St Louis Metro Area Foreclosure Rate Declines in 1st Quarter; St Charles and Franklin Counties Increase

During the first quarter of 2017, the foreclosure rate in the St Louis metro area was one in every 487 housing units, a decline of 19.59 percent from the quarter before, and a decline of 3.61 percent from a year ago, according to a report released today by Attom Data.

As the table below shows, of the 7 counties in Missouri that are part of the St Louis MSA, 6 saw a decline in foreclosure rate from the quarter before and 5 of the 7 saw a decline from a year ago.  The foreclosure rate in St Charles County during the 1st quarter increased 18.64 percent from the 1st quarter of 2016 and Franklin County saw a 43.4 percent increase in the foreclosure rate during the same period.

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St Louis Mortgage Delinquency and Foreclosure Rates Drop To Lowest Level in Years

For the month  of May, 2015, less than 3 percent (2.95%) of St Louis mortgages were seriously delinquent (90+ days) marking a slight decline from the month before and a decline of 13 percent from a year ago, according to data just released by CoreLogic.  The St Louis foreclosure rate also hit the lowest level in a long time in May at 0.67 percent, a slight decline from 0.69 percent the month before and a decline of 10% from a year ago when the foreclosure rate was 0.77 percent.

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St Louis Distressed Home Sales Down From a Year Ago

St Louis distressed home sales declined during the first quarter of this year with distressed  home sales (foreclosures, REO’s and short sales)  in the 5-county core St Louis market (city of St Louis and counties of St Louis, St Charles, Jefferson and Franklin) accounting for 15.0% of all home sales,  This is down 18.5% from the first quarter of 2013 when St Louis distressed home sales accounted for 18.4% of all home sales, according to newly released data from RealtyTrac. As the table below shows, all the counties that make up the core of the St Louis real estate market (on the Missouri side of the river) saw short sales and REO’s decrease in the first quarter of 2014 from a year ago with the exception of REO sales in St Charles that increased 5% during the period.  All counties saw an increase in foreclosure auction activity from the first quarter of 2013 to the first quarter of 2014.

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St Louis Foreclosure Rate Declines

Dennis Norman, St Louis Realtor, Past President of St Louis Association of REALTORSThe foreclosure rate in St Louis fell to 1.04 percent for the month of August, a decline of 33.5 percent from a year ago when the St Louis foreclosure rate was 1.55 percent, according to a report just released by CoreLogic.  The national foreclosure rate for August at 2.36 percent was over twice as high as the St Louis rate.  Other good news for the St Louis real estate market contained in the report was that the St Louis mortgage delinquency rate (90 days or more late) was 3.78 percent, a decrease of 16.6 percent from a year ago when the rate was 4.53 percent.

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Delinquent Home Mortgages 21.3 Percent Higher Than Last Year; Foreclosure Rates at Record High

Dennis Norman

A report published by Lender Processing Services (LPS) analyzing homeowner’s performance on their mortgages as of February 2010 has some data that is encouraging but that data is overshadowed by data that shows the problems int he U.S. housing market are far from over.

Let’s start with the good news…

Delinquencies on home mortgages declined in February by 1.45 percent from January and the percentage of loans that were 90 days late or more in February were at the lowest rate in 17 months. The decline in home loans that were 90+ days delinquent from December 2009 to February 2010 was the largest decline since the same period in 2005 and 2006.

lps-mortgage-monitor-logoNow for the sobering bad news…

Mortgaage delinquencies in February were up 21.3 percent from a year ago and foreclosure inventories continue to climb to record highs. February’s foreclosure rate of 3.31 percent is an increase of 0.06 percent from January and a 51.1 percent increase from a year ago. In addition, the average days delinquent on loans 90+ days delinquent increased to 256 days, an increase of 36 percent from a year ago when the average delinquency was 188 days.

  • Total U.S. loan delinquency rate for February was 10.2 percent.
  • Approximately 1.145 million loans that were current at the beginning of January were at least 30 days delinquent as of the end of February
  • 3.8 percent of loans that were current in December 2009 in Nevada and Mississippi were delinquent as of the end of February 2010
  • 4.56 percent of loans moved to “worse” status in February vs. 2.22 percent that improved
  • For every 1 loan that improved in February in terms of delinquency, 2.1 loans deteriorated.
  • The percentage of loans that have missed 12 payments and are not in foreclosure has almost doubled in the past year.

The national average for home loans that are not current as of February is 13.5 percent. The state with the highest percentage of home loans that are not current is Florida with almost a fourth of the home loans not current (23.8 percent) followed by Nevada at 23.3 percent, Mississippi at 17.5 percent and Arizona at 16.3 percent.

lps-mortgage-delinquency

Information provided by LPS Applied Analytics

Thinking of “walking away” from your mortgage?

Dennis Norman

You may want to consider possible legal issues before deciding to “walk away”

Homeowners who are considering “walking away” from their home to avoid making their mortgage payment need to know that their mortgage company may try to file a lawsuit to recover the amount owed on the home.

In addition, homeowners who sell their home for less than the amount they owe – a process called a “short sale” — may be sued for the unpaid balance, even after the sale of the home. Finally, homeowners with unpaid home equity loans or second mortgages may also face legal action if they “walk away” from an unpaid mortgage or conclude a short sale.

My advice is that no homeowner should ever simply ‘walk away’ or ‘turn in the keys’ without receiving a document that absolves them of all liability,” said Frank Alexander, professor of law at Emory University School of Law and a member of the board of directors of Consumer Credit Counseling Service (CCCS) of Greater Atlanta.

“A borrower facing a foreclosure should assume that a post-foreclosure lawsuit is possible,” said Alexander. “In addition, no homeowner should ever participate in a short sale without receiving a signed agreement clarifying that all outstanding debt has been forgiven. The same is true for all deed-in-lieu of foreclosure resolutions.”

Before the current mortgage crisis, mortgage companies usually did not sue homeowners after foreclosure or short sales because many borrowers had little income and few remaining assets, according to Alexander.

But the increase in homeowners deciding to “walk away” from their homes means mortgage companies may file more lawsuits to try and recoup their losses. In addition, Alexander says that mortgage companies are often selling promissory notes for the amount owed on the mortgage, at steep discounts, to collection agencies. The collection agencies will likely pursue the former homeowner to collect the amount owed.

Because some borrowers who decide to “walk away” from their homes still have good incomes, Alexander predicts an increase in the number of lawsuits filed by mortgage companies to obtain garnishment of a homeowner’s wages. “Garnishment actions are going to become quite common in late 2010 and throughout 2011 and 2012,” he says.

If a homeowner involved in a foreclosure, a short sale or deed-in-lieu of foreclosure has any questions about this issue, Alexander recommends that they hire an attorney to determine if their mortgage company has any basis for legal action.

Will you owe taxes on a short-sale or foreclosure?

Dennis Norman

Depending on which estimate you believe, somewhere between one-third and one-half of the homeowners with a mortgage in the U.S. owe more on their homes than their homes are currently worth. This has lead to an unprecedented amount of short-sales and in many cases, a lender “forgiving” you of the short-fall (the amount of your loan your sale proceeds were not adequate to pay) which, in the past could have left you owing taxes on the “forgiven debt”.

For some of those underwater homeowners that are not fortunate enough to do a short sale they may end up losing their homes through foreclosure. Like short sales, in the past some foreclosures also resulted in the homeowner finding they owe taxes as a result of the foreclosure.

Fortunately seller’s in these situations today are getting some relief through the Mortgage Forgiveness Debt Relief Act which, according to the IRS, “generally allows exlusion of income realized as a result of modification of the terms of a mortgage, or foreclosure on your principal residence.” This applies to debt forgiven in 2007 through 2012 up to $2 million in forgiven debt.

The following are some FAQ’s on the subject from the IRS. This is for information only…you should consult your CPA or tax professional to see how this may or may not apply to your situation:

What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.

Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.

How long is this special relief in effect?
It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.

Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.

If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and this form must be attached to your tax return.

Do I have to complete the entire Form 982?
No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

Where can I get this form?
If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.

How do I know or find out how much debt was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.

Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.

If part of the forgiven debt doesn’t qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent. You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.

I lost money on the foreclosure of my home. Can I claim a loss on my tax return?
No. Losses from the sale or foreclosure of personal property are not deductible.

If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?
Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case. An exclusion is also available for the cancellation of certain nonbusiness debts of a qualified individual as a result of a disaster in a Midwestern disaster area. See Form 982 for details.

If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence?
Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

Will I receive notification of cancellation of debt from my lender?
Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.

What if I disagree with the amount in box 2?
Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.

How do I report the forgiveness of debt that is excluded from gross income?
(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2. Any remaining canceled debt must be included as income on your tax return.

(2) File Form 982 with your tax return.

Obama administrations loan modification program ‘destined to fail’

Dennis Norman
Dennis Norman

Laurie Goodman, the Senior Managing Director at Amherst Securities, testified today before the House Financial Services Committee hearing on “The Private Sector and Government Response to the Mortgage Foreclosure Crisis“. Amherst Securities specializes in the trading of residential mortgage backed securities and charges Goodman with keeping them and their customers abreast of trends in the market.

Today, in her testimony, Goodman told the committee she hoped to make two primary points in her testimony:
  • “The housing market is fundamentally in very bad shape. The single largest problem is negative equity.”
  • “The current modication program does not address negative equity, and is therefore destined to fail. It must be amended to explicitly address this problem. And there is no single solution; it is a combination of policy measures. Clearly, the arsenal of solutions must include principal reduction and must explicitly address the loss allocation between first lien investors and second lien investors.”

In her testimony Goodman cited some very interesting (albeit it depressing) facts and figures, including:

  • They (Amherst) estimate that approximately 7 million of the 7.9 million homeowners that were reported by the MBA as not making their mortgage payments in 3rd quarter will be forced into vacating their properties.
  • 250,000 New borrowers per month stop making their payments

As a reason for estimating failure on such a large percentage (88.6 percent) of the 7.9 million borrowers that were delinquent, Goodman said;

“The real problem is that default transition rates are high and cure rates are low because the borrower has negative equity in their home. Most borrowers do not default because of negative equity alone. Generally, a borrower experiences a change in financial circumstances. If the home has substantial negative equity, they will choose to walk.”

To prove her point, Goodman cited a study that was done by Amherst which looked at Prime borrowers that were 30 days delinquent on their mortgage 6 months ago. They then sorted the loans by the amount of equity the borrowers had, then came back 6 months later to see which borrowers were at least 60 days delinquent. For borrowers with 20 percent equity, only 38 percent had become 60+ days delinquent. For borrowers with substantial negative equity (owed 41-50 percent more on their homes than the value) 75 percent had become 60+ days delinquent.

During her testimony, Goodman said “there is a substantial group of people who have argued that the primary problem is not negative equity, it is unemployment. This argument is not supported by the evidence. First, the increase in delinquencies for subprime, Alt-A and pay option ARM mortgages began to accelerate in Q2, 2007. By contrast, we did not begin to see large increases in unemployment until Q3, 2008.”

Goodman goes on to point out the results of another study done by Amherst Securities entitled “Negative Equity Trumps Unemployment in Predicting Defaults” which included the following:

  • The combined loan-to-value ratio or CLTV plays a critical role. For prime and Alt-A loans in low unemployment areas the default frequency was at least 4 times greater for borrowers underwater by 20 percent than it was for borrowers with at least a 20 percent equity position.
  • If a borrower has positive equity, unemployment plays a negligible role. We found that all borrowers with positive equity performed similarly no matter the local level of unemployment.
  • If a borrower has substantial negative equity, unemployment plays a role, but less than CLTV. If the borrower has a CLTV greater than 120, the default frequency was 50 percent to 100 percent higher in a high unemployment area versus a low unemployment area.

The evidence is irrefutable. Negative equity is the most important predictor of default,” said Laurie Goodman.

In addition to Laurie Goodman, there was testimony today from Dr. Anthony B. Sanders, Distinguished Professor of Real Estate Finance, Professor of Finance School of Management, George Mason University. Dr. Sanders also paints a pretty dismal picture of the success of the Obama administration loan modification program. Dr. Sanders said “it is a real challenge to servicers to make loan modifications succeed when 70 percent of modifications that have only interest rate cuts have gone into re-default after 12 months.

Dr. Sanders goes on to state that “only 12.5 percent of eligible borrowers receiving permanent loan modifications are able to keep them current. And it is entirely possible that the “success” rate could enve fall below 10 percent of eligible loans.” Dr. Sanders says the reason for this is:

“the degree to which many residential loans in the United States are in a negative equity situation. According to a Deutsche Bank research report, they are expecting 25 million homes to be in negative equity position.”

The second reason Dr. Sanders gave as the cause for such a bleak outlook for successful permanent loan modifications is the unemployment rate. He said “while 10 percent report(ed) unemployment rate is bad enough, the true unemployment rate (including wage and salary curtailment) is closer to 17.5 percent. “

I am glad to see testimony by these two professionals, and others, to help convince Congress that the loan modification plan, in it’s present form, is not effective. I think the evidence is overwhelming that negative equity is the major problem and must addressed in their “stimulus” and “recovery” programs.

Home Affordable Foreclosure Alternatives Program (HAFA) Launched

Dennis Norman

Dennis Norman

Last week the Treasury Department announced the Home Affordable Foreclosure Alternatives Program (HAFA), the latest program under the Home Affordable Modification Program (HAMP), designed to offer alternatives to homeowners facing foreclosure.

THE HAFA PROGRAM:

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 Continue reading “Home Affordable Foreclosure Alternatives Program (HAFA) Launched

Almost 1 in 8 Missourians are delinquent on mortgage payments according to MBA report

Missouri ranks 21st in delinquencies and 30th in foreclosures

Mortgage Bankers Association Logo MBAAccording to a report just issued by the Mortgage Bankers Association, the mortgage delinquency rate on one-to-four-unit residential properties in the U.S. rose to a new record rate of 9.64 percent.  Here in Missouri, the delinquency rate is slightly lower at 9.41 percent.

Included in the MBA’s report as a “delinquency” are loans that are at least one payment past due, but does NOT include loans somewhere in the process of foreclosure. At the end of third quarter 2.05 percent of mortgage loans in Missouri were in the foreclosure process. Therefore 11.46 percent of mortgage loans in Missouri are actually delinquent once we add in the ones in foreclosure. Continue reading “Almost 1 in 8 Missourians are delinquent on mortgage payments according to MBA report

New alternative for some homeowners facing foreclosure; Deed for Lease

Dennis Norman

Dennis Norman

If you are a homeowner facing losing your home in foreclosure but you do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification, you may have another alternative: The Deed for Lease program announced yesterday by Fannie Mae for homeowners with loans insured by Fannie Mae.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.” Continue reading “New alternative for some homeowners facing foreclosure; Deed for Lease

Mortgage Programs Fall Short in Keeping Homeowners out of Foreclosure

To alleviate some suffering by homeowners, the Obama Administration introduced the “Making Homes Affordable” plan last March. Unfortunately, the plan has not yet had the intended effect.

Article by the Grand Law Firm

Economists debate whether or not the country is actually currently in a recession. Some say that there are positive signs that we have reached the bottom and the economy is turning around. Others, however, suggest that the country still has a long way to go and it may be years yet before we truly reach financial recovery. Regardless of who is right though, one thing is clear: many people are facing significant financial hardships and need help now. Continue reading “Mortgage Programs Fall Short in Keeping Homeowners out of Foreclosure

Appraisal, Loan Modification and Foreclosure Lawsuits Soar

Dennis Norman
Dennis Norman

A surge in litigation tied to real estate appraisals, loan modifications and foreclosures contributed to a 54 percent increase in mortgage-related lawsuits, according to the second quarter Mortgage Litigation Report from MortgageDaily.com.

During the second quarter, 125 cases were tracked, jumping from an already active 81 first quarter cases. The second quarter of 2008 had just 42 cases. Continue reading “Appraisal, Loan Modification and Foreclosure Lawsuits Soar

Free Movers For Families Affected by Foreclosure

Dennis Norman

Dennis Norman

By: Dennis Norman

I came across something today that, while it is very sad there is such a demand for, it is heartwarming to see this need being addressed; helping families that have lost their homes in foreclosure move and store their belongings. 

Freemooves.ComThere is a new non-profit organization, FreeMooves, that is offering free moving and storage services to families affected by foreclosure throughout the U.S. Continue reading “Free Movers For Families Affected by Foreclosure

FBI Arrests Two People in Foreclosure Scheme

Dennis Norman

Dennis Norman

By: Dennis Norman

Previously I did an article on avoiding foreclosure rescue scams which have unfortunately become rather common in recent months.

This week the FBI arrested two people that the FBI alleges has done just that. I wanted to share the press release from the FBI to heighten people’s awareness of scams such as this and hopefully help prevent more victims of such scams. The press release describes in detail how they allege this scam was carried out. To read the FBI press release click here, or just read below as I have published it in it’s entirety. Continue reading “FBI Arrests Two People in Foreclosure Scheme

Avoid mortgage modification and foreclosure rescue scams

foreclosureBy: Dennis Norman

Recently the The Office of the Comptroller of the Currency issued a Consumer Advisory.  The Advisory contains consumer tips for avoiding mortgage modification scams and foreclosure rescue scams.

The advisory states; “Scams that promise to “rescue” you from foreclosure are popping up at an alarming rate nationwide, and you need to protect yourself and your home.   If you’re falling behind on your mortgage, others may know it too – including con artists and scam artists.  They know that people in this situations are vulnerable and often desperate.”

The OCC suggests that before you do business with someone offering to negotiate a loan modification for you or to stop or delay foreclosure for a fee that you carefully check his or her credentials, reputations, and experience.  Watch out for warning signs of a scam, and always maintain personal contact with your lender and mortgage servicer. Continue reading “Avoid mortgage modification and foreclosure rescue scams