Tag Archives: foreclosure

Housing Inventories Are Falling

January 24, 2013 jd 2 Comments

Photo Credit: http://www.shakesville.com/2008/06/my-former-landlord.html

Home prices are increasing across the country as the number of homes for-sale continues to fall. But at a time when buyer demand is picking up, why is inventory still so low?

Inventories fell to 1.82 million at the end of last year, a 21.6 percent drop from one year earlier, the National Association of REALTORS® reports.

The Wall Street Journal recently highlighted several reasons behind the dropping inventories, including:

Sellers hesitant to sell: About 22 percent of home owners with a mortgage are still underwater, owing more than their home is currently worth. Home owners don’t tend to sell unless a life-changing event occurs when they’re underwater because they don’t want to take a loss on the sale of their house. CoreLogic data shows that inventories are the most constrained in areas with the highest number of underwater borrowers.
Not enough equity to trade up: Often times, home owners rely on the equity from their home to make a down payment on their next home. With fewer home owners seeing equity in their houses, they may not have enough money to move into a pricier home, which is constraining the would-be “trade up” buyer from moving.
Investors continue to snatch up properties: Investors are snapping up properties, but they’ve changed their strategy from past years, which is also constraining inventories. Now they’re holding onto properties and turning them into rentals instead of rehabbing properties and flipping them for profit. This is keeping fewer homes on the market.
Banks are slowing down foreclosures: Banks have new rules to meet with the foreclosure process, and it’s causing them to move at a slower pace in foreclosing on homes. Banks also are showing a preference for short sales and loan modifications, which are curbing the number of foreclosed homes on the market.
Builders are doing less building: Housing starts were at record lows from 2009 through 2011 so there’s less inventory being added to the market. A rebound in the new-home market has only recently started to occur.

Source: “Six Reasons Housing Inventory Keeps Declining,” The Wall Street Journal (Jan. 22, 2013)

Six Reasons Housing Inventory Keeps Declining

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Real Estate

Banks Close To $10B Settlement Over Foreclosure Abuses

January 2, 2013 jd

Fourteen banks are reportedly nearing a $10 billion settlement with banking regulators over the banks’ past involvement in foreclosure mishandlings that included faulty paperwork and excessive fees, The New York Times reports.

About $3.75 billion of the reported settlement would go to aid home owners who lost their homes to foreclosure — more than double what was set aside from a $26 billion settlement reached in 2012 among the state attorneys general and five of the nation’s largest banks.

The majority of the money from the latest settlement would go to help home owners struggling to make their payments and remain in their homes, such as with aid like loan modifications or lowering the amount of principal on their mortgages.

Banks have faced several settlements with government officials and home owners in recent months that have aimed to hold them accountable for the 2008 financial crisis and subsequent housing slump. From 2007 to early 2012, four million Americans faced foreclosure.

“It’s certainly a victory for consumers and could help entire neighborhoods,” Lynn Drysdale, a former co-chairwoman of the National Association of Consumer Advocates, told The New York Times about the latest proposed settlement. “But the devil, as they say, is in the details, and for those people who have had to totally uproot their lives because of eviction it may still not be enough.”

The same banks involved in the $26 billion mortgage settlement–JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial — also are included in this recent settlement, The New York Times reports.

Sources: “Settlement Expected on Past Abuses in Home Loans,” The New York Times (Dec. 30, 2012) Daily Real Estate News

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Real Estate

New Short Sale Program Offers Relief For Underwater Homeowners

November 16, 2012 jd

One of the federal government’s most-important financial relief efforts for underwater homeowners started operating Nov. 1.

Making sense of the story

Traditionally short sales, where the lender agrees to accept less than the full amount owed and the house is sold to a new purchaser at a discounted price, are associated with extended periods of delinquency by the original owner. The new Fannie-Freddie program breaks with tradition by allowing short sales for owners who are current on their payments but are encountering a hardship that could force them into default.

Eligible hardships under the new program run the gamut: Job loss or reduction in income; divorce or separation; death of a borrower or another wage earner who helps pay the mortgage; serious illness or disability; employment transfer of 50 miles or greater; natural or man-made disaster; a sudden increase in housing expenses beyond the borrower’s control; a business failure; and “other,” meaning a serious financial issue that isn’t one of the above.

Homeowners who participate in this new program should be aware that although officials at the Federal Housing Finance Agency – the agency that oversees the program – are working on possible solutions with the credit industry at the moment, it appears that borrowers who use the new program may be hit with significant penalties on their FICO credit scores – 150 points or more.

Other factors to consider are promissory notes and other “contributions.” In the majority of states where lenders can pursue deficiencies, Fannie and Freddie expect borrowers who have assets to either make upfront cash contributions covering some of the loan balance owed or sign a promissory note. This would be in exchange for an official waiver of the debt for credit reporting purposes, potentially producing a more favorable credit score for the sellers.

Finally, participants should be aware of second-lien hurdles. The program sets a $6,000 limit on what second lien holders – banks that have extended equity lines of credit or second mortgages on underwater properties – can collect out of the new short sales. Some banks, however, don’t consider this a sufficient amount and may threaten to thwart sales if they cannot somehow extract more.

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Real Estate

Homeowner Bill of Rights Plans Move Forward

June 29, 2012 jd

On Wednesday, a so-called “Homeowner Bill of Rights” moved a step closer to passing, with housing advocates claiming the bill would help people stave off foreclosures. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) opposes provisions in this measure which will allow anyone to stop the foreclosure process by filing a lawsuit, merited or not.

C.A.R. agrees that careful and balanced reforms to the foreclosure process are necessary. However, C.A.R. opposes AB 278 because it will further delay the housing recovery by inviting bad-faith lawsuits and defaults, making it difficult for even well-qualified borrowers to obtain financing.
The legislation would ban the practice of dual-tracking, in which a bank continues foreclosure proceedings while a homeowner is seeking a loan modification; require banks to provide a single of point – either a person or a team – for struggling borrowers; and give borrowers the right to sue their lenders for “significant, material” violations of the new law.
The bills also require lenders to give a clean explanation when they reject borrowers for a loan modification, to verify mortgage documents before a foreclosure, and to provide copies to borrowers upon request. Lenders can be fined up to $7,500 per loan for filing and recording unverified documents. The bills’ provisions apply to first-lien mortgages for owner-occupants.
For more information about C.A.R.’s opposition to AB 278 and to learn how to take action, visit this website

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Real Estate

Short Sales May Get Shorter

June 2, 2012 jd

The Colonial Revival headquarters of Fannie Mae, designed by architect Leon Chatelain, Jr. in 1956, located at 3900 Wisconsin Avenue, N.W., in the Cathedral Heights neighborhood of Washington, D.C. (Photo credit: Wikipedia)

Beginning June 15, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, will require both agencies to give short-sale buyers a final decision within 60 days.

Under this same guideline, Fannie Mae and Freddie Mac also must respond to initial requests for a short sale within 30 days of receiving the buyer’s submission.

According to one analyst, expedited sales as a result of the new directive will benefit the entire housing market. They could also remove some risks for buyers – many of whom previously had to wait months for a decision and then ended up not getting the house they wanted.

Lenders favor short sales because they are less costly and more efficient than foreclosures. Yet the homeowners, trying to exit as gracefully as possible, never know how long the process will take or how badly their credit will be hurt.

Although short sales have a reputation for being easier on credit scores than foreclosures, Experian says that is a “fairly common misperception.” If there is a difference in impact, according to Experian, it is slight.

Both short sales and foreclosures remain on the credit report for seven years, but foreclosures don’t appear until the legal paperwork is filed, and that could take months.

The effect was measured by an analysis by VantageScore, a provider of credit scores used by lenders. The higher the credit rating a consumer has, the more points he or she would lose in a short sale.

If consumers started with an 830 score, they would most likely lose 100 to 110 points from a short sale, 120 to 130 points from a foreclosure. But a homeowner with a 625 score, who is behind on his mortgage and some credit card payments, would lose 15 to 25 points from a short sale and 10 to 20 points from a foreclosure.

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Real Estate

Real Estate Investor Busted – Sacramento, California

January 31, 2012 jd

SACRAMENTO, CA—A real estate investor pleaded guilty today in United States District Court in Sacramento to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Calif ., Sharis A Pozen, Acting Assistant Attorney General of the Department of Justice’s Antitrust Division, and Benjamin B Wagner, United States Attorney for the Eastern District of California, announced.

Kenneth A Swanger pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices, the department said in court papers.

According to the court documents, after the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit.
Continue reading Real Estate Investor Busted – Sacramento, California →

Real Estate

How Long Are Loans Delinquent in Foreclosure?

November 2, 2011 jd

Loans in foreclosure have been delinquent an average of 624 days — a record high, according to Lender Processing Services’ September report.

The time loans spend in foreclosure continues to increase. For example, 40 percent of home owners with loans in foreclosure have failed to make a payment within two years, and 72 percent of home owners have failed to make a payment in a year or more.

The time from the last payment to foreclosure sale has been found to be even longer in judicial states, in which foreclosures must be approved by the courts. The time span in judicial states is averaging 761 days, six months longer than non-judicial states, LPS reports.

While loans are spending longer in foreclosure, the number of foreclosure starts is decreasing. Foreclosure starts decreased 11.2 percent in September compared to August, and foreclosure starts are 15 percent below a year earlier, LPS notes in its recent report.

The states with the highest percentage of loans in delinquency or foreclosure are:

Florida
Mississippi
Nevada
New Jersey
Illinois

The states with the lowest: North Dakota, South Dakota, Wyoming, Alaska, and Montana.

Source: “LPS: Foreclosures Delinquent an Average of 624 Days,” HousingWire (Nov. 1, 2011) and Lender Processing Services

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Real Estate

Home Owners Beware A New Twist on Foreclosure Rescue Fraud

September 27, 2011 jd

Forensic Mortgage Loan Audit Scams:

Fraudulent foreclosure “rescue” professionals use half-truths and outright lies to sell services that promise relief to homeowners in distress. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, the latest foreclosure rescue scam to exploit financially strapped homeowners pitches forensic mortgage loan audits.

In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The “auditors” say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

Nothing could be further from the truth. According to the FTC and its law enforcement partners:

there is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.
some federal laws allow you to sue your lender based on errors in your loan documents. But even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable.
if you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.

If you are in default on your mortgage or facing foreclosure, you may be targeted by a foreclosure rescue scam. The FTC wants you to know how to recognize the telltale signs and report them. If you are faced with foreclosure, the FTC says legitimate options are available to help you save your home.

Spotting a Scam

If you’re looking for foreclosure prevention help, avoid any business that:

guarantees to stop the foreclosure process – no matter what your circumstances are
instructs you not to contact your lender, lawyer or credit or housing counselor
collects a fee before providing any services accepts payment only by cashier’s check or wire transfer
encourages you to lease your home so you can buy it back over time
recommends that you make your mortgage payments directly to it, rather than your lender
urges you to transfer your property deed or title to it
offers to buy your house for cash at a fixed price that is inappropriate for the housing market
pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.

Source: Federal Trade Commission

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Real Estate

Foreclosure Notices Soar 33%, Biggest Monthly Gain In 4 Years

September 17, 2011 jd

A new wave of foreclosures hit in August, as banks picked up the pace in taking action against home owners who have fallen behind on their mortgage payments, RealtyTrac Inc. reported Thursday.

The number of U.S. homes that receiving an initial default notice rose 33 percent in August from July. That increase represents the biggest monthly gain in four years, according to RealtyTrac.

“This is really the first time we’ve seen a significant increase in the number of new foreclosure actions,” says Rick Sharga, a senior vice president at RealtyTrac. “It’s still possible this is a blip, but I think it’s much more likely we’re seeing the beginning of a trend here.”

The uptick in foreclosure activity follows after months of a slowdown in foreclosures, which started last fall, with banks reviewing foreclosure policies and paperwork after facing lawsuits and criticism over how they processed foreclosures. Some banks even temporarily halted their foreclosures as they more carefully reviewed pending cases. The slowdown was also blamed on court delays in some states.

But some housing experts say the increase in foreclosure activity actually could be good for the housing market. A faster turnaround in foreclosures could help clear the glut of shadow inventory hovering over the market, which many say has caused home values to plummet.

The “bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery,” said Josh Levin, a Citi analyst. About 3.7 million more homes are in some stage of foreclosure than in a normal housing market, Levin said.

Banks are on track to repossess about 800,000 homes this year — down from more than 1 million last year, Sharga said.

Overall, 228,098 U.S. homes — or one in every 570 U.S. households — received a foreclosure-related notice in August, a 7 percent increase from July. However, that represents a 33 percent decline from August 2010.

Source: “Report: Mortgage Default Warnings Spiked in August, Signaling Potential New Foreclosure Wave,” Associated Press (Sept. 15, 2011)

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Real Estate

Shadow Inventory Continues to Fall

August 19, 2011 jd

Standard & Poor’s estimates that it would take nearly four years — or 47 months — for the housing market to work through its shadow inventory at the current rate. While that number is still high, it marks an improvement over S&P’s first quarter report that had estimated 52 months.

Shadow inventory represents homes that are in the foreclosure system but haven’t hit the market yet. S&P defines shadow inventory as foreclosure and REO properties in 90-day delinquency or worse.

“In conjunction with stable liquidation rates, we believe these are positive signs that the amount of time it will take to clear this ‘shadow inventory’ should continue to decline over the next year,” S&P analysts said.

Delays from mortgage servicers in processing foreclosures likely will cause more than 1 million foreclosures to be postponed until next year, RealtyTrac recently reported.

As such, “the shadow inventory will continue to jeopardize the housing market’s recovery until servicers are able to improve liquidation times,” S&P said. “However, if and when that happens, an influx of homes will likely enter the market, increasing supply and driving prices down further.”

Shadow inventories are largest in New York, where S&P estimates it will take 144 months — or 12 years — to work through foreclosure properties at the current rate. That is down slightly from 146 months in the first quarter.

Source: “Standard & Poor’s: Shadow Inventory Levels Begin to Improve,” HousingWire (Aug. 17, 2011)

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