosures Delayed Until 2012
An estimated 1 million foreclosure-related notices for defaults, auctions, and home repossessions that should be filed by lenders this year will be pushed back until next year, according to the latest report by RealtyTrac.
While the delays could give home owners more time to catch up on their payments and try to avoid foreclosure, housing experts warn this means the looming shadow inventory of distressed properties likely will continue to plague the real estate market even longer.
“The best-case scenario is we don’t get back to normal levels of foreclosure activity until 2015, which means the housing market recovery gets delayed by at least a year,” says Rick Sharga, a senior vice president at RealtyTrac.
Foreclosure Notices Drop, Threat Still Looms
Overall, the number of homes repossessed by lenders in the first half of this year dropped 30 percent compared to the same period in 2010. But foreclosure processing delays — with lenders taking longer to take action against delinquent borrowers — is stalling the housing recovery, experts note.
About 1.2 million homes received a foreclosure-related notice in the first six months of this year — in other words, one in every 111 U.S. households, RealtyTrac reports.
Nevada continues to face the most foreclosures; one in every 21 households in that state received a foreclosure notice in the first half of the year.
The foreclosure process continues to lengthen too. From April and June, homes took 318 days on average to go from the first stage of foreclosure to ultimately where it was repossessed by the lender — that’s up from 298 days in the first three months of the year. (In New York, the foreclosure process took the longest at an average of 966 days or 2.6 years; Texas boasted the shortest at 92 days.)
Source: “Delays in Bank Processing Push Likely U.S. Foreclosures Until 2012, Stalling Recovery,” Associated Press (July 14, 2011)
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Foreclosures Facing More Court Challenges
Recent court rulings are raising some uncertainties when it comes to Mortgage Electronic Registration Systems (or MERS), which electronically tracks and transfers millions of loans and has been in use by the mortgage industry since the 1990s.
Borrowers who have been foreclosed upon using MERS have fought back in court–with mixed success–challenging the legality of MERS and arguing that it doesn’t own the mortgage and therefore, doesn’t have the right to foreclose on them.
The industry is keeping a close watch on recent court rulings since the results could have a big impact on reshaping the mortgage industry and potentially throwing the validity of thousands foreclosures into question, The Washington Post reports. MERS holds 65 million loans in its registry.
A New York appellate court ruled last week that MERS did not have the right to foreclosure on a property it doesn’t own. However, an appeals court in California recently ruled that MERS did have the power to act on behalf of lenders. In Minnesota, lawmakers passed a law stating that MERS had the right to undertake foreclosures.
However, earlier this year, a Michigan court of appeals ruled that MERS lacks authority to foreclose. Following the court decision, the ruling practically brought closings on REOs to a halt there and called into question foreclosures already sold in the city.
In March, MERS requested banks and mortgage servicers stop using the MERS name to foreclose on homes.
“We know that MERS is a problem; we don’t know exactly what that’s going to mean,” says Adam Levitin, a Georgetown University law professor. “We still don’t have really definitive law on any of the issues involved. It’s going to take awhile before we really know the answers.”
A MERS spokeswoman disagrees. “The court decisions have overwhelmingly leaned in favor of MERS and validating MERS’s business model,” says Janis Smith, vice president of corporate communications for MERSCORP. “Overall, the record is pretty clearly established.”
Source: “Courts May Reshape Mortgage Industry,” The Washington Post (June 15, 2011)
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Foreclosures Costing Some Borrowers Their Jobs
Foreclosure can mean more than just a blemish to borrowers’ credit record–it can jeopardize their job too. Federal contractors and employees are finding a foreclosure can cost them their federal security clearance and ultimately their job. It can take years to restore a security clearance so they can work again too.
Many employees who have security clearances are required to report mortgage defaults and other financial issues to their company’s or agency’s security officer.
About 70 security clearance appeals involving foreclosures and other distress sales were reported from January 2006 through January 2010 by the U.S. Defense Department’s Office of Hearings and Appeals. Of those 70 cases, 62 clearances were revoked or denied, according to reports.
“Losing your security clearance is like losing your most marketable aspect for employment,” Travis John, a real estate broker, told the Orlando Sentinel.
David P. Price, a lawyer who specializes in security clearance cases, says he’s seen financial related security clearance problems double in recent years.
For borrowers at risk of foreclosure, they usually have more success at keeping their security clearance if they can prove that their mortgage was a sensible loan that did not overextend them at the time and also show they’ve tried to find a work-out solution, such as a short sale. However, Price says that even a short sale doesn’t put borrowers in the clear since it can take a long time to complete such transactions and increase the chance of a foreclosure.
Source: “Foreclosures Put Workers’ Security Clearances at Risk,” Orlando Sentinel (June 7, 2011)
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New Homes Competing Against Foreclosures
Builders broke ground on fewer homes in April as the new-home sector continues to face competition from a glut of foreclosures that in many markets has brought home values down.
Construction on homes and apartments dropped 10.6 percent to a seasonally adjusted annual rate of 523,000 units, the Commerce Department reported on Tuesday. In March, housing starts reached a 585,000-unit pace (an upward revised figure). Residential construction is down 23.9 percent compared to April of last year–its largest drop since October 2009.
Considered the “volatile part” of the new-home market at the moment, construction of multifamily homes (buildings with five or more units) particularly hampered housing starts last month, decreasing 28.3 percent. Single-family home construction–which generally makes up 75 percent of all housing starts–dropped 5.1 percent from a month earlier.
Regionally, the results were mixed. In the South, housing starts dropped 23 percent and 4.8 percent in the Northeast. However, the Midwest posted a 15.7 percent gain in housing starts, as well as the West with 3.7 percent.
Permits for future home construction dropped last month, falling 4 percent to a 551,000-unit pace last month, the Commerce Department reports.
The Distressed Sales Impact
New-home construction is being weighed down by an oversupply of existing homes on the market, particularly foreclosures, experts say. Buyers are increasingly choosing bargain-priced foreclosures and previously owned homes over–in general–pricier new homes.
“Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing,” NAHB Chairman Bob Nielsen said Monday in statement about the National Association of Home Builder/Wells Fargo Housing Market Index, which shows builders’ confidence about the new-home market remains low.
Source: “U.S. Housing Starts, Permits Fall in April,” Reuters News (May 17, 2011), “US Apr Housing Starts -10.6% to 523K,” Dow Jones International News (May 17, 2011), and “U.S. NAHB: Distress Homes Continue to Weigh on New Sales,” Market News International (May 16, 2011)
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Foreclosures Fall Again, Reaching 3-Year Lows
Fewer home owners are losing their homes as the number of foreclosure filings sank to more than a three-year low in April, RealtyTrac reports.
The number of foreclosure filings in April dropped 34 percent from a year ago, also marking the seventh straight month of declines, and reaching its lowest level since December 2007. Foreclosure filings include notices of default, scheduled auctions, and bank repossessions. Also, 69,532 homes were repossessed in April — an 8.6 percent drop from March and a 32 percent drop from last September’s peak.
Banks being blamed for faulty paperwork continued to slow the pace of foreclosure activity last month, but many foreclosures still loom, experts warn. About 3.7 million borrowers are at least 90 days late on payments.
However, there are hopeful signs of a turnaround: The employment picture is improving, which will allow more home owners to make payments and banks are completing more loan modifications to keep borrowers in their home. Banks completed 77,000 mortgage modifications in March, which is a 26 percent increase from February.
States With the Highest Foreclosure Rates
Nevada, Arizona, and California continue to post the highest foreclosure rates in the nation.
Ten states account for more than 70 percent of all foreclosure activity in the country: California, Florida, Arizona, Michigan, Nevada, Illinois, Texas, Georgia, Ohio, and Colorado.
Source: “Foreclosures Down 7th Straight Month,” CNNMoney (May 12, 2011) and “Faulty Paperwork Slows Foreclosure Activity, Survey Shows,” Reuters (May 12, 2011)
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Banks Need More Lawyers for Foreclosures
Several banks lost confidence in law firms who handled a huge volume of its foreclosures that resulted in a “robo-signing” scandal from shoddy reviews of loan documents. Now banks are dropping these law firms and looking for replacements, which is causing more delays in foreclosures, The Wall Street Journal reports.
While fewer homes are being foreclosed upon, late fees for home owners seeking loan modifications are adding up and home owners becoming upset that they haven’t heard from lawyers regarding their cases.
“It’s causing chaos because nobody knows who’s representing whom,” Thomas Ice, a foreclosure defense lawyer in Royal Palm Beach, Fla., told The Wall Street Journal.
In Florida alone, Fannie Mae and Freddie Mac ended their relationship with the Law Offices of David J. Stern, a firm that once handled 20 percent of all foreclosures in the state and that is being investigated on allegations of wrongdoing in processing foreclosure documents. The law firm recently has said it is unable to process paperwork needed to withdraw from 100,000 cases.
Florida is one of 23 states where foreclosures are required to be processed through courts.
Meanwhile, the backlog in foreclosures is causing trouble for some home owners who must continue to wait for an answer from banks. Some home owners in Florida say they’ve been trying to get a loan modification on their home for the past two years. Another home owner says she’s been trying to do a “deed-in-lieu” of foreclosure, but continues to hear nothing from the lawyers assigned to the case.
A Fannie Mae spokeswoman recently announced that foreclosure files from terminated law firms had been transferred to new lawyers. The government-sponsored enterprise has approved 16 law firms to handle its cases in Florida alone, which is a jump from nine last year. Freddie Mac says it also has increased the number of law firms it’ll be using in Florida, from 4 to 14.
Source: “Foreclosures Trapped by a Lack of Lawyers,” The Wall Street Journal (May 4, 2011)
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More Banks Pay to Fix Up Foreclosures for Resale
More banks are investing thousands of dollars to fix up foreclosures in trying to spur sales and appeal to a broader buying pool. Banks have inherited plenty of foreclosed homes that have everything from water damage, mold, broken windows, and missing plumbing fixtures.
But while banks used to be hesitant to invest much money in fixing up these homes, more real estate pros say that banks are heeding their suggestions for repairs and seeing the benefits of how a little investment can make these properties more sellable. As such, they are paying for new paint and carpet, refinishing damaged floors, replacing old windows, and repairing leaky roofs.
They hope to extend the foreclosed homes’ appeal past traditional investors and professional rehabbers. For example, home buyer would have trouble securing a mortgage on homes that lenders deem “uninhabitable” because of needed repairs.
The banks interest in fixing up these properties also can help the overall real estate market because the foreclosed properties can sell at a higher price.
Real estate agents say they are making more suggestions to banks on how to spruce up the properties. First, they identify the target customer for a property. For example, if the home will likely appeal to owner-occupant, agents may recommend fixes such as paint to $25,000 kitchen remodel.
Source: “Banks Fixing Up Foreclosures to Spur Sales; Strategy Aims to Give Them Broader Appeal, Reduce Big Inventory,” The Chicago Tribune (March 13, 2011)
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Foreclosures Post Biggest Drop on Record
The number of foreclosure notices filed in February declined 14 percent compared with last month, and foreclosure notices dropped 27 percent compared to last year at this time. That marks the largest year-over-year decline that RealtyTrac, a foreclosure tracking site, has ever recorded.
The number of U.S. homes in some stage of foreclosure fell drastically last month, reaching a 36-month low, RealtyTrac reports.
Initial default notices, scheduled foreclosure auctions, and homes repossessed by lenders all dropped in February, RealtyTrac says.
“Allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets,” says RealtyTrac CEO James Saccacio. “The industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures.
Lenders repossessed 64,643 homes in February, a 17 percent drop from January.
Initial default notices dropped 16 percent from January — and 41 percent from a year ago. What’s more, foreclosure auctions dropped 10 percent from last month and 21 percent from February of last year, RealtyTrac said.
Rick Sharga, a senior vice president at RealtyTrac, says the real estate market isn’t out of the clear quite yet. He expects foreclosure activity to likely spike again as banks resolve foreclosure paperwork issues.
About 2 million households are in foreclosure proceedings. In addition, about 5 million borrowers are at least two months behind on their mortgage payments.
States With the Highest Foreclosure Rates
The states with the highest foreclosure rates for the month:
1. Nevada (which has held the No. 1 spot for 50 consecutive months, with one in every 119 households receiving a foreclosure notice)
2. Arizona (one in 222)
3. California (one in 239)
4. Utah
5. Idaho
6. Georgia
7. Michigan
8. Florida
9. Colorado
10. Hawaii
Source: “Foreclosures Plunge 27%-Biggest Drop on Record,” CNNMoney.com (March 10, 2011)
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Wells Fargo Foreclosures Under Investigation
Government agencies are investigating Wells Fargo & Co.’s foreclosure practices, and the company says it will likely face penalties from how it handled many foreclosures.
The investigations center on whether the bank violated fair-lending laws and if it followed proper procedures with its foreclosure affidavits, according to filings with the Securities and Exchange Commission.
“With regard to the investigations into foreclosure practices, it is likely that one or more of the government agencies will initiate some type of enforcement action against Wells Fargo, which may include civil money penalties,” Wells Fargo said in its filing.
The bank also faces seven class-action lawsuits as well as several individual-borrower lawsuits, which mostly accuse Wells Fargo of submitting fraudulent affidavits or other documents to foreclose on homes.
Wells Fargo says it may face as much as $1.2 billion in losses from the lawsuits.
Source: “Wells Fargo Says Being Investigated, Could Face Penalties on Foreclosures,” Associated Press (Feb. 25, 2011)
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Foreclosures Jump in Unexpected Cities
The foreclosure crisis is now spreading to cities that were once relatively unscathed from the crisis. Seattle, Houston, and Chicago have joined the list of other cities in the United States plagued by a growing number of foreclosures and home owners unable to make their mortgage payments.
Foreclosure activity increased in 149 of the country’s 206 largest metro areas last year, reported RealtyTrac Inc., a foreclosure listing firm.
In the Houston-Sugar Land-Baytown metro area, the foreclosure rate jumped 26 percent from 2009 — the largest increase in foreclosures among the top 20 metro areas, according to RealtyTrac.
In Seattle-Tacoma-Bellevue, the foreclosure rate increased nearly 23 percent — ranking second in areas with the largest increases. In Georgia, the Atlanta-Sandy Springs-Marietta metro area was third with a 21 percent spike.
In the Chicago-Naperville-Joliet area, foreclosure activity rose 16 percent and home repossessions climbed nearly 20 percent, making it the second-highest city with the largest number of bank repossessions. (Phoenix-Mesa-Scottsdale in Arizona had the highest number of bank repossessions overall.)
Bad mortgages are no longer taking most of the blame for the spike in foreclosures either.
“We’ve actually had a sea change in what’s causing foreclosures, from the overheated home prices and bad loans to a second wave of foreclosures actually caused by unemployment and economic displacement,” Rick Sharga, a senior vice president at RealtyTrac, told MSNBC.
As unemployment and the economy improve, Sharga expects metro areas like Houston, Seattle, and Chicago to bounce back quickly. However, he expects the traditional foreclosure hotbeds — California, Florida, Nevada, and Arizona — to take longer to recover. Those states account for 19 of the top 20 metro areas with the highest foreclosure rates in 2010.
The highest overall foreclosure rate in the nation? Las Vegas-Paradise, Nev.: One out of every nine households received a foreclosure-related notice in 2010, which is nearly five times the national average, RealtyTrac reports.
Source: “Foreclosures Spread Into Previously Safe Areas,” MSNBC (Jan. 27, 2011)
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Speed Up Foreclosures to Stabilize Housing?
The Federal Reserve and banks need to ramp up foreclosures to expose the shadow inventory that awaits, some real estate industry leaders say. Shadow inventory are homes that have been repossessed or are in the process of being foreclosed upon but have not yet hit the market.
About 2 million homes are expected to account for shadow inventory in the United States, yet that number could be higher — even up to 7 million — if you include loans that are in default.
The top five cities with the highest shadow inventory are Las Vegas, San Diego, Los Angeles, San Francisco, and Phoenix.
Some industry experts say that shadow inventory threatens the stabilization of home prices and is scaring buyers off.
Therefore, they argue that these properties need to get through the system quickly and that foreclosure moratoriums or any delays will only lead to pent-up release and damage home prices more, according to an article in National Mortgage News.
Source: “Why Foreclosures Could Stabilize Housing Market,” National Mortgage News (Jan. 21, 2011)
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Some Foreclosures Showcase Big, Bad, Ugly
In Lane County, Ore., real estate professionals have practically seen it all when it comes to foreclosed properties, from one property owner cutting a hole in his kitchen wall so he could take his jacuzzi bathtub with him as he left to other evicted home owners’ who have smashed walls in with golf clubs or covered walls in obscenities.
Often times home owners will stop paying garbage bills before they’re evicted so it’s not uncommon to find large amounts of trash and abandoned possessions–or even pets–left behind too.
“I’ve learned to tie garbage bags around my feet,” said Brian Schartz with John L. Scott Real Estate in Eugene.
Sometimes home owners also try to take as much of the house with them as they can, such as one departing property owner who hauled away the kitchen’s cabinets, counters, sinks, and appliances before he left.
After a property has been repossessed from foreclosure, real estate professionals often do the initial inspection. They will then call in “asset preservation contractors,” contractors the bank pays to fix any problems with the house and get it ready for resale.
“A lot of [the properties], you have to wear masks inside,” said Lynn Hunter, a broker with Century 21 Westover Realty. “They’re filthy dirty. We’re plugging our nose. We’re covering our faces. You run in and do your work-up and get out.”
Source: “Ore. Foreclosures Bring Trash, Abandoned Items,” Associated Press (Jan. 3, 2011)
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Foreclosures Fall Thanks to Robo-Signing Woes
Thanks to the robo-signing investigations, foreclosure filings fell to a two-year low in November, according to RealtyTrac.
A total of 262,339 U.S. properties received default or auction notices or were seized in November, down 21 percent from October and 14 percent from a year earlier, RealtyTrac reported Thursday.
Default notices were down 31 percent compared to a year ago and were at levels equal to where they were in July 2007. In judicial states, where courts oversee foreclosures, default notices fell 43 percent compared to last year.
RealtyTrac CEO James Saccacio said the robo-signing investigation “forced lenders and servicers to hit the pause button on many foreclosures while they scrambled to revamp their internal procedures and revise or resubmit questionable paperwork.”
Source: CNNMoney.com, Les Christie, and Bloomberg.com, Dan Levy (12/15/2010)
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Foreclosures Still Driving Down Sales, Prices
Sales of foreclosures were about 25 percent of all U.S. residential sales in the third quarter. The average sale price of a foreclosure was $169,523, or 32 percent below the average price of properties not in foreclosure.
A total of 188,748 properties in some state of foreclosure sold during the third quarter. That was 25 percent fewer than were sold in the second quarter and about 31 percent fewer than were sold in the same quarter of 2009.
Here are the 10 states with the highest percentage of foreclosure sales:
· Nevada, 54 percent
· Arizona 47 percent
· California 40 percent
· Florida 37 percent
· Massachusetts, 35 percent
· Michigan 32 percent
· Georgia, 29 percent
· Oregon, 27 percent
· Idaho 25, percent
· Illinois 25, percent
Source: The Associated Press (12/02/2010)
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Mortgage Bankers: Foreclosures Are Falling
Fewer homes are falling into foreclosure, the Mortgage Bankers Association reported Thursday.
The percentage of homes that entered some stage of foreclosure in the third quarter fell to 13.52 percent compared to 14.42 percent in the second quarter in part because of state and federal investigations into procedural errors, the bankers said.
Mortgages more than three months overdue also fell during the third quarter to 8.7 percent of all loans, down from 9.11 percent in the second quarter.
The bankers say it is too early to know whether this represents a positive trend because once the foreclosure investigations grind to a halt, foreclosure activity will pick up.
Elizabeth Duke, a Federal Reserve Board governor, testified that the Fed expected about 2.25 million foreclosure filings this year and in 2011, and 2 million in 2012. “They will remain extremely high by historical standards,” Duke said in a prepared statement.
Source: The New York Times, David Streitfeld (11/18/2010)
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Wells Fargo Continues Foreclosures
Bank of America announced Sunday that no homes were foreclosed in error, but it did find a few technical errors in its investigation. As a result, it has combined the signing and notarization processes into a single step. Bank spokesman Dan Frahm said the bank believed this would prevent the possibility of further error as it restarts foreclosure actions beginning Monday.
Meanwhile, Wells Fargo & Co. is staying mum about the whole process and keeping foreclosures moving along. Foreclosure attorneys say that Wells Fargo is betting that its refusal to halt foreclosures will, in the long run, discourage more home owners from fighting foreclosure.
“My belief is it may be a strategic move not to admit anything,” said Richard Roth, founder of The Roth Law Firm in New York. “It’s a legal strategy – and it may pay off if no one refutes them.”
Source: Reuters News, Elinor Comlay and Joe Rauch (10/22/2010), and The New York Times, Nelson D. Schwartz (10/25/2010)
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B of A and GMAC to Resume Foreclosures
Bank of America Corp. announced Tuesday that it has reopened more than 100,000 foreclosure actions in 23 states, saying its investigation found no significant problems. Likewise, GMAC Mortgage said it would reopen an undisclosed number of foreclosure files.
“This is an important first step in debunking speculation that the mortgage market is severely flawed,” said Bank of America spokesman James Mahoney.
Meanwhile, state attorneys in general continue to push for a halt to foreclosure sales, saying they have little confidence that procedures have been fixed.
Source: The Wall Street Journal, Jessica Silver-Greenberg, Robbie Whelan, and Dan Fitzpatrick (10/19/2010)
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Second Big Lender Stops Foreclosures
A second major mortgage lender, JPMorgan Chase, has stopped foreclosures so it can review loan documents for errors.
“It will probably slow things down for a couple of months while these documents are reviewed,” said Rick Sharga, senior vice president at foreclosure listing service RealtyTrac Inc. “It won’t stop things.”
But if Sharga is wrong and more problems surface, they are likely to slow the foreclosure crisis still more, making it drag on for several more years, other analysts say.
In any case, an increased number of lawsuits are likely. Christopher Immel, a Florida lawyer who represents foreclosed home owners, says many former home owners could sue their lenders, alleging errors in documents.
GMAC Mortgage was the first big lender to pause foreclosures while it reviews past files.
Source: The Associated Press, Janna Herron and Alan Zibel (09/29/2010)
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Appraisals Continue to Be Low and Sink Some Deals
With foreclosures a large share of property sales in some areas, appraisers continue to factor in the sale price of foreclosed properties when setting values of regular properties. Appraisers are aware the practice isn’t ideal, but in some markets they’re left with little choice because of the large number of foreclosed properties.
Bill Geiger Jr., an appraiser in Cocoa Beach, Fla., told a local magazine that when he has to use a distressed property while doing an appraisal, he contacts the real estate practitioners involved in the sale and reviews computerized listings for the property to find out as much as he can about the condition of the home when it sold. He adjusts the appraisal value accordingly.
There are other factors at work in holding down valuations. Rob Johnson, vice president of lending at San Diego Funding, says lenders demand greater scrutiny of a property if the buyer has a credit score on the low end or a high debt level relative to income. That extra scrutiny can impact whether the lender decides whether to make a loan at the originally appraised value
A third factor is the fluctuation of the market, with some sellers reluctant to let go of their previous expectations.
Industry professionals had hoped that repeal of unpopular appraisal standards would help address concerns with low valuations, but repeal by itself doesn’t change the conditions appraisers face. The repeal of the standards, called the home valuation code of conduct, was enacted into law as part of the big Wall Street reform bill passed a few months ago.
Source: UPI, Steve Cook (09/28/2010)
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Fannie, Freddie in the Home-Selling Business
Fannie Mae and Freddie Mac repossessed more than 191,000 homes during the first six months of 2010, twice as many as a year earlier.
The mortgage financiers must act carefully to avoid flooding the market with foreclosures, which tend to depress neighborhood home prices in the process.
As an alternative, Fannie Mae has launched a pilot “lease-and-hold” program in which foreclosures are rented rather than sold; the move could pose challenges, however, as the firm takes on the new role of property manager.
Source: The Wall Street Journal, Nick Timiraos (09/17/10)
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Foreclosures Down, But Late Payments Up
The wave of foreclosures appears to be subsiding slightly. According to data from Mortgage Bankers Association’s National Delinquency Survey:
• The percentage of loans on which foreclosure action were started during the second quarter was 1.11 percent, down 12 basis points from last quarter and down 25 basis points from one year ago.
• The percentage of loans in the foreclosure process at the end of the second quarter was 4.57 percent, a decrease of six basis points from the first quarter of 2010, but an increase of 27 basis points from one year ago.
• Loans that were 90 days or more past due or in the process of foreclosure was 9.11 percent, a decrease of 43 basis points from first quarter, but an increase of 114 basis points compared to the second quarter of last year.
“The good news is that foreclosure starts are down, and the inventory of homes anywhere in the process of foreclosure fell for the first time since 2006 and had the largest drop since 2005,” says Jay Brinkmann, MBA’s chief economist.
The bad news is that the percent of loans one payment behind had peaked in the first quarter of 2009 at 3.77 percent and fell to 3.31 percent by the end of 2009. Now that rate has risen to 3.51 percent.
“Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers,” Brinkmann adds.
Source: Mortgage Bankers Association (08/26/2010)
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Home Builders Yearn for Normalcy
Some home builders are reporting a second quarter surge in income, but business has slowed since buyers rushed to meet the April 30 tax credit deadline.
With unemployment high and foreclosures flooding the market, Ken Campbell, CEO of Standard Pacific Corp., said during an earnings call last week. “I think it will recover, but it sure as heck is not clear when it’s going to recover at this point.”
Reaching a point where the industry can make a profit selling a predictable number of homes is the goal for some builders.
DR Horton CEO Donald Tomnitz said no more tax credits, please. “We want to get back to a normalized market. It is a lot easier to run a business based upon designing your business with the current demand as opposed to having any kind of stimulus or incentives to create abnormal demand.”
Source: The Wall Street Journal, Dawn Wotapka (08/04/2010)
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Foreclosures Account for 31% of Sales
Online foreclosure marketplace RealtyTrac reported today that homes in foreclosures accounted for 31 percent of the residential sales in the first quarter of 2010. The average sales price of these properties was nearly 27 percent below the average sales price of properties not in foreclosure.
RealtyTrac expects foreclosure discounts to stay between 25 percent and 30 percent as lenders steadily release foreclosures. The average price of foreclosed properties is $171,971.
Overall, foreclosures are down 14 percent in the first quarter compared to the fourth quarter of 2009. They are down 33 percent from the peak during the first quarter of 2009.
Source: RealtyTrac and Bloomberg, Dan Levy (06/30/2010)
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Fewer Buyers Consider Foreclosures
Fewer U.S. homebuyers are interested in foreclosed properties than they were a year ago, according to a survey conducted for Trulia.com and RealtyTrac.
About 45 percent of U.S. adults age 18 say they are at least somewhat likely to consider purchasing a foreclosed home, down from 55 percent of people surveyed in May 2009.
Most home owners – 98 percent – expect to pay less for a foreclosure, but 36 percent expect a discount of 50 percent or more. Only 18 percent say they would be satisfied with a discount of less than 25 percent.
Some 92 percent of potential buyers were realistic about the likelihood that a foreclosed property will need improvements, but 65 percent wanted to spend less than 20 percent of the purchase price on fixing the place up.
Among U.S. adults who say they are at least somewhat likely to purchase a foreclosed home, 62 percent said they would use the property for their primary residence, 19 percent said they would use it as a rental investment, 8 percent said they would use it as a second home or vacation home, and 6 percent said they would buy and quickly resell.
Source: Trulia.com (05/20/2010)
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Total Foreclosures Fall, But REOs Rise
Foreclosure marketer RealtyTrac reported today that properties in all stages of foreclosure from default notices to auctions and repossessions were down 9 percent in April compared with March. They fell 2 percent compared with April 2009. Also, default notices were down 27 percent year over year.
RealtyTrac CEO James J. Saccacio predicted that foreclosures are plateauing, but won’t drop off dramatically any time soon. He pointed out that although default notices have dropped, repossessions are at a record level, indicating that banks are working through their backlogs.
Five states account for 52 percent of the total number of foreclosures: California, Florida, Michigan, Illinois, and Nevada. The states rounding out the top 10 are Arizona, Georgia, Texas, Ohio, and Virginia.
Source: RealtyTrac (05/13/2010)
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Investment Bank Predicts Rising Foreclosures
Foreclosed homes owned by banks, Fannie Mae, Freddie Mac, and other mortgage investors topped 480,000 at the end of February, Barclays Capital estimates in a new study.
Barclays expects housing inventory to rise further over the next 20 months, peaking at 536,000 homes in January 2012. Barclays also predicts 1.6 million sales of distressed properties in 2010 and 2011, declining to 1.5 million in 2012, with about 30 percent of all home sales this year and next foreclosure related. Normally, only 6 percent of sales are related to foreclosures.
Barclays also expects home prices to fall another 3 percent to 5 percent over the next two years, assuming that unemployment will decline to 8 percent within the next two years.
Source: The Wall Street Journal, James R. Hagerty (04/28/2010)
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Foreclosures Decline in Most Hard-Hit Markets
Among the 20 U.S. metropolitan areas with the highest foreclosure rates, foreclosures actually declined in the last year, falling in 14 of the top 20 cities and eight of the top 10, reports RealtyTrac, which provides a market platform for foreclosures.
“The decreasing foreclosure activity in some of the nation’s top foreclosure hot spots in the first quarter is largely the result of government intervention and other non-market influences, and not a sure signal that those areas are out of the woods yet when it comes to foreclosures,” says RealtyTrac CEO James J. Saccacio.
Nationwide, foreclosure activity increased in 159 of the 206 metro areas RealtyTrac tracks and was up 16 percent overall compared to the first quarter of 2009.
Here are the top 10 cities with the most foreclosures:
1. Las Vegas-Paradise, Nev.
2. Modesto, Calif.
3. Cape Coral-Fort Myers, Fla.
4. Riverside-San Bernardino-Ontario, Calif.
5. Stockton, Calif.
6. Merced, Calif.
7. Phoenix-Mesa-Scottsdale, Ariz.
8. Vallejo-Fairfield, Calif.
9. Bakersfield, Calif.
10. Orlando-Kissimmee, Fla.
Source: RealtyTrac (04/29/2010)
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Investors Urge Broad Solutions for Foreclosures
The Association of Mortgage Investors (AMI) reacted to Thursday’s news that foreclosures hit record highs by commenting that this was an indication that the causes of homeowner defaults aren’t being addressed.
In a statement, the organization said: “Any solution will be incomplete if it does not give homeowners a way to reduce debt payments on all of their obligations,” including not just mortgages, but other kinds of loans and credit card payments as well.
AMI urged:
• All modifications should include the requirement for income verification.
• Second liens and other loans should be aggressively modified.
• Servicer conflicts must be addressed.
• Debt to income ratios must be examined and adjusted for all borrowers.
• AIM supports reducing principal for underwater home owners, but the program must be clearly defined.
Source: Association of Mortgage Investors (04/15/2010)
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Study: Multiple Woes Lead to Foreclosures
In a Florida study that could shed light on other financially strapped households, homeowners who faced foreclosure during the housing bust were not driven into that situation by a single factor but were victims of multiple issues that left them financially strapped, according to a study for the Florida REALTORS®.
“What we found in talking with people who’ve gone through foreclosure is that there’s a ‘plus-one factor,’ meaning job loss coupled with other circumstances such as divorce or health problems that usually led to homeowner distress,” says Joel Searby, director of marketing for Strategic Guidance Stems, which conducted the survey.
Other findings:
• 20 percent had incomes between $50,000 and $75,000; 20 percent had incomes greater than $100,000.
• 55 percent had attended college or graduated.
• 92 percent were married.
• 35 percent had lived in their homes for 10 years or more.
• 40 percent had lived in their homes five years or less.
Source: Miami Herald, Toluse Olorunnipa (04/07/2010)
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Future Foreclosures Could Hamper Housing
In spite of signs of a recovery, many home buyers are continuing to fall behind on their mortgages. Some economists see this as an indication that a second major wave of foreclosures is likely, even though the housing market appears to be stabilizing.
This next upsurge in foreclosures could cause more disruption and push prices down farther.
Housing experts say that the recent favorable housing data doesn’t reflect the number of properties that banks have left in limbo — repossessed, but not yet on the market.
“Lenders are deluged by late-stage delinquencies. The pent-up foreclosure inventory is there,” says Massoud Ahmadi, director of research for the Maryland Department of Housing and Community Development.
Source: Washington Post, Renae Merle (03/12/2010)
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Rate of New Foreclosures Shows Decline
The national foreclosure rate is moderating with the number of foreclosures in February rising 6 percent compared to February 2009, the lowest year-over-year increase in four years.
Foreclosure filings, including default notices, scheduled auctions, and bank repossessions, were reported on 308,524 U.S. properties during February, a 2 percent decrease compared to January, RealtyTrac also reports.
“The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said RealtyTrac CEO James J. Saccacio.
Saccacio said it was too early to call this the beginning of the end of the foreclosure crisis because of the number of homes in limbo due to government programs and other delays.
The 10 states with the higher foreclosure rates are Nevada, Arizona, Florida, California, Michigan, Utah, Idaho, Illinois, Georgia and Maryland.
Six states account for more than 60 percent of the national total: California, Florida, Michigan, Illinois, Arizona and Texas.
Source: RealtyTrac (03/11/2010)
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Obama Takes Licks From HAMP Critics
Congressional lawmakers on both sides of the aisle took potshots at the Obama administration’s latest efforts to fix the Home Affordable Modification Program (HAMP).
President Obama announced last week that he was allotting $1.5 billion to assist local housing finance agencies in the states with the most foreclosures: California, Florida, Nevada, Arizona, and Michigan.
Democratic Congresswoman Marcy Kaptur of Ohio said this week that the program might be “doomed to failure” and added that having the Treasury Department run the program doesn’t make sense because Treasury doesn’t have any housing expertise.
Another skeptic: Democratic U.S. Rep. Dennis Kucinich, chair of the House Oversight and Government Reform subcommittee on domestic policy. He told Treasury representatives, “You’re going to have to do more. This is a wake-up call.”
Source: The Wall Street Journal, Judith Burns, and Reuters News, Corbett B. Daly (02/25/2010)
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Fannie to Offer Closing Cost Aid on Foreclosures
Fannie Mae, the largest provider of residential home funding in the United States, announced Friday that it would pay the closing costs on purchases of foreclosed homes in its inventory.
The government-controlled company said buyers of qualified properties will get up to 3.5 percent in closing costs, or an equivalent amount for the purchase of new appliances.
The goal of Fannie is to clear out the nearly 50,000 properties it has in inventory— listed on HomePath.com, the Web site created by Fannie Mae last year to sell the growing number of foreclosed homes.
“Attracting qualified buyers to the market and reducing inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover,” said Terry Edwards, executive vice president for credit portfolio management, in a statement.
Source: Reuters News, Al Yoon (01/28//2010)
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Record Number of Foreclosures in 2009
Total foreclosures in 2009 reached 2.8 million, a 21 percent increase over 2008 and a 120 percent rise compared to 2007, according to foreclosure sales Web site RealtyTrac in a year-end report released Wednesday.
RealtyTrac also reported that fourth quarter foreclosures decreased 7 percent from the third quarter, although they were up 18 percent compared to 2008. December 2009 foreclosures were up 14 percent over December 2008.
The 10 states with the highest foreclosure rates in 2009 were: Nevada, Arizona, Florida, California, Utah, Idaho, Georgia, Michigan, Illinois, and Colorado.
California, Florida, Arizona, Illinois account for 50 percent of the foreclosures. The other 10 states with the largest numbers of foreclosures are Michigan, Nevada, Georgia, Ohio, Texas, and New Jersey.
“A massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog,” says RealtyTrac CEO James Saccacio.
Source: The Associated Press (01/14/2010)
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Principal Cuts May Prevent Foreclosures
At least 7 million borrowers will lose their homes this year and next unless there is a broad increase in property values or lenders become much more willing to cut the principal on mortgage loans, an analyst with Amherst Securities Group told the U.S. House Financial Services Committee last month.
That testimony has motivated Federal Deposit Insurance Corp. Chair Sheila Blair to consider incentives for lenders to cut principal on $45 billion in mortgages her agency has acquired from seized banks.
“We’re looking now at whether we should provide some further loss-sharing for principal write downs,” says Bair. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs.”
While principal reductions are rare, some banks are doing them. In the third quarter of 2009, about 21,000 home loans were modified by reducing the principal, according to Mortgage Metrics, a government publication.
Mark Zandi, the chief economist for Moody’s Economy.com, suggests that banks receive a federal match of $1 for every $2 in principal reductions they offer to home owners.
“You’re not going to wipe out all the borrowers’ negative equity,” he says. “This just gives them enough hope to get them committed again.”
Source: Bloomberg, John Gittelsohn and Prashant Gopal (01/07/2010)
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Coming Soon: More Foreclosures
More than 1.7 million homeowners were verging on foreclosure this fall, making it likely that these houses will soon end up on the market one way or the other, driving down overall housing values.
“We’re going to be dealing with high levels of distressed (sales) in the marketplace for at least a couple of years,” says Mark Fleming, chief economist of researcher First American CoreLogic, which has been studying the problem.
Some real estate practitioners say they fear that this onslaught is coming.
“We’ve been in recovery mode for most of the year. How many foreclosures do they have to dump on the market to affect that? I don’t know,” says Deborah Farmer, owner of StarLight Realty in Tampa, Fla. “Any house priced under $225,000 will be affected by a large increase in foreclosures in this market.”
Source: Associated Press, Alan Zibel (12/17/2009)
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Defaults Could End Up Being a Boon
The increasing willingness to abandon home ownership in favor of renting could, in a counterintuitive way, be an important step in the economic recovery, some analysts say.
The U.S. home ownership rate has declined to 67.6 percent as of September, down from its peak of 69.2 percent in 2004. Much of the reason for this decline is the number of foreclosures.
Deutsche Bank Securities expects 21 million U.S. households to be underwater by the end of 2010. If 20 percent of these homeowners default, loses to banks and investors could exceed $400 billion.
While these losses are definitely bad for banks, relief from paying a mortgage makes more money available—an estimated $5 billion a month—for consumers to purchase other things.
“It’s a stealth stimulus,” says Christopher Thornberg of Beacon Economics, a consulting firm specializing in real estate. “The quicker these people shed their debts, the faster the economy is going to heal and move forward again.”
Source: The Wall Street Journal, Mark Whitehouse (12/10/2009)
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Foreclosures Decline for Fourth-Straight Month
Foreclosures declined 8 percent in November compared with October, but were still up 18 percent from November 2008.
This was the fourth-straight month that U.S. foreclosures have declined since hitting an all-time high in July, according to online foreclosure marketer RealtyTrac.
Default notices, an indicator of coming foreclosures, also were down 8 percent from October, but up 22 percent from November 2008. Bank repossessions were flat from the previous month and down 2 percent from November 2008.
“We don’t really believe the underlying problems have been resolved,” said Rick Sharga, senior vice president for RealtyTrac. Many borrowers, he told the Associated Press, “simply aren’t going to qualify” for government and mortgage servicer help.
States with the highest foreclosure rates are:
* Nevada
* Florida
* California
* Arizona
* Idaho
* Michigan
* Illinois
* Utah
* Maryland
* New Jersey
Four states account for more than 50 percent of actual foreclosures: California, Florida, Illinois, and Michigan.
Source: RealtyTrac, (12/10/2009)
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Increasing Volume of Foreclosures in Pipeline
An additional seven million properties are headed for foreclosure, according to a study in September by Amherst Securities Group.
Mark Zandi, chief economist at Moody’s Economy.com, concurs with high estimates of potential foreclosures, anticipating 2.4 million homes in foreclosure in 2010, compared with 2 million in 2009.
Experts say the onslaught is the result of moratoriums lifting, banks overwhelmed by the demand for modifications, and the sheer volume of late payers. Banks also are trying to spread asset write-downs over several reporting periods to maintain a better profit picture.
Source: USA Today, Stephanie Armour (11/19/2009)
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Foreclosures Tricks and Treats
HGTV’s real estate Web site Frontdoor.com has identified what it calls the “tricks and treats” of buying a foreclosure:
Tricks to avoid:
* Just because a foreclosure has a low price tag doesn’t mean it’s a bargain. Many need lots of expensive repairs.
* Buying a foreclosure property isn’t for amateurs. Buyers need a knowledgeable real estate practitioner to guide them through the process.
Foreclosure treats:
* Well-maintained foreclosures priced at 50 percent or less of their market value make homeownership very affordable.
* Building a relationship with a lender’s REO (real estate owned) department can help when it’s time to make a deal.
Source: Frontdoor.com (10/29/2009)
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Foreclosures: Down But Still Elevated
Mortgage foreclosure filings declined in September for the second-straight month, but September was still the third-highest monthly total behind July and August since real estate data firm RealtyTrac began keeping count in January 2005.
September filings were down 4 percent from August, according to a report released Thursday, but they were up 29 percent compared to August 2008. Third-quarter filings were 5 percent higher than the second quarter.
One in every 136 U.S. housing units received a foreclosure filing during the third quarter. “Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters,” James J. Saccacio, CEO of RealtyTrac, said in a statement.
Nevada’s foreclosure rate led the nation, followed by Arizona, California, Florida, Idaho, Utah, Georgia, Michigan, Colorado, and Illinois.
Unemployed homeowners are driving the increase.
Source: Reuters News, Julie Haviv (10/15/2009)
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Renewed Attention to Halting Foreclosures
With foreclosures continuing to rise, Rep. Joe Sestak (D-Pa.) hopes to spark interest in a bill that would give borrowers who owe more than their homes are worth new FHA mortgages.
The Homeownership Vesting Plan Act—which received little attention when first introduced in March—would pay original lenders the difference between the old and new loans over the next five years, and pay mortgage servicers $1,000 for each loans they agree to convert, while borrowers would get a lower rate on a smaller loan.
Crafted to reduce foreclosures and help keep home prices from sinking further, the legislation seeks to pay for the $50 billion initiative largely with unused TARP money that was set aside for less successful home-loan workout programs.
Source: Philadelphia Inquirer, Joseph N. DiStefano (10/16/09)
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Distressed Properties: Still More Pain Than Gain?
Foreclosures and other distressed property might look like a good deal, but some buyers are discovering that they just don’t have the stomach for the problems that come with it.
Buyers of distressed property often must deal with severe vandalism, unpaid water bills and homeowner-association dues, hidden second mortgages, and mechanics liens.
Lenders are trying to make these purchases go more smoothly. J.P. Morgan Chase & Co. has twice as many employees as before handling short sales, while Bank of America Corp. now allows real estate practitioners to submit short-sale documents online. The U.S. Treasury Department is expected to soon issue streamlined guidelines to lenders on short sales.
An experienced real estate practitioner with training in selling foreclosures and short sales can make a big difference, but in the long run, buyers who don’t have much cash or aptitude for home repairs should think hard before trying to buy a distressed property.
As Jerrold Horning, a homebuyer in El Cajon, Calif., said, “I don’t think it’s worth the hassles.”
Source: The Wall Street Journal, M.P. McQueen
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Florida Panel Urges Mediation on Foreclosures
A panel chaired by the Florida judiciary is recommending strategies to clear out the backlog of foreclosed properties in the state, including mediation for primary homes and a fast-track plan for vacant and abandoned properties.
The 15-member panel chaired by Circuit Judge Jennifer Bailey of Miami agreed that managed mediation should be required for primary homes in foreclosure unless both the borrower and the bank agree to opt out.
Opponents to the plan said mandatory mediation would slow the process.
Source: The Associated Press
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Receivers Take on Foreclosure Hassles
Some banks tired of the headaches involved with foreclosures are turning properties over to receivers, which for steep fees keep the banks’ names off the properties, pay all the costs and taxes, and handle the maintenance.
It’s hard to track down exactly how frequently this is happening, but membership in the California Receivers Forum, a trade group, has gone from 300 in 2007 to 550 today.
Beyond not having to deal with the minutia of property management, the advantage for the banks is avoiding local and state governments that increasingly are fining owners and managers of properties for code violations. In some areas, the fees are a punishing $1,000 per day.
Also, in the case of a newly developed property, avoiding taking title on a property allows banks to avoid liability for construction defects and injuries on unsecured construction sites.
Source: The Wall Street Journal, David A. Graham (07/29/2009)
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Investors Drive Foreclose Prices Up
Home shoppers in parts of the country with lots of foreclosures are finding it increasingly difficult to buy. Investors are bidding up prices thousands above the original asking price.
Federal legislation slowing the number of foreclosures is adding to the problem by reducing the number of homes on the market. For instance, in Las Vegas, one of the areas where the bidding problem is greatest, home inventories are down 10 percent since March, according to the Las Vegas Association of REALTORS®.
When a bidding war erupts, the problem is particularly difficult for traditional buyers because investors are usually cash purchasers. They can bid up a property without concern whether the appraisal will prevent them from getting a loan.
Experts say the problem is not unlike the situation at the height of the housing bubble. “This market is about as abnormal as the hypermarket that we came out of a few years ago,” says Jay Butler, director of the Realty Studies program at Arizona State University.
Source: The Associated Press, Jonathan J. Cooper (07/20/2009)
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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 home sales, causing more workers to lose their jobs and putting a drag on the economic recovery,” said NAHB Chairman Joe Robson.
The survey showed that nearly 60% of the builders are reporting that inadequate appraisals are causing serious problems in the market, with the biggest problem being comparables of new single-family homes that are too often based on foreclosures and distressed sales.
“Lost home sales are killing jobs, deepening the housing slump and hurting local economic activity,” said Robson, who noted that construction of 100 single-family homes generates 324 local jobs, $21.1 million in local income and $2.2 million in taxes and other revenue for local governments in the first year.
Of those who are reporting appraisal problems, 54% said that the appraisal amount was actually less than the cost of building the home. Full Story.
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Strapped Condo Boards Initiating Foreclosures
Strapped condo boards are foreclosing on units whose owners have failed to pay monthly assessments.
Because banks that hold defaulted mortgages don’t owe condo dues until they actually take title of the property, many condos are facing serious shortfalls and as a result face difficulty paying operating expenses.
Condos and the attorneys who represent them say banks are deliberately slowing foreclosure proceedings to avoid paying monthly assessments.
“It’s become common practice to delay foreclosure,” says Eric Glazer, a condo-association lawyer in Hallandale Beach, Fla., which is between Fort Lauderdale and Miami. “Banks are forcing the associations to take them the distance.”
To combat this, condo boards, which can attach liens just like banks do, are stepping up and forcing foreclosure sales. After collecting back assessments, they pay out what’s remaining to the bank and rent out the unit until the bank gets around to deciding what to do next.
Lenders say they aren’t deliberately slowing foreclosure sales, but are facing political pressure to allow time for loans to be modified. “There’s no generalized delay in foreclosure on either condominiums or anything else. Unfortunately, the courts are clogged with these things,” says Thomas Cardwell, general counsel for the Florida Bankers Association.
Source: The Wall Street Journal, Nick Timiraos (06/18/2009)
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Low-Ball Appraisals Cause Problems
Real estate practitioners in Nevada, one of the areas hit hardest by foreclosures, say low-ball appraisals are slowing sales and preventing recovery.
Mark Stark, CEO of Prudential Americana Group in Las Vegas, says he thinks appraisers are too focused on projecting how much prices could fall rather than reflecting what values really are.
“The appraisers are being very conservative,” Stark says. “They are trying to cover themselves.”
Mark Madsen, communications director for Raintree Mortgage Services, says appraisers are just doing what they’ve been told. “I think appraisers are scared to get blacklisted,” he explains. “If the appraisals are too high, then banks may no longer accept appraisals from that person.”
Source: Brian Wargo, Las Vegas Sun (06/05/09)
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More Buyers Lured to Foreclosed Properties
Many households say that foreclosures are a bargain and are increasingly eager to buy them, according to a Harris Interactive survey conducted for Trulia.com and RealtyTrac.
The survey found that 55 percent of U.S. adults are at least somewhat likely to consider purchasing a foreclosed home, up from 47 percent who answered the same question in November 2008.
But buyers aren’t naïve about the hassles involved with purchasing foreclosed property. About 85 percent said that they could identify negative aspects, up from 80 percent who felt the same way last November.
* 71 percent were concerned about hidden costs;
* 46 percent believe the process is risky;
* 31 percent fear the property will lose value.
Buyers of foreclosures also expect hefty discounts – at least 25 percent.
Source: RealtyTrac.com and Trulia.com (05/20/2009)
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