Scorecard on Obama’s Housing Recovery Plans

Dennis Norman St Louis

Dennis Norman

The U.S. Department of the Treasury and the Department of Housing and Urban Development today released their “October 2010 Scorecard” on the “Obama Administration’s Efforts to Stabilize the Housing Market”.

The scorecard points out the success of “The President’s housing market recovery efforts” but does point out that “data in the scorecard also show that the recovery in the housing market continues to remain fragile.” Continue reading “Scorecard on Obama’s Housing Recovery Plans

Is now a safe time to buy foreclosures?


Dennis Norman St Louis

Dennis Norman

According to a report just released by RealtyTrac® foreclosures increased in the third quarter of 2010, although with a slowing rate of increase.  There were 930,437 foreclosure filings in the third quarter, up almost 4 percent from the 2nd quarter but up only 1 percent from the year before.  One in every 139 housing units in the U.S. received a foreclosure filing during 3rd quarter.

During the month of September alone, there were foreclosure filings reported on 347,420 U.S. properties, an increase of nearly 3 percent from the previous month and an increase of 1 percent from September 2009. A record total of 102,134 bank repossessions were reported in September, the first time bank repossessions have surpassed the 100,000 mark in a single month. Continue reading “Is now a safe time to buy foreclosures?

Initial report shows increased mortgage delinquencies and foreclosure inventory in September


Dennis Norman

A “first-look” report issued by Lender Processing Services, one of the countries largest loan servicers and aggregators of loan performance data, shows that things are not getting better on the “home-front”….The U.S. mortgage delinquency rate (not including foreclosures) for September was 9.27 percent, a 0.6 percent increase from the month before, however it is a 7.8 percent decrease from the year before. The foreclosure rate for September was 3.84 percent, a 1.1 percent increase from the month before and a 3.6 percent increase from the year before.

Continue reading “Initial report shows increased mortgage delinquencies and foreclosure inventory in September

Wall Street Reform Emergency Homeowners Loan Program (EHLP) Update

Dennis Norman St Louis

Dennis Norman

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in July,called for HUD to administer and oversee a $1 billion Emergency Homeowners Loan Program (EHLP), to provide assistance, for up to 24 months, to homeowners who are at risk of foreclosure on their home as a result of a substantial reduction in income due to “involuntary unemployment, underemployment, or a medical condition”. This program will be available to borrowers in 32 states, those states that did not receive other funding under the Treasury Departments “Hardest Hit Housing Fund” program.

Continue reading “Wall Street Reform Emergency Homeowners Loan Program (EHLP) Update

Bank of America halts foreclosures in all 50 states

Dennis Norman

Today Bank of America announced they will stop foreclosure sales in all fifty states until after they have completed their review of foreclosure documents.

This comes after Bank of America, JPMorgan Chase & Co and GMAC deciding last week to stop foreclosure proceedings in states that require a judicial foreclosure process which was apparently the result of recent court decisions on lawsuits brought by homeowners that alleged lenders were abusing the foreclosure process.

 

St. Louis foreclosures on the rise in July

Dennis Norman

A report released by CoreLogic showed the St. Louis metro area to have a foreclosure rate in July of 1.48 percent up slightly from June’s rate of 1.43 percent and an increase of 27.6 percent from the year prior when the rate was 1.16 percent. Continue reading “St. Louis foreclosures on the rise in July

New Incentives for Buyers of Fannie Mae Foreclosures; Over 700 Homes Available in St. Louis

Dennis Norman

Fannie Mae is offering 3.5 percent in closing cost assistance and a $1,500 bonus to buyers’ real estate agent or broker for people purchasing a Fannie Mae-owned HomePath® property.

Fannie Mae is trying to entice buyers to buy one of their Continue reading “New Incentives for Buyers of Fannie Mae Foreclosures; Over 700 Homes Available in St. Louis

Mortgage delinquencies decline; foreclosure starts accelerate

Dennis Norman

A report published by Lender Processing Services (LPS) analyzing homeowner’s performance on their mortgages as of August 2010 shows that mortgage delinquencies continue to decline however are still at very high levels versus historical norms. At the same time however, foreclosure starts continue to accelerate. Continue reading “Mortgage delinquencies decline; foreclosure starts accelerate

Owner-occupants get first shot to buy Fannie Mae foreclosures; Investors must wait

Dennis Norman

Fannie Mae announced this week that it is expanding the Freddie Mac First Look Initiative so any home shopper can buy a HomeSteps® home as their primary residence during the first 15 days of the property’s listing without competition from investors. HomeSteps is the real estate sales unit of Freddie Mac and markets a nationwide selection of Freddie Mac-owned homes. Continue reading “Owner-occupants get first shot to buy Fannie Mae foreclosures; Investors must wait

One in five St Louis home sales are distressed sales; more ‘distress coming’

Dennis Norman St Louis

Dennis Norman

A report by CoreLogic shows that in June 2010 almost one in five (19.3 percent) of the home sales in St. Louis are distressed home sales, such as foreclosure or a short sale.  The report cautions that recent data showing improvements in negative equity, serious mortgage delinquency and a decrease in market share of short-sales, has been distorted as a result of the short-term boost in the “non-distressed” housing market by the homebuyer tax credit program, which recently ended. Continue reading “One in five St Louis home sales are distressed sales; more ‘distress coming’

North Carolina Real Estate Speculator Pleads Guilty to Bid Rigging in Real Estate Foreclosure Auctions

A Raleigh, N.C., real estate speculator pleaded guilty to conspiring to rig bids for public real estate foreclosure auctions held in multiple counties in eastern North Carolina, the Department of Justice announced today.

Christopher J. Deans pleaded guilty yesterday in U.S. District Court in Greenville, N.C., for participating in a conspiracy to rig bids during the real estate foreclosure auction process in eastern North Carolina from at least as early as April 2003 until at least April 2005.   The primary purpose of the conspiracy was to suppress and eliminate competitive bidding on foreclosed properties and obtain selected real estate offered at public foreclosure auctions at non-competitive prices. Continue reading “North Carolina Real Estate Speculator Pleads Guilty to Bid Rigging in Real Estate Foreclosure Auctions

The Five Best Places to Find Foreclosure Bargains

Dennis Norman

When I first entered the real estate business in 1979, at the age of 18 which seems so long ago) foreclosures were a mystery to most people and certainly no one looking for a home to live in looked to buy a foreclosure.  Homes that were being foreclosed upon were advertised in legal newspapers that no one other than some speculators, attorneys and bankers subscribed to basically.  Here in St. Louis I was one of a couple of handfuls of real estate investors that would do the research then go out and try to buy foreclosures to resell.  Continue reading “The Five Best Places to Find Foreclosure Bargains

Foreclosures in July are 4th highest on record; delinquencies continue to decline

Dennis Norman

A report published by Lender Processing Services (LPS) analyzing homeowner’s performance on their mortgages as of July 2010 shows that mortgage delinquencies continue to decline however are still at very high levels versus historical norms. At the same time however, foreclosure starts have increased to the fourth highest level on record. Continue reading “Foreclosures in July are 4th highest on record; delinquencies continue to decline

Help for unemployed homeowners facing foreclosure

Dennis Norman St Louis

Dennis Norman

The U.S. Department of the Treasury has announced yet another new plan to help homeowners avoid foreclosure. This plan targets homeowners that are struggling with unemployment and offers two foreclosure-prevention programs to help them.

The first program will be through the existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund). Through this program the U.S. Department of the Treasury will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment. Continue reading “Help for unemployed homeowners facing foreclosure

Foreclosure Activity Increases In July; Down from a year ago

Dennis Norman

I remember, not that long ago, when 300,000 foreclosures in a month would have seemed unreal. However, July now marks the 17th consecutive month that there have been foreclosure filings exceeding 300,000 for the month.

Continue reading “Foreclosure Activity Increases In July; Down from a year ago

U.S. Home Values Fall In 2nd Quarter; Negative Equity Declines Though

Dennis Norman

A report just issued by Zillow shows that home values in the United States continued to decline in the second quarter of 2010, with the Zillow Home Value Index falling 3.2 percent year-over-year and 0.6 percent from the first quarter to $182,500. The national rate of decline decelerated from the first quarter, marking the second consecutive quarter of slowing declines. Continue reading “U.S. Home Values Fall In 2nd Quarter; Negative Equity Declines Though

St. Louis Foreclosures Increase in June

Dennis Norman

A report released by CoreLogic showed the St. Louis metro area to have a foreclosure rate in June of 1.48 percent up slightly from May’s rate of 1.46 percent and an increase of 28.7 percent from the year prior when the rate was 1.15 percent. Continue reading “St. Louis Foreclosures Increase in June

Mortgage Fraud Trend Down; Still $14 Billion in 2009 Losses

Dennis Norman

Missouri one of 32 States Identified as “Low” risk of mortgage fraud

According to the 2010 Mortgage Fraud Trends Report released by CoreLogic this week, fraud risk in the mortgage industry has declined by 25 percent since it peaked in the third quarter of 2007. Even though the trend is down it is still estimated that there were $14 billion in fraud losses experienced in 2009 alone.

CoreLogics’ fraud index can drill down to show states, cities and even streets that have the highest mortgage fraud risk. Highlights of the report:

  • Overall mortgage fraud risk has been steadily decreasing since 2006 and appears to have leveled off in 2009
  • Short sale volume from first quarter of 2008 through fourth quarter of 2009 increased by more than 300 percent
    • Nearly one in every 200 short sales were deemed “very suspicious” by lenders meaning the property was resold less than 60 days after the short sale and the sale price was more than 20 percent higher than the short sale price.
  • The most common type of mortgage fraud (31 percent) is related to the borrower’s income.
  • States with the highest mortgage fraud risk are Florida, South Carolina, North Carolina, California and Georgia.
  • The highest risk zip codes are Jamaica, N.Y., Orlando, FL, Miami, FL, Atlanta, GA and Detroit, Mich.
  • The top scoring street for mortgage fraud is in Orlando. In fact, 5 of the top 10 ten streets with the highest risk of mortgage fraud in the report were in Orlando. Other cities with streets in the top 10 were Prior Lake, MN, Chicago, IL, Oakland, CA, Atlanta, GA and Urbana, IL.

How about that? They can even identify the “risky street”. In the case of the street in Orlando the report didn’t give a name but did say there were 28 loans on the street from 2007 to 2008, the same company was the seller in most cases and the properties are now selling for about 10 percent of what they originally “sold” for.

One in 78 Housing Units In U.S. In Foreclosure In First Half of 2010

Dennis Norman

According to a report released this morning by RealtyTrac there were 1,961,894 foreclosure filings in the first six months of 2010 on 1,654,634 housing units in the U.S.  This reflects a 5 percent decrease from foreclosure activity for the prior 6 month period but is an 8 percent increase from the same period of 2009.  What is just a sickening statistic in the report is that, during the first six months of 2010, 1.28 percent of all housing units in the U.S., or one in 78, received at least one foreclosure filing during that period.

For the month of June there were foreclosure filings reported on 313,841 U.S. properties, a decrease of nearly 3 percent from May and a decrease of nearly 7 percent from June 2009.  However, June marked the sixteenth consecutive month with over 300,000 foreclosure filings during the month.

James J. Saccacio, chief executive officer of RealtyTrac, said “the midyear numbers put us on pace to exceed 3 million properties with foreclosure filings by the end of the year, and more than 1 million bank repossessions…….the roller coaster pattern of foreclosure activity over the past 12 months demonstrates that while the foreclosure problem is being managed on the surface, a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market.”

States with Highest Foreclosure Rates in first half of 2010-

  1. Nevada – One in ever 17 housing units
  2. Arizona – One in every 30 housing units
  3. Florida – One in every 32 housing units
  4. California – One in every 39 housing units
  5. Utah- One in every 52 housing units
  6. Georgia – One in every 56 housing units
  7. Michigan – One in every 58 housing units
  8. Idaho – One in every 60 housing units
  9. Illinois – One in every 62 housing units
  10. Colorado – One in every 71 housing units

So while it is good to see the month-over-month foreclosure rates decrease the rates continue to hover around record levels which is not good.  Plus, as Mr. Saccacio addresses with his comment about the massive numbers of distressed properties and underwater loans “sitting just below the surface” and as I addressed last week in my post ‘Shadow’ Foreclosure Inventory is the 800 lb Gorilla, this problem is far from over unfortunately.

‘Shadow’ Foreclosure Inventory is the 800 lb Gorilla

Dennis Norman

For way too long I’ve been writing about record, or near- record, levels of foreclosures and mortgage delinquencies. My ongoing concern about this, in terms of the housing market, is that I just don’t see how we are going to have a sustainable recovery of the housing market while we have 1 in 8 homeowners with a mortgage in the U.S. currently either delinquent on their mortgage or in some stage of the foreclosure process.

Lately there has appeared to be some leveling off of mortgage delinquencies and foreclosure growth is at a slowing rate, both of which are good things. Earlier this week I wrote about a report that came out from LPS Applied Analytics, one of the largest mortgage servicers in the U.S., that discussed the mortgage delinquency rate for May. This morning I was giving more thought to something in the report that I saw the other day but it didn’t hit me at the time but now I realize it is potentially the 800 lb gorilla in the room.

According to the report, the average number of days for a loan to move from 30 days delinquent to foreclosure sale has been steadily increasing and is now at an all-time high of 449 days. So, if you add the initial delinquency, that means on average 479 days lapse from the time a borrower misses a payment until they are foreclosed on. While I love the amount of time the struggling homeowner has to stay in their home before losing it, it concerns me greatly that it is taking about 16 months for the lender to complete a foreclosure, and that this is a record high amount of time. What that tells me is, for one reason or another, lenders are stalling and slowing the foreclosure process so any encouragement we have seen of late in this area may be “artificially created” as the result of lenders reluctance to foreclose rather than a result of the housing market and economy actually improving.

The problem is the lenders can’t put off the inevitable forever…at some point they are going to have to pick up the pace and start foreclosing on loans rather than stalling and that I’m afraid is going to keep the foreclosure rates at levels that will negatively impact the housing market.

Mortgage Delinquencies Increase In May; 1 in 8 Borrowers At Risk of Losing Home

Dennis Norman

Homeowners’ mortgage delinquency rates increased in May 2.3 percent from April rising to 9.2 percent of all mortgages being delinquent. This information comes from a report issued by LPS Applied Analytics, one of the largest mortgage servicers in the U.S.

According to the report there are, as of May 31, 2010, 7.3 million home mortgages currently in some stage of delinquency. After seeing a couple of months of improvement there was a turn for the worse in May of the “deterioration ratio”, the reltionship between the number of loans going to a “worse” status for every one that has improved. In May this deterioration ratio increased to 2.5 loans getting worse for every 1 getting better.

Other highlights from the report:

  • Total U.S. Mortgage delinquency rate 9.20 percent
  • Total U.S. Foreclosure Inventory Rate 3.18 percent
  • States with the most delinquent loans and foreclosures:
    • Florida, Nevada, Mississippi, Georgia, Arizona, California, Illinois, New Jersey
  • States with the fewest delinquent loans and foreclosures:
    • North Dakota, South Dakota, Wyoming, Alaska, Montana, Nebraska, Vermont, Colorado, Iowa and Minnesota

When you really give some thought to these statistics I think you’ll find them disturbing, making even sickening, to think that almost 1 out of every 10 homeowners with a mortgage in the U.S. are delinquent on their mortgage (and ultimately at risk of losing their home) and that about 1 in every 8 borrowers are either delinquent on their mortgage or in some stage of foreclosure. So if sometimes while reading my posts you wonder why I seem somewhat negative, or even cynical, toward some of the reports about a “recovery” of the housing market, now you know why. I’m no economist but I just don’t see how we can have a housing recovery while 1 in 8 of us are either losing or at risk of losing our homes.

Mortgage Delinquency and Foreclosure Rates by State:

Source: LPS Applied Analytics

 

Nearly 233,000 Foreclosure and Bank-Owned Homes Sold in First Quarter

Dennis Norman

Average discount on Foreclosure and Bank-Owned Homes is 27 Percent

This morning RealtyTrac released a report stating that 31 percent of all residential sales in the first quarter of 2010 were foreclosure homes or bank-owned homes. They are reporting 233,000 foreclosure and bank-owned homes sold during first quarter 2010 at an average price discount of 27 percent (based upon average sale price of non-foreclosure properties).

This data is fairly consistent with date from the National Association of REALTORS which reported there were right at 1 million existing homes sold in the first quarter of 2010 and roughly 35 percent of those were “distressed” sales. Do the math and this works out to about 350,000 distressed sales which, in addition to foreclosures and bank-owned homes which are counted in RealtyTrac’s numbers, also include short-sales which are very prevalent in many markets.

The bottom line is, distressed sales and foreclosures have a huge impact on the housing market, particularly home prices, and, as I have been saying for some time now, we will not see the housing market stabilize until the foreclosure rate recedes from record levels and starts heading back down toward a “normal” rate the market can live with.

Highlights of the RealtyTrac Report:

  • The share of home sales attributable to foreclosures and bank-owned homes for first quarter 2010 was 14 percent less than the previous quarter and down 33 percent from the peak in first quarter of 2009 when these sales accounted for 37 percent of all residential sales.
  • The average sales price on properties in some stage of foreclosure decreased 23 percent from 2006 to 2009.
  • The average discount on sale prices of foreclosures and bank-owned properties has steadily increased from 21 percent in 2006 to 27 percent in the first quarter of 2010.
  • Discounts on Bank-Owned real estate are larger than on pre-foreclosures…although the trend on foreclosures appears to be showing increased discounts as short sales increase.
  • Foreclosure sales have increased 2,500 percent from 2005 to 2009.
  • More than 1.2 million U.S. properties that were in some stage of foreclosure were sold to third-parties in 2009, an increase of 25 percent from 2008 and an increase of nearly 327 percent from 2008.
  • Nevada, California and Arizona had the highest percentage of foreclosure sales in the first quarter of 2010.
  • Ohio, Kentucky and Illinois had the highest price discounts on foreclosures in first quarter 2010.

 

Federal Government Is Largest Owner of Foreclosed Properties; Over 200,000 and Growing

Dennis Norman

According to a report issued by Radar Logic Incorporated government-sponsored enterprises (GSEs) and Federal agencies involved in housing finance currently have an inventory of over 200,000 repossessed homes. Being the largest owner of foreclosed homes in the U.S. gives the government a lot of power and influence over the housing market for years to come as they will generate significant pressure on home prices as they sell off foreclosed homes in the coming years.

Foreclosed homes currently sell at significant discounts to the unpaid balances of the mortgages they back, generating a loss for the seller (i.e., the lender, mortgage investor or government agency) at every sale. As Fannie Mae, Freddie Mac, the Department of Housing and Urban Development (HUD) and the Department of Veterans Affairs (VA) sell their REO (“real estate owned”) inventories for less than the book value on their loans, they generate billions in losses for taxpayers. When the huge numbers of government-insured mortgages in the intermediate stages of default or foreclosure are taken into account, losses from future government REO sales could reach hundreds of billions of dollars.

“For over a year now we have been saying that the GSEs and other Federal agencies will play a critical role in the success or failure of the housing recovery due to their huge holdings of foreclosed homes,” said Michael Feder, President and CEO of Radar Logic. “Now their role is more critical than ever before. The potential cost to taxpayers resulting from the government’s current policies is enormous. We can’t help but wonder if there isn’t a better approach.”

Highlights from the report:

  • The Federal Government’s REO inventory, including homes owned by Fannie Mae, Freddie Mac, HUD and the VA, has increased steadily for over 24 months and now accounts for approximately 46% of the total REO inventory. This is the government’s largest share of total REO since the beginning of the housing bust.
  • The Federal Government’s share of total motivated sales (i.e., sales of foreclosed homes by financial institutions) has also increased steadily for over 20 months, and this trend shows little sign of slowing. As the largest owner and seller of foreclosed properties, the Federal Government has unprecedented control over the nation’s housing supply and, therefore, home prices.

Recent reports have shown that mortgage delinquencies may be leveling off, albeit at almost record levels, but this is the first step to the foreclosure rate declining which will help the housing market stabilize. Unfortunately with the number of current foreclosures as well as the gloomy projections for future foreclosures, it will be a while before this happens.

Two and a half Million Foreclosures; Just the beginning

Dennis Norman

I spent this morning reading a sobering and, quite frankly depressing, report issued by the Center for Responsible Lending that focused on the demographics of people losing their homes as a result of foreclosure. The report is done well and looks at the impact of foreclosures on different races and ethnicity’s and then addresses what they believe to be the cause of this crisis.

While the reports main subject was eye opening, what really got my attention as I went through the report were some of the facts and figures being quoted. This caused me to dig through the reports extensive four-pages of references and citations and then follow those back to the source. A couple of hours, and about 300 pages of paper (there goes my Sierra-Club membership) later I overwhelmed with the sobering statistics I had found concerning foreclosures.

This is a topic that is obviously on-going and affecting many people’s lives and deserves more space than I will give the topic here, but I’ll be talking more about it in the future as well.

Here are some of the facts and figures from the report from the Center for Responsible Lending as well as from some of the various sources their references lead me to:

  • During the first three years of the foreclosure crisis, from January 2007 through the end of 2009, they (CRL) estimates there have been 2.5 Million foreclosures completed.
  • 83% of these foreclosures were on loans that originated between 2005 and 2008.
  • 82% of the foreclosures were on owner-occupied homes.
  • According to the Mortgage Bankers Association 4.63 percent of mortgages in the U.S. are in the foreclosure process. This is not only a historic high but is five times higher than the average of all quarterly rates reported by the MBA from 1979 to 2007.
  • The CRL estimates that, when combining borrowers that are two or more payments behind on their mortgage with borrowers already in the foreclosure process, there are 5.7 million borrowers at imminent risk of losing their homes to foreclosure.
  • The CRL estimates that 17% of Latino homeowners, 11% of African-American homeowners and 7% of non-Hispanic White homeowners have already lost or are at imminent risk of losing their home.
  • The CRL estimates that subprime loans account for 64% of the foreclosures during this crisis period, but only account for 22% of the loans originated during the period.
  • The foreclosure rate on subprime loans is 16.5%, Jumbo Loans 4.4%, Government Insured Loans 3.8% and conventional loans 2.3%.
  • Credit Suisse, in their December 2008 Foreclosure Update, forecast that 8.1 million mortgages would be in foreclosure over the next four years (this represents 16% of all mortgages in the U.S.- almost 1 out of ever 6 mortgages).
  • The Credit Suisse estimate for foreclosures, under a recession (which we had) was increased to 9.0 to 10.2 million foreclosures through the end of 2012.
  • Goldman Sachs, in their Global Economics Paper, Jan 13, 2009) projected 13 million foreclosures by 2014.
  • A report by Urban Institute estimated the financial cost to local governments of a single foreclosure at $19,229.
  • CRL estimates that $1.86 trillion will be lost in home equity between 2009 and 2012 due to depreciated home values associated with nearby foreclosures.

When you see these facts and figures I think it is easy to understand why I have a rather conservative outlook on when the housing market will recover. Until the foreclosure crisis begins to show signs of coming to an end, which by the facts above appears to be at least 2 if not 3 or 4 years away, the housing market, and home prices, are going to continue to be impacted negatively by the foreclosures.

 

St Louis Area Foreclosures On The Rise

Dennis Norman

While foreclosure activity for the U.S. in May decreased by 3 percent according to a report released by RealtyTrac, the news was much worse for the St. Louis metro area, and Missouri as a whole.

Every County in the St. Louis metro area, on the Missouri side of the river, experienced an increase in foreclosures in May from a year ago, and six of the nine counties contained in the report had an increase in May 2010 from the prior month.

On the Illinois side of the river things looked slightly better with 3 of 7 counties seeing an increase in foreclosures from the year before and also 3 of 7 counties having an increase in foreclosures in May 2010 from the month before.

Highlights from the report for May 2010 Foreclosures:

  • The state of Missouri had a total of 3,841 foreclosure actions for the month; an increase of 5.67 percent from the month before and a 37.37 percent increase from a year ago. One in every 694 households in the state had a foreclosure action in May.
  • The entire St. Louis metro area (9 counties on the Missouri side and 7 on the Illinois side) had a total of 2,558 foreclosure actions for the month; an increase of 12.29 percent from the month before and a 41.95 percent increase from a year ago.  One in every 485 households in the St. Louis Metro area had a foreclosure action in May.

Source: RealtyTrac

Foreclosure Activity Drops 3 Percent in May; 15th Consecutive Month of Over 300,000 Foreclosure Actions

 

Dennis Norman

The good news is, foreclosure activity for the U.S. in May decreased by 3 percent according to a report released by RealtyTrac. The bad news is, May marked the 15 th consecutive month where the overall foreclosure activity has surpassed 300,000 actions; that’s about 4 million foreclosures in the past 15 months.

For May there were foreclosure filings reported on 322,920 properties in the U.S., a 3 percent decrease from April but a 1 percent increase from May 2009. One in every 400 U.S. housing units received a foreclosure filing during the month of May.

“The numbers in May continued and confirmed the trends we noticed in April: overall foreclosure activity leveling off while lenders work through the backlog of distressed properties that have built up over the past 20 months,” said James J. Saccacio, chief executive officer of RealtyTrac. “Defaults and scheduled auctions combined increased by 28 percent from 2007 to 2008 and another 32 percent from 2008 to 2009 — creating a build-up of delayed bank repossessions. Lenders appear to be ramping up the pace of completing those forestalled foreclosures even while the inflow of delinquencies into the foreclosure process has slowed.”

Bank Repo’s Hit Record in May

The number of properties actually taken back (foreclosed upon) in May was 93,777 breaking the prior month’s record high and setting a new record.

States with Highest Foreclosure Rates in May-

  1. Nevada – One in ever 79 housing units
  2. Arizona – One in every 169 housing units
  3. Florida – One in every 174 housing units
  4. California – One in every 186 housing units
  5. Michigan – One in every 223 housing units

The CEO of RealtyTrac stated above that he thinks the foreclosure rate is “leveling off”, which I would certainly hope is true….I don’t know how we can possibly sustain it continuing to increase. I think it is important to note though, we are talking about the rate leveling off at record-high levels and there is no indication the rate is going to drop anytime soon, therefore it is going to be a while before the aftershock of this wears off. Mortgage defaults, the “fuel” for the foreclosure rate, are starting to show signs of leveling off as well but until we see the default rate drop and continue to trend downward we will not see a significant or meaningful downward trend in the foreclosure rate.

 

St. Louis Foreclosures and Mortgage Delinquencies Hit Record Levels in April

Dennis Norman

A report released by CoreLogic showed the St. Louis metro area to have a foreclosure rate in April of 1.49 percent up slightly from March’s revised rate of 1.45 percent and an increase of 34.2 percent from the year prior when the rate was 1.11 percent.

The national foreclosure rate for April remains over twice the rate of St. Louis at 3.20 percent and was an increase of 30.1 percent from a year ago when the national foreclosure rate was 2.46 percent.  For the State of Missouri the April foreclosure rate was 1.33 percent, a 30.4 percent increase from a year ago when Missouri’s rate was 1.02 percent.

Looks like more foreclosures to come…

Unfortunately, as I have been saying for a while now, I don’t think we are going to see much, if any, improvement in the foreclosure rate anytime soon. The rate of serious mortgage delinquencies continues to increase. For April 2010, 6.17 percent of the home loans in St. Louis were 90 days or more delinquent on their mortgage payments, an increase of 51.2 percent from a year ago when the delinquency rate in St. Louis was 4.1 percent.

Nationally, the rate of serious delinquency on home mortgages in April 2010 hit 8.90 percent, an increase of 47.6 percent from a year ago when the national rate was 6.03 percent.

Foreclosures will put downward pressure on the Market…

Over the past couple of months the housing market has had some reason to celebrate as home sales increased at fairly significant rates.  Unfortunately this little bit of Utopia is probably going to be short-lived as it was nothing more than a “false-market” created by the home-buyer tax credits.  Now that the April 30th deadline for the tax credits has passed we are going to no doubt see the sales numbers drop as the underlying problems are still there…unemployment and uncertainty about our country’s financial future, to name a couple.  Even during these recent “good times” we have seen pricing pressures resulting in home prices continuing to decline in many markets.  So, couple the drop in sales we no doubt have coming, along with the still-increasing foreclosure and mortgage delinquency rate, and, in my opinion, we have a recipe to continue to beat on home prices for some time to come.

To end on a positive note though…If you are one of the fortunate people out there that are comfortable in your financial position and are looking to make a move, you have an abundance of homes available out there, with record-low interest rates and prices that we haven’t seen,  in many cases, in years!

 

Fannie Mae Issues Guidelines For HAFA Short-Sales and Deed-in-Lieu

UPDATE- June 2, 2010: The National Association of REALTORS obtained answers from the Treasury Department on 3 common questions about HAFA:

  1. agents are not permitted to rebate a portion of their commission to the buyer,
  2. sellers who are real estate agents must list their home for sale with another broker, not their own broker, and
  3. the incentive allowed for subordinate lien holders (6% of any one subordinate lien, up to a total of $6,000 for all subordinate liens) is a hard cap and may not be supplemented from any source.

Dennis Norman

In March I did an update on the Home Affordable Foreclosures Alternative (HAFA) Program which was scheduled to go into effect April 5, 2010.  Today, Fannie Mae issued guidelines to their servicers outlining the policies and produres Fannie Mae had adopted as a result of HAFA.

What is HAFA?  In a nutshell it gives qualifying homeowners the opportunity to do a short-sale or deed-in-lieu rather than face foreclosure:

The Home Affordable Foreclosure Alternatives Program provides financial incentives to loan servicers as well as borrowers who do a short-sale or a deed-in-lieu to avoid foreclosure on an eligible loan under HAMP. Both of these foreclosure alternatives help the lender out by avoiding the potentially lengthy and expensive foreclosure proceedings and also by protecting the property by minimizing the time it is vacant and subject to vandalism and deterioration. These options help out the borrower by avoiding the foreclosure process and the uncertainty that comes with it and allows the borrower to negotiate when they will give up possession of their home as well as, under the HAFA program be released from any further liability from the loan including short-fall and deficiencies.

Highlights of the guidelines given to mortgage servicers by Fannie-Mae:

  • Servicers are “encouraged to adapt their processes to implement these Fannie Mae HAFA policies and procedures immediately;” however, they have until August 1, 2010 to implement them.
  • The HAFA  Short-Sale and HAFA DIL (deed-in-lieu) program will be offered to borrowers through December 31, 2012

Borrower Eligibility for HAFA Consideration:

  • A borrower cannot be considered for HAFA until the borrower has been evaluated for a HAMP modification (including, but not limited to, providing all required income documentation).
  • Once a borrower has met all of the eligibility criteria for HAMP, the borrower must be considered for a HAFA short sale or DIL (after all home retention options have been considered) if the borrower:
    • was not offered a trial modification due to inability to meet the HAMP qualifications (for example, did not pass the net present value (NPV) evaluation or meet the target monthly mortgage payment ratio based on verified income);
    • failed to complete the trial period successfully;
    • became two consecutive payments (31 or more days) delinquent on the modified mortgage loan; or
    • requests a short sale or DIL.
  • Lender’s are not allowed to consider a borrower for a Fannie Mae HAFA short sale or DIL (without consent from Fannie Mae) if:
    • a foreclosure sale is scheduled to be held within 60 days of the borrower’s request for a Fannie Mae HAFA short sale or DIL, ordetermination that a borrower is ineligible for HAMP, or;
    • a foreclosure proceeding could be initiated and reasonably be expected to result in a foreclosure sale being held within 60 days of the borrower’s request for a Fannie Mae HAFA short sale or DIL or determination that a borrower is ineligible for HAMP; or;
    • the mortgage loan is secured by a property in Florida on which foreclosure proceedings are pending, judgment has been obtained, or a hearing on summary judgment or trial is scheduled within 60 days.

Financial Requirements of Borrower for HAFA:

The lender, prior to deciding if the borrower is eligible for HAFA, must determine if the borrower has:

  • the ability to continue making the mortgage payments but chooses not to do so; or
  • substantial unencumbered assets or significant cash reserves equal to or exceeding three times the borrower’s total monthly mortgage payment (including tax and insurance payments) or $5,000, whichever is greater; or
  • high surplus income.

So the bottom line here is, if you have a bunch of assets, money in the bank or high income relative to you debt, Fannie Mae is not going to be interested in letting you walk away from your deficiency after a short-sale, or DIL.

On question that has come up on other posts I’ve written about this, is the effect of bankruptcy on eligibility for HAFA….Here’s the answer from Fannie Mae:

  • A borrower in an active Chapter 7 or Chapter 13 bankruptcy case must be considered for a Fannie Mae HAFA short sale or DIL if the borrower, borrower’s counsel, or bankruptcy trustee submits a request to the servicer. However, the servicer is not required to solicit borrowers in active bankruptcy cases for shorts sales or DILs. With the borrower’s permission, a bankruptcy trustee may contact the servicer to request a short sale or DIL. The servicer and its counsel must work with the borrower or borrower’s counsel to obtain any court and/or trustee approvals required in accordance with local court rules and procedures. The servicer must extend the required time frames outlined in this Announcement as necessary to accommodate delays in obtaining bankruptcy court approvals or receiving any periodic payment when made to a bankruptcy trustee.

Lenders must, upon determination of eligibility for a HAFA Short-Sale or DIL, determine the fair market value of the property:

  • As soon as a borrower is determined to be eligible for a Fannie Mae HAFA short sale or DIL and has demonstrated a willingness to participate, the servicer must take the necessary steps to determine the market value of the mortgaged property. Fannie Mae will require a broker price opinion (BPO) based on an interior and exterior inspection of the property or, if licensing requirements in the state dictate use of an appraisal for these purposes, an appraisal
  • The BPO (or appraisal, if required) must be dated within 90 calendar days of the date the relevant HAFA Agreement is executed by the servicer.

Allowable Fees on Short-Sale:

Fannie-Mae will allow:

  • real estate sales commission customary for the market. The servicer may not require that the commission be reduced to less than 6 percent of the sales price of the property;
  • real estate taxes and other assessments prorated to the date of closing;
  • local and state transfer taxes and stamps;
  • title and settlement charges typically paid by the seller;
  • seller’s attorney fees for settlement services typically provided by a title or escrow company;wood-destroying pest inspections and treatment, when required by local law or custom;
  • homeowners’ or condominium association fees that are past due, if applicable.
  • Fees paid to a third party to negotiate a short sale with the servicer (commonly referred to as “short sale negotiation fees” or “short sale processing fees”) must NOT be deducted from the sales proceeds or charged to the borrower.
    • Additionally, the Servicer, its agents, or any outsourcing firm it employs must not charge (either directly or indirectly) any outsourcing fee, short sale negotiation fee, or similar fee in connection with any Fannie Mae loan.

In addition, Fannie Mae will allow;

  • The Lessor of 6% of the balance of a junior lien, or $6,000, to settle the second lien.
  • $3,000 to the Seller, to be paid out of sale proceeds, to help defray the costs of relocation.

Short-Sale Approval Should be Faster:

One of the major hindrances to short-sales has been the amount of time it takes for a lender or servicer to respond to an offer to purchaser, many times taking several months.  Under these new guidelines that should not be a problem because, provided the Seller’s Agent has submitted all the required document to Fannie Mae (they only have 3 business days to submit) then the servicer must respond to the offer within 10 business days indicating acceptance or rejection of the offer. This is huge and should really help facilitate short-sales.

Deed-in-Lieu Eligibility:

Generally, for a borrower to be eligible for a Fannie Mae HAFA DIL, the mortgaged property must have been listed for sale at market value for 120 days or more. A servicer may waive the requirement that the property securing the mortgage loan previously be listed for sale in cases involving:

  • a serious illness or disability,
  • a deceased borrower or co-borrower,
  • a borrower or co-borrower who has been relocated or who has been deployed by the military,
  • a determination that local market conditions would impede a sale of the property,
  • a borrower who demonstrates an unwillingness or inability to maintain or market the property during the listing period, or
  • a borrower who has expressed an interest in doing a Deed for Lease

This is simply an overview of the Fannie-Mae guidelines and the HAFA program…there is much more, but this gives you the idea.  For starters, this is nothing that  a homeowner would want to take on alone in my opinion.  I think you need a qualified real estate broker or agent, that has in-depth knowledge about HAMP and HAFA and the short-sale process.

To get more information I suggest your read my post from March, you can access that by clicking here, or if you really want to have some fun, you can read the complete Fannie-Mae guidelines by clicking here.

 

St. Louis Foreclosures and Mortgage Delinquencies Hit Record Levels in March

Dennis Norman

A report released by CoreLogic showed the St. Louis metro area to have a foreclosure rate in March of 1.49 percent up slightly from February’s rate of 1.44 percent and an increase of 39.3 percent from the year prior when the rate was 1.07 percent.

The national foreclosure rate for March remains over twice the rate of St. Louis at 3.23 percent and was an increase of 73.9 percent from a year ago when the national foreclosure rate was 2.32 percent.

No End In Site

Unfortunately, I don’t think we are going to see much, if any, improvement in the foreclosure rate anytime soon.  The rate of serious mortgage delinquencies continues to rise.  For March 2010, 6.22 percent of the home loans in St. Louis were 90 days or more delinquent on their mortgage payments, an increase of 55 percent from a year ago when the delinquency rate in St. Louis was 4.02 percent.

Nationally, the rate of serious delinquency on home mortgages in March 2010 hit 8.93 percent, an increase of 54.23 percent from a year ago when the national rate was 5.79 percent.

Continued Pressure on the Market

For the past couple of months we have seen some good reports come out about the housing industry which are indicating that the market may have bottomed out and is starting to stabilize a little finally.  Unfortunately, foreclosures bring a lot of downward pressure on the housing market and with the rising foreclosure and delinquency rate, we are assured of feeling this pressure for some time to come.  If the economy could rebound strong, unemployment drop, and interest rates remain affordable, then perhaps the housing market could absorb this inventory of foreclosures and their downward pressure on pricing, but that is a big IF.

 

Foreclosures Still On The Rise – Some Improvement in Hardest Hit Areas Though

RealtyTrac® released its U.S. Foreclosure Market Report™ for the first quarter of 2010, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 932,234 U.S. properties during the first quarter of 2010, an increase of 16 percent from the first quarter of 2009 (which, I should remind you, was up 24 percent from the first quarter of 2008).

According to the report, the 20 metro areas with the highest rates of foreclosures were still contained to four states:

  • California – 10 of the top 20 metro foreclosure rates
  • Florida – 7 of the top 20 metro foreclosure rates
  • Nevada – 2 of the top 20 metro foreclosure rates
  • Arizona – 1 of the top 20 metro foreclosure rates

The year-over-year foreclosure rate declined in 14 of the 20 top metro areas and in eight of the cities in the top 10, so there is some encouragement for these four states that have been hammered by 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,” said James J. Saccacio, chief executive officer of RealtyTrac. “For example, the federal government’s new program designed to encourage short sales, which was launched April 5, may have caused some lenders to delay initiating foreclosure against distressed properties — particularly in hard-hit housing markets where a short sale costs less than a foreclosure.”

Top 10 metro foreclosure rates:

  • Las Vegas continued to post the nation’s highest metro foreclosure rate in the first quarter, with one in 28 housing units receiving a foreclosure filing (3.51 percent) — 4.9 times the national average. A total of 28,480 Las Vegas housing units received a foreclosure filing during the quarter, an increase of nearly 13 percent from the previous quarter but a decrease of 19 percent from the first quarter of 2009.
  • Modesto, Calif., foreclosure activity decreased 13 percent from the first quarter of 2009, but the metro area still documented the nation’s second highest metro foreclosure rate, with one in every 34 housing units receiving a foreclosure filing (2.93 percent).
  • Cape Coral-Fort Myers, Florida, #3 with one in every 35 housing units receiving a foreclosure filing (2.82 percent)
  • Riverside-San Bernardino, Calif., #4 (2.82 percent)
  • Stockton, Calif.,#5 (2.77 percent)
  • Merced, Calif., # 6 (2.76 percent)
  • Phoenix-Mesa-Scottsdale, Ariz., #7 (2.63 percent)
  • Vallejo-Fairfield, Calif., # 8 (2.41 percent)
  • Bakersfield, Calif., # 9 (2.33 percent).
  • Orlando-Kissimmee, Florida, #10 (2.30 percent)

Cities outside Sun Belt post big increases:

Several cities in the top 100 but not in the top 20 posted substantial year-over-year increases, continuing the trend of foreclosure activity spreading to areas previously protected from the brunt of the real estate slump.

Foreclosure activity increased nearly 171 percent from the first quarter of 2009 in Columbia, S.C., and the city’s foreclosure rate ranked No. 99, with one in every 202 housing units receiving a foreclosure filing.

Baltimore’s first quarter foreclosure rate was also below the national average, with one in every 170 housing units receiving a foreclosure filing, but the city’s foreclosure activity increased nearly 141 percent from the first quarter of 2009.

Salt Lake City and Charlotte, N.C. also posted year-over-year increases in foreclosure activity of more than 100 percent.