St Louis Short-Sales Dwindling

St Louis RealtorShort-sale” is a term that was relatively unknown until the real estate market bubble burst in 2008.  After the bubble burst the term quickly became a common topic of conversation among homeowners that found themselves “underwater” in their homes, meaning they owed more on their homes than they were worth, and also among potential home buyers and investors looking to snag a good deal.

If you are one of those buyers wanting to snag a deal, you may have missed the boat as the volume of short sales in St Louis has fallen dramatically.  While, overall, this is good news as it indicates the health of the real estate market is improving and will help to stabilize prices, it does remove some of the opportunities for bargains to buyers willing to go through the short-sale process.  As the chart below shows, the number of short sale listings in St Louis hitting the market peaked around January 2012,  when around 230 new short sale listings came on the market, and then the trend has been downward ever since.  The blue line on the chart shows the number of short sale listings sold which peaked in July 2012 around 90 sales for the month and has fallen to less than 25 a month for the past couple of months.

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2011 Real Estate Market Performing about as Poorly as Predicted Thus Far

Radarlogic, real estate data and analytics company that frequently disagrees with the National Association of REALTORS® view of the housing market, released their RPX Monthly Housing Market Report for May 2011 yesterday and in it had a scorecard showing how their rather bleak predictions they made at the end of 2010 for the 2011 housing market were holding up. Unfortunately, as you will see below, it seems many of their predictions have been accurate and the housing market is performing as poorly as they expected in many areas. Continue reading “2011 Real Estate Market Performing about as Poorly as Predicted Thus Far

Local Rehab Loan Program Allows Buyers To Take Advantage of Distressed Sale Bargains

Would you like to buy one of those foreclosure or REO bargains, but don’t have the cash to have the necessary work done?  There’s a new rehab loan program in St. Louis that will help homeowners do just this!  This program allows buyers to buy Bank Owned or Foreclosed Property (let’s call them “distressed homes”) and also borrow funds for the rehabilitation of these properties.  Continue reading “Local Rehab Loan Program Allows Buyers To Take Advantage of Distressed Sale Bargains

Foreclosures on the rise in December; Mortgage delinquences decline though

A “first-look” report issued by Lender Processing Services, one of the countries largest loan servicers and aggregators of loan performance data, is somewhat encouraging as it shows the U.S. mortgage delinquency rate (not including foreclosures) for December was 8.83 percent which is a decrease of 2.1 percent from November’s rate of 9.02 percent. Continue reading “Foreclosures on the rise in December; Mortgage delinquences decline though

Foreclosures on the rise in November however mortgage delinquences decline

A “first-look” report issued by Lender Processing Services, one of the countries largest loan servicers and aggregators of loan performance data, is somewhat encouraging as it shows the U.S. mortgage delinquency rate (not including foreclosures) for October was 9.02 percent which is a decrease of almost 3 percent from October’s rate of 9.29 percent. Continue reading “Foreclosures on the rise in November however mortgage delinquences decline

Homeowner Negative Equity Declines for Third Straight Quarter

Dennis Norman St Louis

A report released this morning by CoreLogic shows negative equity declined in third quarter of 2010 for residential properties, marking the third-consecutive quarterly decline. The CoreLogic reports that 10.8 million, or 22.5 percent, of all residential properties with mortgages were in negative equity at the end of the third quarter of 2010, down from 11.0 million and 23 percent in the second quarter. While the decline is good news, the bad news is that the report states the decline is “due primarily to foreclosures of severely negative equity properties rather than an increase in home values.” Continue reading “Homeowner Negative Equity Declines for Third Straight Quarter

Buyers of distressed properties in third quarter reaped largest discount in five years

According to a report released by RealtyTrac, foreclosure homes accounted for 25 percent of all U.S. residential sales in the third quarter of 2010 and that the average sales price of properties that sold while in some stage of foreclosure was more than 32 percent below the average sales price of properties not in the foreclosure process — up from a 26 percent discount in the previous quarter and a 29 percent discount in the third quarter of 2009. Continue reading “Buyers of distressed properties in third quarter reaped largest discount in five years

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?

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’

Why do Short Sales Take so Long to Close?

Daniel Manzano

Daniel Manzano

Many of us Real Estate industry professionals know that a Short Sale transaction can take months for it to be approved and closed. Nevertheless, we have had Short Sale approvals in less than 10 days. But, the reality is that Short Sales usually take three to four times as much as a regular sale to finally get to the closing.

From the time the Realtor actually gets the property under contract to the time the Lender approves, it could take anywhere from 30 days to 6 months, depending on how fast the Borrower provides critical information for Lender and Investor approval. Even then, you still have one more variable to account for which is the Buyer waiting for all this time to get the contract approved by the Lender. For this, setting the expectations is a key factor in any short-sale transaction. Continue reading “Why do Short Sales Take so Long to Close?

Report Shows Fraud in Short-Sales Cost Lenders $310 Million Annually

Dennis Norman

A report just released by CoreLogic estimate the financial impact of short-sale fraud to be $310 million annually. It is estimated there is fraud in one in every 53 short sale transactions resulting in an unnecessary loss to the lender of $41,000 per transaction on average. Continue reading “Report Shows Fraud in Short-Sales Cost Lenders $310 Million Annually

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.

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.

 

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.