Thursday, November 4, 2010

The Truth About Foreclosures

We all know that the foreclosure problem in the country and quiet serious right now. There are actually thousands of home owners that are underwater and they owe far more than their homes could ever sell them.

Many of these homeowners have come to the conclusion that giving up their home is a better financial decision than making payments until real estate values recover. Numerous "strategic defaulters" now can afford to buy mortgage payments.

With the way the foreclosure process works, it normally takes at-least 8 months of missed payments before the bank will actually finalize the foreclosure and repossess a house. With the huge number of foreclosures, some banks are literally taking years to initiate foreclosure auctions. They don't want to add the losses to the books and so are postponing foreclosures as long as possible.

Underwater homeowners can not only eliminate thousands in debt by being foreclosed on, but with way the system works, can also save money by not making home payments for many months.

Providing what is known as "stealth stimulus is the flaw in the foreclosure process.” People who are living rent free in homes undergoing foreclosure, have a lot of extra cash, and most of this is helping the overall economy by being spent.

To be specific, some owners of underwater homes listed in the Boston MA MLS Listings are actually making money off of the foreclosure process by renting out their homes that they aren't making payments on.

Foreclosure was meant as a way to protect banks from irresponsible borrowers by using the real estate as collateral. Foreclosures are providing the opposite effect because of the the current real estate market, and unscrupulous lending practices that occurred during the housing boom. Undergoing through a foreclosure process can literally provide financial benefits to the borrower while transferring to the bank.

Strategic defaulting provides huge financial relief to insolvent borrowers but somehow might be unethical in other ways. Because of the slow foreclosure process that stimulates buyers in today's slow economy to give out extra cash to people who need money for housing repayments.

Tuesday, October 26, 2010

Housing Boom Leaves Salt Lake Real Estate In Decline

The housing boom was remarkable for real estate agents, and some home owners. What happened was home values escalated and the people who sold at the right time made money effortlessly. But, those boom days are long gone, and the reality of the Real Estate in Salt Lake Utah market is one of decline. Nearly everyone now might have wished that the housing boom never happened.

If market conditions remained steady and constant, where would home sales and prices be? If they increased by exactly 2% each year, this is where annual home sales in Salt Lake City would be. If this were the case, we would have had about 4,750 single family home sales this year. This is two times the original home sales we'll see that are probably aroudn 2,400.

The real estate market in Salt Lake has been going up and down. Because of economic recovery and home buyer's tax credit, it is still considered feeble than the average rates. For buyers, this is a an opportunity to take advantage of the low prices. This is the best time to deal with properties for investors, but they have to be careful for competition is growing. For sellers, it is best to be patient because this is still the buyer’s market.

Compared with home price averages from 1998-2001, if Salt Lake home prices increased by exactly 3% every year, they would still be too high. The yellow and red lines show what “average” home values would be, while the blue and green lines represent the median values. Under this model, average home prices in 2007 were about 28% too high. This year they are still nearly 12% above the turn of the century adjusted for inflation levels.

The SLC Real Estate market has come down a long ways over the past three years, but with the way things are looking, it looks like SLC Homes will see further price declines over the next year.

Wednesday, October 20, 2010

Is this a good time to try and sell?

At this point, Logan Real Estate is worth less than it has been at any other time in the last 4 years because there are fewer buyers and more Logan homes for sale.

If there are too many homes for sale, the rate of selling is relatively slower than expected, and homes might not sell at all. This trend results to home prices going down because there is more real estate inventory than potential buyers, which makes this period not a good time to market your home.

Hence, this is not a good time to try to sell your home because the market conditions are not in its competent state.

However, the real estate inventory might be at all time high, but lowering of home prices ensue delay of home sales. These market conditions might get worse next year and right now Northern Utah is experiencing this upshot. They observed a big decline in home sales. Compared with 2009, last quarter home sales in Cache County were down by 38%. So, the price you can get for your home now will be more than what you will be able to get next year with the current real estate trend.

But sooner or later, the prices will start rising again and the levels of inventory will level out when real estate inventory goes down. Hopefully, this will happen after 10 months if and only if something drastic sways the real estate market.

You’re probably better off selling now than you will be next year. But if you really need to sell, now is not a good time to sell if you want to get as much money as possible out of your home.

Thursday, September 30, 2010

Bank of America Short Sales and their Dawdling Process

Almost any real estate agent trying to work out a short sale deal with Bank of America will express frustrations with the slow and painful process. Bank of America is dealing with more short sales than any other company, in large part due to their acquisition of Countrywide Home Loans which was notorious for offering bad loans during the housing boom.

There are a couple of things Bank of America does that especially make the short sale transaction difficult. For one, Bank of America will not allow the same agent to represent both sides of the transaction. They won’t approve a short sale file unless there are two separate agents.

I’m sure they are doing this because they feel it will help them to get the best purchase price for each home they need to approve, and will help them stay out of potential legal issues. But, for real estate agents who have BOA short sales listed, this can be a royal pain when they have a buyer who is interested in a property they have listed.

Bank of America also requires that buyers get prequalified with BOA before they will accept a short sale offer. This is a pain for people who are trying to buy short sales, who are already prequalified with other banks, but it’s actually a smart move by Bank of America. For one, they know that the potential buyers are actually qualified, and they might actually get a few more loans out of the deal, helping them get business in a time of major losses.

If we step back and look at short sales from the view of Bank of America, it is a really tough situation they are in. They are losing millions every day. And while the policy’s they have are annoying for real estate agents, as a business, they have to do what they can to try and make a profit, or at least reduce their losses.

Now Bank of America has paid the attorney's fees to foreclose (estimated at a low end of $40K in my state) and will continue to face the same or worse market conditions. Not a good business move, but that's Bank of America for you. Wasting America's money!

They say that learning to do a short sale is very simple with Bank of America compared to other banks. But since they have been attacked due to their slow approval rate, short sale homes are processed painstakingly. In today's real estate world, purchasing short sales can really turn homeowners, buyers, sellers, and real estate agents upside-down.

Monday, September 20, 2010

Increased Foreclosures Could Double Real Estate Inventory

I just read an article that brought up an interesting thought. According to a recent study done by CoreLogic, foreclosure homes should start flooding the market during the last quarter of the year. They say that this could DOUBLE the average time it takes for homes to sell. Right now the average time residential homes are on the market is 11 months. Can you imagine nearly 2 years before selling the AVERAGE home?

If the market really got this bad, I wonder if real estate agents would start declining listings. With the way the real estate industry works, real estate agents don't make money unless the home actually sells. Having an overpriced, unsellable listing is only a cost. They still have to pay for advertising, filling flyer boxes, etc.

Most listing agreements are for six month terms. If only a select few houses actually sell within the first six months of listing, then real estate agents will be wasting their time with most listings.

While there will always be the desperate and new agents willing to do anything to get their name out there, I think we will begin to see the top agents decline listing homes unless the seller is reasonable and will price their home at a sell able point. It will be interesting to see what happens for the future real estate market.

Because foreclosures in Logan Utah have been low, we hopefully won't see double the time homes are on the market. Hopefully the Logan Utah Real Estate market can avoid this possible catastrophe.

The future for areas like Arizona, Nevada, California and Florida Real Estate could be substantially bleaker if the number of foreclosure homes really floods the market.

Friday, May 7, 2010

High Income Affluent Adults Have Highest Rate of Foreclosures

  • I found this study really interesting. The highest percentage of foreclosures was actually among high income earners who were greedy, and aggressive with their money. Most of these didn't have large families. Their priorities in life were the show and money. They spent much more than they really should have and when times got tough, they couldn't keep up. I think this helps illustrate the importance of conservative values.

    tags: foreclosures

    • Researchers at the University of Arkansas found that most households in foreclosure were relatively affluent and highly educated people with few or no children, living in geographical areas that experienced extremely rapid real estate appreciation.

      The researchers divided U.S. households into 21 life-stage groups, using data from a variety of sources. Then they identified which groups experienced the most foreclosures. The group with the highest foreclosure percentage was one they dubbed “Cash & Careers,” affluent adults born between the mid-1960s and the early 1970s.

      Members of this group had high household incomes, high education levels, high home values, and none to only a few children. Also, members of this group were classified as aggressive investors, most of whom lived in areas – California, Nevada, Arizona, and Florida – with rapid real estate appreciation.

      “The policy implication from our results is that strong consumer protection laws, though necessary to prevent Wall Street banks from offering high-risk loans to the most vulnerable – will not be sufficient to prevent another financial crisis like the one the U.S. economy experienced in 2007 and 2008,” says Tim Yeager, associate professor of economics and lead author of the study.

      Source: University of Arkansas (05/06/2010)

Thursday, April 29, 2010

Foreclosure Sales Expected to Increase over next few years.

  • Some interesting stats about foreclosures, projections and future home prices from the Wall Street Journal. It's amazing how big a problem foreclosures really are for home values and the housing market.

    tags: foreclosures, short sales

    • No one can estimate with much confidence how many foreclosed homes banks need to sell or how fast they are getting rid of all that property.

      A huge chunk of today’s housing supply comes from homes that have been acquired by banks or mortgage investors through foreclosure, plus those that are being offered by people who hope to avoid foreclosure by doing “short sales,” selling their homes for less than the mortgage balance due.

    • National Association of Realtors estimates that such “distressed” situations accounted for 35% of home sales in February and March
    • Barclays Capital in New York. They estimate that banks and mortgage investors including Fannie Mae and Freddie Mac owned 480,000 homes at the end of February.
    • RealtyTrac Inc., another data provider and one of the few other firms that regularly makes such calculations, estimates that banks and mortgage investors own 758,000 foreclosed homes.
    • all of the economic data the government tracks, the sector it appears to track the worst is…the housing market
    • Inside Mortgage Finance reports that mortgages backed by government-related entities – Fannie Mae, Freddie Mac, the FHA and the VA – accounted for more than 96% of home loans originated in the first quarter
    • Whatever the number of homes that banks, the federal agencies and private mortgage investors own now, it’s likely to increase. Barclays expects the inventory generally to rise over the next 20 months, peaking at 536,000 in January 2012, and then decline gradually.
    • Barclays expects 1.6 million “distressed sales” of homes – mainly foreclosures or short sales – both this year and in 2011, then a slight decline to 1.5 million in 2012.
    • Around 30% of all home sales this year and next will be foreclosure-related, forecasts Robert Tayon, a mortgage analyst at Barclays, who says that would be only about 6% in a normal housing market.
    • Barclays expects U.S. home prices on average to fall another 3% to 5%
    • adding to a decline of about 30% already recorded since 2006

Posted from Diigo. The rest of my favorite links are here.

Wednesday, April 28, 2010

103 Months to Clear Foreclosure Housing Inventory

  • This is a staggering stat about foreclosures, which shows realities of a very scary side of the housing and foreclosure market. If most of the foreclosures of people in default really happen, there are going to be lots more foreclosure homes for sale and home prices will go down.

    tags: foreclosures, shadow inventory

    • As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.

      Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses.

    • little can stop banks’ inventory of distressed homes from growing. Too many people owe too much more on their homes than they can afford. For the housing market, that could mean a long-lasting hangover.

Posted from Diigo. The rest of my favorite links are here.

Friday, April 23, 2010

First-Time Homebuyers Drive Housing Market in March: Report

  • March was a record month for US Real Estate. There were more first time buyer sales than ever before, and there were also more distressed sales than ever before. More than half of US homes sold during march were distressed in some way. 18.6% of the homes that sold were Short Sales. Here are some notes from an article on DSnews.com

    tags: first time buyers, short, sales

    • The surge in first-time buyer activity in March came at the same time the volume of distressed properties in the housing market climbed to over 50 percent, according to the survey.
    • The latest survey found that short sales accounted for 18.6 percent of the housing market in March.
    • Campbell survey found that 48.2 percent of March’s home purchase

      transactions were attributable to first-time homebuyers. This eclipsed the previous peak of 46.9 percent reached last October when the November expiration of the original homebuyer tax credit sent purchases by first-time buyers soaring.

      “The strong participation of first-time homebuyers this spring is a welcome surprise,” said Thomas Popik, research director for Campbell Surveys. “Many observers had felt that the pool of first-time homebuyers had been depleted last fall, but this is turning out not to be the case. Instead, the normal spring-summer buying season is combining with the tax credit to produce blow-out results for first-time homebuyers.”


The number of distressed homes is absolutely incredible. It will be really interesting to see what happens to the Utah real estate market this summer, post tax credit expiration. So far the rate of Utah Foreclosures isn't nearly this high. 

Friday, April 16, 2010

The Rich Are More Likely to Default

  • Homes with values more than a Million are far more likely to default than less expensive homes. Here is some interesting information from a Wall Street Journal blog.

    tags: luxury homes, default

    • People who bought some of the most expensive homes in America now are far more likely to be behind on their mortgages than are ordinary Joes.
    • We got this interesting data from First American CoreLogic, whose loan database covers more than 80% of the overall home-loan market. That database includes 1,700 mortgage loans with balances of $4 million or more. About 14.8% of those loans were 90 days or more overdue at the end of January, compared with 8.7% for all home loans tracked by First American.

      First American CoreLogic
      Percentage of home loans 90 days or more delinquent. Blue: greater than $1 m Red: less than $1m

      What’s going on here? Sam Khater, a senior economist at First American, said his theory is that the borrowers with huge loans may be more inclined than people of lesser means to decide it isn’t worth paying the lender any more once the value of the home crashes far below the loan balance.

      Another possibility is that many of those borrowers were high rollers on Wall Street who have lost much or all of their incomes and no longer can keep up their Gatsby-esque lifestyles.

Political Tide Turns Against Aggressive Mortgage-Modifications - Developments - WSJ

  • Republicans and Democrats are both not completely supportive of the Home Affordable Modification Program. Just 6% of American's are in default, is it the best interest of Government to make the other 94% pay for it?

    tags: foreclosures, bail out, HAMP

    • Rep. Jeb Hensarling, a Texas Republican, is:

      Yet another chapter in ‘America: The Bailout Nation,’ as coauthored by the President and by Speaker (Nancy) Pelosi.  It takes $50 billion from taxpayers or borrows the money from the Chinese to bail out banks that made bad loans, and to bail out many who bought more home than they could afford, speculated in residential real estate or used their home equity as an ATM machine.  We must remember that 94% of Americans own their home outright, rent or are current on their mortgage, and they are being asked to bail out the other 6%.  It’s a policy that says to the citizens who work hard, who live within their means, who save for a rainy day, ‘You are a sucker.’ When you are struggling to pay your own mortgage, you shouldn’t be forced to pay your neighbors as well.


Monday, April 12, 2010

HUD Redefines

  • Okay this is really stupid. HUD changing the definition of things will just confuse the public more. It is now calling a property behind on payments as "Foreclosed". The word, with the "ed" suffix implies that the foreclosure has happened. In reality, these properties haven't foreclosed. There hasn't been a foreclosure process yet in place, in fact there are still many months before the foreclosure auction will ever take place, that is if the mortgage loan is never made current. 

    tags: foreclosed, hud

    • Effective immediately, HUD is classifying any property that is at least 60 days behind on the mortgage or the property owner is 90 days or more delinquent on tax payments as a “foreclosed” home.

      In addition, HUD is expanding the definition of an “abandoned” property to include homes where no mortgage or tax payments have been made by the property owner for at least 90 days or a code enforcement inspection has determined that the property is not habitable and the owner has taken no corrective actions within 90 days of notification of the deficiencies.


Posted from Diigo. The rest of my favorite links are here.

Thursday, April 8, 2010

Twenty-Seven Million People with Mortgages Believe They Owe More than Their Homes Are Worth

  • Many Americans are underwater on their homes and/or worried about their abilities to pay all their bills. The number of people who claim to have a hard time paying their mortgages is also very high, especially among those who have underwater mortgages.

  • Over two-thirds (69%) of adults who are homeowners have a mortgage that they need to pay off. People whose homes are believed to be worth less than the money owed on their mortgages are common across all income groups. Fully 26% of adults with mortgages who have household incomes of $75,000 or more believe their homes are worth less than the balance of their mortgages.

  • Almost a third (29%) of adults with mortgages are having some difficulty (18%) or a great deal of difficulty (11%) paying off their mortgages.

      •               Among those who believe their homes are worth less than their outstanding mortgages, fully 26% are having a great deal of difficulty and another 23% are having some difficulty paying them off
    • The two-thirds (65%) of all adults who are concerned about having enough income to cover all their costs and expenses include 26% who are very concerned and 39% who are somewhat concerned.
      Among those who believe that their homes are worth less than their mortgages, fully 42% are very concerned and another 38% are somewhat concerned about not having enough income to cover their costs.
    • Unsurprisingly, income levels make a big difference. Concerns about not having enough income to cover costs and expenses is much higher among people with household incomes below $35,000 (40% are very concerned) than among those with incomes over $75,000 (16% are very concerned).

Posted from Diigo. The rest of my favorite links are here.

Friday, April 2, 2010

Foreclosures Will Solve Housing : NPR

  • This is an interesting article that talks about the ineffectiveness of the HAMP efforts to reduce foreclosures. It claims that foreclosures are the answer to solve the housing crisis, and Government needs to stop giving incentives for irresponsible behavior. 

    tags: foreclosures, housing, HAMP

    • Team Obama is rewarding reckless behavior, punishing the 90 percent of responsible homeowners who are making good on their mortgages, and setting up a greater moral hazard that will surely lead to an expansion of bailout nation.

      I’m talking about an add-on to HAMP, the $75 billion Home Affordable Modification Program, which has been a dismal failure. In fact, the entire foreclosure-prevention effor—-- including forgiveness of mortgage-loan principa—-- has been a failure.

    • The Office of the Comptroller of the Currency reports that nearly 60 percent of modified mortgages re-default within a year.
    • Team Obama would actually subsidize people making up to $186,000 a year who have a mortgage balance of over $700,000
    • It’s an upper-middle-class entitlement. Actually, at $186,000, it’s virtually a top-earner entitlement, according to Team Obama's definition of rich people eligible for tax hikes.
    • Why should the 90 percent of folks who make good financial decisions on their homes have to pay for the 10 percent who did not?
    • Just because a home loan is "underwater" — meaning its value is lower than today’s current market pric—-- why should a responsible person whine about it and walk away? Why not service this loan for the longer term and wait for prices to improve? That’s called personal responsibility.
    • Bloomberg financial columnist Caroline Baum argues that lower home prices are the key to solving the housing problem. Popular blogger Barry Ritholtz says we need more foreclosures, not fewer, to solve housing.
    • Bouncing from pillar to post, the White House has unsuccessfully tried mortgage modifications, foreclosure abatements, and tax credits. None of it has worked. But the price tag so far for these failed government interventions in the housing market is $75 billion and rising.

Friday, March 26, 2010

Mortgage delinquencies rise to nearly 14 percent | Reuters

  • According to the US Treasury Department. Delinquent Mortgages are Substantially Up, especially for prime loans, but somehow newly initiated foreclosures dropped during the fourth quarter of 2009.

    tags: foreclosures, delinquencies

    • The percentage of current and performing mortgages fell to 86.4 percent at the end of the fourth quarter of 2009
    • down 0.9 percent from the previous three months
    • down 3.9 percent from a year earlier.
    • 21.1 percent jump in mortgages 90 or more days past due
    • 4.7 percent of all mortgages
    • The increase in seriously delinquent mortgages was most pronounced among prime borrowers
    • The jump in seriously delinquent mortgages is likely to lead to a rise in foreclosure actions
    • mortgages accounted for 68 percent of all home loans within the portfolio
    • Home forfeiture actions -- foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions -- increased by 8.6 percent from the previous quarter to 163,224. That is up 44.5 percent from a year earlier.
    • newly initiated foreclosures, however, dropped by 15.4 percent from the previous quarter
    • up 19.0 percent from a year earlier

Posted from Diigo. The rest of my favorite links are here.

Government Moves to Assist Underwater Homeowners

  • The government is trying to encourage lenders to reduce principal amounts owed for borrowers who are "underwater." Personally, I think this is a mistake. It is giving free rides to people who used their home equity as piggy banks and can still actually afford their homes. Government needs to stop spending tax payer money rewarding the irresponsible. Here are a few notes from an article about it in the New York Times:

    tags: foreclosures, administration, underwater

    • New initiatives to help troubled homeowners, potentially refinancing millions of them into fresh government-backed mortgages with lower payments.
    • Temporarily reduce the payments of borrowers who are unemployed.
    • Encourage lenders to write down the value of loans held by borrowers in modification programs to make their mortgages more affordable.
    • The new initiatives could well spur protests among those who have kept up their payments and are not in trouble
    • White House briefing, officials emphasized that no new taxpayer money would be used for the programs. Instead, funds to provide incentives for loan servicers to participate would be drawn from the $50 billion allotted to housing in the Troubled Asset Relief Program.
    • The administration’s earlier efforts to stem foreclosures have largely been directed at borrowers who were experiencing financial hardship. But the biggest new initiative, which is also likely to be the most controversial, will involve the government, through the Federal Housing Administration, refinancing loans for borrowers who simply owe more than their houses are worth.
    • About 11 million households, or a fifth of those with mortgages, are in this position, known as being underwater. Some of these borrowers refinanced their houses during the boom and took cash out, leaving them vulnerable when prices declined. Others simply had the misfortune to buy at the peak.
    • If successful, however, the plan could pose a different type of problem: it could put taxpayers at increased risk. If many additional borrowers move into F.H.A. loans, a renewed downturn in the housing market could send that government agency into the red.
    • The new initiatives will expand the government’s current mortgage modification plan, announced a year ago with great fanfare. It has resulted in fewer than 200,000 people getting permanent new loans. As many as seven million borrowers are seriously delinquent on their loans and at risk of foreclosure.
    • fewer people are beginning default, the number of borrowers who are seriously distressed is rising. In the fourth quarter, the number of households at least 90 days past due on their mortgages swelled by 270,000
    • The government is seeking to persuade people to stay in their homes by aligning the mortgage debt with the asset value, which is the only viable path to real housing stability

Thursday, March 25, 2010

Nearly Half of Home Purchases Are Distressed Properties: Survey

  • Wow. This is pretty astounding. 17% of all US home sales are of Short Sales, 14.4% are Damaged REO homes, and 16.6% are move in ready foreclosures.

    tags: foreclosures, reos, short, sales

    • There are three major types of distressed properties: damaged REO, move-in ready REO, and short sales. During the period from November to February, sales in all three categories rose, according to Campbell Surveys. Damaged REO grew from 12.3 percent to 14.4 percent; move-in ready REO grew from 12.6 percent to 16.6 percent, and short sales grew from 12.4 percent to 17.1 percent.
    • Last month distressed properties – those involving homes acquired as part of a foreclosure or pre-foreclosure sale – accounted for 48.1 percent of the home purchase transactions
    • As more distressed properties have come onto the market, Campbell Surveys reports that home prices are again showing signs of weakness. Average home prices for all four categories of properties – damaged REO, move-in ready REO, short sales, and non-distressed – declined from January to February in the latest survey.

Utah Home Sales don't count for nearly this many foreclosures, especially Real Estate Cache Valley.

Foreclosure Inventory Is Increasing

  • Foreclosure inventory held by banks is up, but less than it was in November of 2008.This means that more foreclosures will be for sale in the near future.

    tags: foreclosures

    • 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.

Posted from Diigo. The rest of my favorite links are here.

Wednesday, March 24, 2010

Bank of America to Offer Principal Reduction to Underwater Borrowers

  • Bank of American will be losing a fortune in this new loan modification effort to reduce foreclosure by reducing principal amounts owed. But, the losses will likely be less than actually foreclosing. I think this is a pretty good idea, it's just sad that such huge sums of money have to be used just to keep people in their homes.

    tags: mortgage, reduction, underwater, loan modification

    • Bank of America has announced it will make principal forgiveness– ahead of an interest rate reduction – the initial consideration toward modifying certain subprime, Pay-Option and prime two-year hybrid mortgages qualifying for its National Homeownership Retention Program (NHRP). An interest rate reduction and other steps would then be considered, if additional savings are necessary to reach the 31 percent debt to income targeted payment.

      Under the plan BOA will forgive up to 30 percent of the mortgage loan balance in two stages, but with a quid pro quo from the homeowner.  The bank will offer an interest-free forbearance of up to 30 percent of the principal balance for five years.  If the homeowner stays current on mortgage payments for the period of time, then the amount will be forgiven.  On paper, at least, that forgiveness will allow the homeowner to return his loan to an LTV of 100 percent.

      Barbara Desoer, president of Bank of America Home Loans says, "Bank of America has found that many homeowners who owe considerably more on their mortgages than their homes are worth are reluctant to accept a solution that addresses only the amount of the payment without an accompanying reduction in the balance due on the loan."

Monday, March 22, 2010

Credit scores can drop after getting loan help.

  • Government Sponsored Loan Modification Help can still hurt FICO credit scores. Applying for these programs sends a signal to the major credit bureaus, that the homeowner is having difficulties making payments. This in turn has an adverse effect on credit scores.

    tags: credit, scores

    • For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points.
    • the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That's due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner's' credit by 150 points or more on a scale of 300 to 850.

      To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus -- Experian, Equifax and TransUnion.

      For delinquent borrowers, the damage was done when they fell behind on their loans.

      But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower's credit score.

      The credit rating industry defends the practice. People who sign up for loan modifications would not be asking for help unless they were having severe money troubles, said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade group in Washington that represents the credit bureaus.


Personally, I don't think there is anything wrong with lowering credit scores. In essence, these people receiving government assistance were unable to repay the amount they borrowed. It doesn't matter that their home is now worth less than they thought, they have proved unable to keep their financial commitments. That is exactly what credit bureaus are trying to track, how responsible borrowers are and how likely they are to meet their financial obligations.

Monday, March 15, 2010

Loan Mod Conversion Rate Improves in February. True Success Depends on Job Creation

  • The government foreclosure prevention programs are seeing more success in the Making Home Affordable Program.

  • The sad thing is that the success rate is really low, and a large part of this is because many of the troubled borrowers just don't have income sufficient to make any kind of house payment, let alone house payments on loans they can't afford.

    tags: loan, modification

    • The Making Home Affordable Program (HAMP), a joint effort by the Departments of the Treasury and Housing and Urban Development to prevent foreclosures, is reporting that 168,708  homeowners have now graduated from the HAMP trial modification program and have active permanent modifications by the end of February. This works out to a 12.4 percent conversion rate, a modest improvement from January when the permanent modification conversion rate was 9.2 percent.

      The program, which began last spring, has now enrolled 1,094,064 borrowers in modifications which lower mortgage payments to a maximum of 31 percent of monthly income.  1,354,350 invitations to participate in the program have been extended to distressed homeowners.  This is 34 to 45 percent of the goal of 3 to 4 million set for the end of 2012.  At present 835,194 loans are in some phase of the trial period, a number which includes the pending permanent modifications. To date 88,663 trial modifications and 1,499 permanent modifications have been cancelled.   The report does not give any reasons for the cancellations. In addition, 91,843 borrowers had successfully completed the three month trial period and permanent modifications were awaiting borrower acceptance.


Friday, March 12, 2010

Short-Sale Program Will Pay Homeowners to Sell at a Loss - NYTimes.com

  • Here are some details from a new plan to help reduce foreclosures, by encouraging people to use Short Sales. This program gives money to mortgage lenders, in effort to encourage them to approve more short sales, and to delinquent homeowners to "assist" them in relocation.

    tags: short, sales, foreclosures

    • This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.
    • Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
    • Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

While I do think that streamlining the short sale process is something that is much needed, I don't think that the $1,000 incentives to banks will make that much of a difference. I don't think that the return on investment, our future investment as American Tax Payers, will be worth the cost.

The $1,500 incentive for people who are selling their homes as short sales is just ridiculous. In most cases, these home owners haven't made a housing payment in months, sometimes years. Their poor decisions and actions have already cost the banks and American Tax Payers thousands and thousands of dollars. Why should they be rewarded for being irresponsible?

For credit reasons, home owners in distress are much better off short selling their home, rather than letting it foreclose. If the bank will approve the short sale, the sale of their homes at a reasonable near market value park, that should be incentive enough to get out and move on.

Thursday, February 25, 2010

New wave of foreclosures by end of 2010 is feared - latimes.com

  • Most reports are showing that the foreclosure crisis isn't going to get better any time soon. Another new wave is expected as unemployment is taking its toll.

  • tags: foreclosures, wave

    • About 4 million U.S. homeowners are 90 days or more delinquent on their loans or in foreclosure proceedings, Moody's Economy.com says. A federal loan modification program is helping a relative few.
    • BofA holds about 1 million mortgages that are at least 60 days delinquent.
    • About 4 million homeowners nationwide are 90 days or more delinquent on their mortgages or in foreclosure proceedings, according to Moody's Economy.com
    • Trial modifications and other delays have kept many of those mortgages out of foreclosure, but by the end of this year, 2.4 million borrowers are expected to lose their homes, said Celia Chen, a housing economist at Economy.com.
    • That would be up from 2.1 million foreclosures and short sales last year and five times the annual numbers earlier in the decade.
    • their large numbers are likely to push home prices back down this year, to a bottom in the fourth quarter, Chen said. And that would make things worse for the 25% of homeowners who already owe more on their mortgages than their houses are worth.
    • 11.4% of California homeowners were 90 days or more late on their loans, according to First American CoreLogic, a Santa Ana real estate data firm. That compares with a delinquency rate of 8.4% nationwide.

I've decided that the forclosure situation is officially unreal. Nearly 1 in every nine California Homes is behind on payments! That's crazy. The sad thing is that as values continue to decline it's going to put even more people underwater. Home values are going to be even less than they were before the boom happened. Just think how much better off the housing market and economy would have been if the housing bubble never happened.

Monday, February 22, 2010

Home Home Affordable Foreclosure Alternatives Program « Logan Utah Real Estate Blog

  • "There is another new Federal Government program out their designed to reduce the consequences and liability of people trying to avoid foreclosure by selling their homes as short sales, or else voluntarily giving up their homes with a Deed in Lieu of Foreclosure. This program is called the Home Affordable Foreclosure Alternatives Program. Say that five times fast.

  • This program will be implemented on April 5th. It is supposed to “streamline” the short sale process, and remove the ability for banks to seek a deficiency judgement for the amounts they are actually owed from the borrowers. According to the official HMPadmin website: The Home Affordable Foreclosure Alternatives (HAFA) Program provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower. HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. More details are available at this the official site: HMPadmin: Foreclosure Alternatives."

    tags: foreclosure prevention, short sales


Foreclosure Prevention Has Aided 116,000

  • It looks like the Federal government Foreclosure prevention programs actually have done some good things. It has prevented more than 100,000 additional homes from being on the market as foreclosures. The interesting thing will be seeing how long it actually lasts, how many of these people who saw their loans modified will be able to make their payments and stay in their homes for extended periods of time.

    tags: foreclosures, foreclosure, prevention

    • 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)

Posted from Diigo. The rest of my favorite links are here.

Wednesday, February 17, 2010

Is Foreclosure Dam breaking?

  • More and more people who can afford to make their mortgage payments are defaulting anyways because it economically makes sense. Foreclosures will likely continue to get worse before they get better.

    tags: foreclosures

    • RealtyTrac senior Vice president Rick Sharga said, “The real spike was in bank repossessions. And that suggests to me that some of the processing delays that we saw keeping numbers down may be ending.” More and more borrowers are defaulting strategically – seriously delinquent and walking away from their mortgages even if they can afford the payments.

      Las  Vegas posted the nation’s highest metro foreclosure rate for the year, with  more than 12 percent of its housing units receiving a foreclosure notice in  2009 — more than five times the national average. Las Vegas reported a quarter-over-quarter decline in foreclosure activity in the fourth quarter — as did all the other metro areas with foreclosure rates ranking among the top 10 for 2009.

      With 11.87 percent of its housing units receiving a foreclosure notice in 2009, Cape Coral-Fort Myers, Fla., documented the second highest metro foreclosure rate. Other Florida cities in the top 10 were Orlando-Kissimmee at No. 7 (8.17 percent), Port St.  Lucie at No. 9 (7.58 percent), and Miami-Fort   Lauderdale-Pompano Beach at No. 10 (7.16 percent).


Posted from Diigo. The rest of my favorite links are here.

Monday, January 18, 2010

FHA lifts 90-day waiting period for Flippers

  • This ban on the required "90-day" waiting period is an effort to get investors to buy more foreclosures.

    tags: foreclosures, fha, 90-day

    • Starting Feb. 1, housing regulators will suspend for one year a 90-day waiting period on property resales that it says has put FHA borrowers at a disadvantage in bidding on foreclosed properties.
    • Some sellers of foreclosed properties have been reluctant to enter into contracts from potential FHA buyers because of the cost of holding a property for 90 days, and the risks that a vacant property would be vandalized, HUD said.

      Lifting the waiting period "will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities," HUD said.


Posted from Diigo. The rest of my favorite links are here.