Monday, October 31, 2005

Philly Foreclosure Facts

This Philadelphia Daily News story on sheriff sales had a few local pointers. "Four times a month, the Philadelphia sheriff’s office conducts sheriff’s sales, which are a way for mortgage companies and other financial institutions and the government to recover debts owed to them."

"Often, the properties in question are sold to new owners. There are mortgage-foreclosure sales for mortgage companies, which are looking to recoup money from homeowners who have defaulted on their home loans."

"Delinquent tax sales are how the city collects unpaid real-estate taxes, water and sewer bills. There are also twice-a-month tax-lien sales that cover a variety of liens on properties."

"Roughly 1,400 to 1,600 properties are exposed to sheriff sale each month, and about a third of the mortgage foreclosures and one half of tax lien cases result in properties being sold."

Ten Percent Of Subprime Borrowers Are Late

Delaware Online has this report on delinquencies. "The initial advice all credit counselors give to homeowners facing foreclosure is: When you find yourself in a hole, stop digging. A culprit, said Mike Shannon, a Realtor and foreclosure specialist in Dearborn Heights, Mich., is the prevalence of subprime lending programs, those that help borrowers with poor credit obtain mortgages at higher interest rates, and no-money-down, interest-only mortgages."

"'The leniency in lending leaves people in jeopardy, especially when they're doing 100 percent financing, using 80 percent as the primary mortgage and a 20 percent equity line,' he said. 'It really becomes a problem if that financing is based on a two-person-income household and something happens.'"

"Nationally, 10 percent of subprime borrowers are late with their mortgage payments, while 3 percent of all sub-prime borrowers are in foreclosure, according to the mortgage bankers group. In Michigan, nearly 16 percent of sub-prime borrowers are delinquent, and 9 percent are seriously delinquent or in foreclosure."

Saturday, October 29, 2005

Foreclosures Near Record In Mesa County, CO

The Grand Junction Sentinel reports on foreclosures on the western slope of the Colorado Rockies. "The number of foreclosures in Mesa County during the first 10 months of 2005 is down slightly from the same time last year. According to the Mesa County Public Trustee’s Office, 333 foreclosure actions will be opened by Oct. 31. At the same time last year, 337 foreclosures were reported."

"Public Trustee Barbara Brewer said the reasons people fall behind on their mortgage payments and drop into foreclosure remain the same. 'We’ve got people who are just overextended, or it’s illness, a death in the family, divorce, loss of job. All of those issues can impact people’s ability to pay their loans,' Brewer said."

"The number of foreclosures this year appears to be on track to almost match last year’s total of 392. That’s the most foreclosures in a year in Mesa County since 1988, when 438 foreclosures were reported."

Friday, October 28, 2005

Up To 10% Of Mortgage Apps Include Fraud

Inman News has a report on the FBI and mortgage fraud. "'Mortgage fraud is a crisis in the making,' said James Burrus, deputy assistant director of criminal investigations for the FBI. He likened the wave of real estate loan fraud sweeping the country to the savings and loan crisis of the 1970s and 1980s that left failed companies and bankruptcies in its wake."

"'It's important that we get together for a solution,' Burrus said. 'After the savings and loan crisis, the government imposed a solution on the banking industry, and I don't think we want that to happen here.'"

"Mortgage fraud is on the upswing, with the number of suspicious activity reports to the Federal Bureau of Investigation in 2004 almost triple those in 2003, according to a report the FBI released in May. Burrus said around 15,000 SARs were filed in 2004, and more than 20,000 in 2005."

"According to the Federal Financial Institutions Council, up to 10 percent of all mortgage loan applications in the $3 trillion annual U.S. residential real estate market involve some form of material misrepresentation."

"Some new wrinkles include the rising trend of asset rentals, Burrus said. 'These people will rent you a beach house, a certificate of deposit, things you can say you own for the purpose of getting a loan,' he said. 'Once the loan is obtained, the asset is returned.'"

High Foreclosures Means Big Discounts

A report looks at foreclosures and the effect on home prices. "The study by Christopher Cagan, Ph.D., quantifies the correlation between foreclosures as a percentage of total sales and the size of the discount buyers typically receive when purchasing foreclosure properties."

"For example, in Maricopa County, Ariz., where foreclosure sales accounted for 1.6 percent of total sales during the first half of 2005, the median discount was 6.3 percent. Whereas in St. Louis, Mo., foreclosures made up 7.9 percent of sales for the same time period, with a median discount of 29.5 percent."

"'The prevalence of foreclosures and the depth of discounts are sensitive indicators of the present and future state of a real estate market, regardless of geographic location or market type,' said Cagan."

"Among the areas with few foreclosure sales and little or no foreclosure discounts during the first half of 2005 were California, the District of Columbia, Hawaii, New Mexico, Virginia, Nevada, Florida and Arizona. States where foreclosures were most prevalent and discounts were deepest included Michigan, Missouri, New York, Ohio, South Carolina and Tennessee."

California Defaults Up

Annette Haddad at the LA Times has this on the California market. "The number of default notices sent to California households rose during the third quarter for the first time in more than three years, the result of lower appreciation rates and riskier loans. In what analysts said was another sign of a peaking housing market, lending institutions sent default notices to 12,568 California homeowners during the third quarter, a 3.5% increase from the year-ago period."

"The last time default notices increased was during the first quarter of 2002."

"The bulk of the defaults were sent to addresses in Southern California, where the torrid rate of appreciation has been slowing for much of the year. The region saw a 20% jump in default activity on a year-over-year basis. The Bay Area saw a 13% decline. Northern California is seeing home values rise at a faster pace than in the south now, John Karevoll said."

"Typically, only about 10% of homeowners who find themselves in the default process actually lose their homes to foreclosure."

Thursday, October 27, 2005

Almost 700 Buffalo Properties Auctioned

The Buffalo News examines the outcome of the huge auction in that city. "Buffalo's get-tough stance on collecting delinquent taxes and fees spawned the highest revenue-producing foreclosure auction in city history. For the first time since the auctions began in the early 1980s, high bidders broke the $4 million mark, pledging about $4.5 million for 683 properties, including vacant lots, homes and commercial buildings."

"Mayor Anthony M. Masiello said he's 'very comfortable' with the more aggressive approach, noting that hundreds of people who demonstrated financial hardship were given court stays or allowed to set up payment plans. 'We've provided help to those who legitimately need it,' Masiello said. 'But if we didn't do what we're doing, it would send the wrong message to people who are paying.'"

"Hundreds of properties sold at this week's auction had delinquent garbage fees, some going back to when the fee was first imposed in the mid-1990s. About 2,400 properties were offered for sale at this year's auction, but only 683 received opening bids. The city acquired 545 properties that did not receive sufficient opening bids; another 1,200 foreclosures were adjourned."

HUD Incentives There For The Asking

HUD homes have a high default rate, and the government is looking to get rid of them. "The federal government over the last four years has found itself in a similar position, too many foreclosures in their inventory. This has led Housing and Urban Development (HUD) to create and offer special incentives for homebuyers such as such as lowering prices, an allowance to upgrade the property, a moving expense allowance or a bonus for closing the sale early. The buyer can request HUD to pay all or a portion of the financing and closing costs."

"According to Michael Urbanski, 'Each area of the country has its own management company with latitude regarding these incentives. Buying Incentive Programs are created in each individual state. According to Urbanski, the government is being forced to reduce inventory in the fourth quarter as the year comes to a close, therefore home buyers should see a slash in prices."

I should add that I am not recommending the site found in this ad/link, but having tried to work through HUD and realtors, I found that neither are much help. That's why they have so many houses, I suppose.

Firm Sees Future In Foreclosures

The Orange County Register reports on one California companys plans for housings future. "First American Corp.'s real-estate businesses may be thriving in a hot housing market, but the Santa Ana-based company is hedging its bets by beefing up its foreclosure-processing businesses."

"First American Chairman and CEO Parker Kennedy said he expects foreclosures to more than double in 2006. He noted that foreclosures are at historic lows thanks to rising home prices. Homeowners suffering a financial setback, like losing a job, don't have to foreclose. Merely selling their homes today raises enough to pay off the mortgage for many owners in trouble."

"But Kennedy predicted that foreclosures will return to relatively normal levels as fewer homeowners rely on rising home prices to bail them out."

"First American benefited from the frenetic housing market because it is selling more title-insurance policies, which account for 70 percent of the firm's gross revenues. First American is already benefiting from bad news in real estate: flooding damage from Hurricane Katrina and Rita. First American is a leading provider of data on flood-prone homes – information that lenders and insurers have requested in growing numbers since the storms ravaged the Gulf Coast."

Wednesday, October 26, 2005

Secured Creditors Win In 'Bankruptcy Bubble'

The New York Times has an article on the 'bankruptcy bubble.' "Bankruptcy filings were supposed to snowball in the months before the tough new law went into effect on Oct. 17. But the avalanche of petitions, and the lines of debtors streaming out the courthouse doors caught even the credit card issuers who supported the new law by surprise."

"In recent days, the five biggest bank issuers of credit cards have said that the unexpectedly large flood of filings shaved hundreds of million of dollars off their earnings in the third quarter. 'We thought it would cause a bubble,' James Dimon, the president of J. P. Morgan Chase, said last week. 'The bubble is just bigger than we thought.'"

"More than 500,000 Americans filed for bankruptcy protection in the 10 days before the law took effect on Oct. 17. That is roughly a third of the total number of bankruptcies filed in 2004. 'The banks are saying that we expect bankruptcy-law-related losses will subside because of the rush to file,' said David A. Hendler. 'But the undertone of credit quality is worsening.'"

"Even before bankruptcy filings began rising this spring, an American Bankers Association survey of 350 member institutions found that credit card delinquencies had been increasing when measured by the number of accounts past due. (When measured by dollars lost, it has declined). In September, it reported that the rate rose to a record of 4.81 percent during the second quarter, driven in large part by the higher price of gasoline. And it is not expected go down anytime soon."

"Under a so-called cram-down provision that was woven into the code, secured creditors like auto lenders get a big advantage in collecting Chapter 13 bankruptcy debts. Under the new law, debtors will be obligated to make payments on the purchase value of a car they bought up to two and half years before the bankruptcy filing. In the past, a debtor was required to make payments only on the current depreciated value. That left more money on the table for credit card companies to collect."

"'What is going to happen to the distribution to unsecured creditors that traditionally goes to the credit card people in Chapter 13?' asked Judge Keith M. Lundin of the Federal Bankruptcy Court in Nashville. 'There is no more money in these cases. It is only going to be shifted to the pockets of the car lenders, who all of the sudden have a much bigger claim.'"

Fraud 'Pervasive And Growing': FBI

This North Carolina story shows that the lax oversight is creating opportunities for foreclosure buyers. "Two High Point businessmen and a Greensboro real estate lawyer have pleaded guilty in connection with a mortgage fraud scheme involving more than 20 properties."

"Their convictions this month mark the third Triad mortgage-fraud ring brought down by federal authorities in recent years. The FBI says mortgage fraud is 'pervasive and growing' across the country. Between August 1999 and January 2001, the pair was involved in more than 20 fraudulent real estate transactions in Guilford County."

"The scheme involved 'double closings' on property. They arranged mortgage loans for an amount higher than the sales price, then recruited a 'straw' buyer to apply for the loan. The straw buyer received a kickback of between $1,000 to $5,000 per property for acting as a real buyer."

"The pair would buy property at the sale price and immediately resell it to the straw buyer for the loan amount, making a profit.Though straw buyers were told the property would be transferred out of their names, that never happened."

"No one paid the loans, which went into default and led to foreclosures. The straw buyers, who were not charged, suffered damage to their credit records."

Tuesday, October 25, 2005

Buffalo Moves Forward With Mass Auction

The Buffalo News reports on the big auction. "On the first day of Buffalo's most controversial foreclosure auction in years, winning bidders pledged nearly $925,000 for 225 properties."

"Three-quarters of the 886 properties that were up for sale Monday did not draw opening bids. But the first phase dealt with many vacant properties and empty lots in struggling neighborhoods."

"Officials said they expected more spirited bidding activity today and Wednesday, when properties in the North, Delaware, University and South Council districts are offered. Earlier this month, more than 3,700 properties were on the foreclosure list. By Monday afternoon, the number had dipped to fewer than 2,500 as people made payments or obtained court orders to delay the sales."

"In some instances, the city collected money from people who had failed to pay the garbage fee since the unpopular levy was imposed nine years ago. 'It proves what we've said since Day One; that foreclosure is the only effective vehicle for collecting what's owed to the city,' said Bruna Michaux, commissioner of assessment and taxation. Michaux predicted about 2,000 properties will have been put up for sale by the time the auction ends Wednesday."

"Housing Court Judge Henry J. Nowak (noted) that most of the structures have some housing code violations, he told them they will be expected to repair and maintain properties they buy. New owners who ignore the problems could face fines and even jail time, he warned."

"A reporter asked Nowak if he thought his comments might deter people from bidding on properties. 'It may discourage some out-of-town folks from bidding,' he said. 'It's a lot easier for someone living here to deal with [repairs].'"

Defaults Soar In Troubled States

With existing home sales near historic highs, it's not a surprise that nationwide, fewer homes are falling into foreclosure. "68,646 properties nationwide entered some stage of foreclosure in September, a 9.2 percent decrease from the previous month."

But individual markets didn't fair as well. "Despite the lower foreclosure rates nationally, a number of states showed increased numbers of foreclosures. Colorado reported 3,602 properties entering some stage of foreclosure, a 50 percent increase from August and one foreclosure for every 508 households, the highest foreclosure rate of any state and more than three times the national average."

"Foreclosure rates in Georgia and Ohio were more than twice the national average thanks to foreclosures increasing more than 20 percent in both states. With 3,923 properties entering some stage of foreclosure, Georgia foreclosures occurred at one in every 789 households. With 5,799 foreclosures, the Ohio foreclosure rate was one in every 825 households."

A breakdown by state is available at the bottom of the link.

Monday, October 24, 2005

Spec Homes Break Homebuilder

This article from Kansas shows how a developer can get in trouble. "In the past few weeks, dozens of subcontractors have filed mechanics' liens against properties built by Three Sons, claiming that Wes Pechin owes them money for work done in Andover. Sixty-seven liens have been recorded so far in the Sedgwick County Courthouse, totaling nearly $385,000."

"The trouble continues for Pechin, who can't afford to complete several homes in the residential developments. And last week, the Wichita Area Builders Association board of trustees suspended Pechin's membership. Pechin says he understands the concerns from WABA and his subcontractors, but says he's trying his best to fix the mistakes he made, which started when he overestimated the amount of work he thought he'd get in 2005. That led him to overspend and overbuild, leaving Three Sons operating for the past 90 days on zero revenue."

"He says he's working with bankers, subcontractors and homeowners to get everyone paid back and get the houses finished. 'I've been in construction my entire life, and I've never done anything other than be completely honest,' he says."

"Pechin went more than four months without any new business. And eight spec houses that he built, thinking they'd sell quickly, haven't been touched. With virtually no money coming in, and unused inventory already paid for, Pechin found himself in a deep hole."

"Pechin says his problems are a combination of a market that isn't as good as he expected, and him 'setting the bar too high.' WABA president Wess Galyon disagrees that the housing market has been soft. He says Pechin simply made an error in judgment and built more homes than he could sell, which caused him to lose money and not be able to finish what he had started."

"'I think what's happened is there was some wrong decisions made about products, the timing didn't gel with the volume of building being done, and it just caught up with him,' Galyon says."

Unpaid City Fees Land 2,500 Homes In Auction

This report from Buffalo, NY shows what it takes to end up in an auction. "Today, the City of Buffalo will start foreclosing on properties where people haven't paid their taxes, or, in some cases, their garbage fees or even their water bills."

"'At last count, there were about 1,000 owner-occupied homes still on the list, and that's a significant number of people in jeopardy of losing their homes,' said (attorney) David Chadwick."

"Some properties go before the gavel this morning, others will be auctioned tomorrow or Wednesday. Chadwick says the city has been more flexible on payment agreements as of late, but there are a lot more properties on the foreclosure list, too."

Update: But this account has a much higher total. "The first year that unpaid water, sewer and user fees are included along with unpaid City of Buffalo taxes for foreclosures has resulted in more than 2,500 residential homes being auctioned Monday. A usual year brings about 1,000 homes to auction."

"'The city has held a tax foreclosure since 1981 (but since) user fees were accumulating, this is the only program that will facilitate the correction of (late payments),' said Bruna Michaux, commissioner of the city's department of assessment and taxation."

Sunday, October 23, 2005

'Sense Of Entitlement Part Of American Culture'

Myrtle Beach Online reports on a rash of foreclosures. "At least 106 families have lost their homes to foreclosure since 1999 in Laurel Woods, a 135-acre manufactured-housing neighborhood with 369 homesites in the Burgess community. That is the highest foreclosure rate, an average of more than one out of every four homes, for any Grand Strand neighborhood, according to Michelle Halstrom, a local real estate agent."

"Laurel Woods is perhaps the area's most stark example of the pitfalls of the state's and region's booming mobile home industry, which has a network of subprime lenders who specialize in high-risk loans that real estate experts say can be susceptible to questionable lending practices. For many aspiring mobile home owners, these lending practices can leave families without homes or hope because of ruined credit and foreclosures."

"The situation in Laurel Woods, according to interviews and a review of 5,000 pages of documents, is the result of three factors: Developers, mobile home dealers, appraisers and mortgage brokers who work closely together to steer home buyers into high-profit land-and-home packages they might not be able to afford. Lenders willing to take risks on low-income buyers with bad credit, sometimes based on misleading or falsified loan applications. Long-term mortgages with high interest rates and other costs for homes that may lose rather than gain value over the life of the loan."

"The foreclosures represent $10 million worth of bad debt on mortgages with interest rates as high as 18 percent. Much of that debt, according to interviews, state documents and court records, resulted from loans to consumers who had little or no resources to repay the money."

"Halstrom said there are four reasons for most foreclosures: death, divorce, job loss or bank fraud. 'In a place like Laurel Woods, where 10 percent of the property is bank-owned and pieces of property are foreclosed on two, three or even four times in a four-year period, that's not due to death, divorce or job loss,' Halstrom said."

"There are only two ways to get out of a high-interest mobile home mortgage once a home buyer signs his or her name on a contract, Surfside Beach lawyer Nate Fata said. 'You can either die or you can file for bankruptcy protection,' said Fata. 'The odds that a borrower will be able to sell that mobile home and get enough money to pay off the loan is less than 1 percent,' he said."

"Joey McNutt..did appraisal work in Laurel Woods. In one case McNutt valued a mobile home at about $141,000 in 2000. That appraisal was used for a $124,200 mortgage that Willie Carter and Emma Jean Young signed for in August of that year to buy the home. Carter and Young made one of their $1,112.96 monthly payments before defaulting on the mortgage. The home was sold at auction in September 2001 for $60,000."

"Horry County tax records show the current owner purchased the property for $49,900 in 2004. McNutt said the Shady Grove Road home sold for less in foreclosure because 'banks are notorious for taking pennies on the dollar in a foreclosure, and the homes never sell for their market value.'"

"While he sees a mortgage industry that feeds off the lack of financial knowledge of many high-risk buyers, Fata said he agrees buyers must share in the blame. The buyers, he said, rarely read what they sign and usually are the ones initiating a loan for something they know they can't afford."

"'It's part of American culture, this idea that everyone wants to own a home,' Fata said. 'And then you have these people out there saying, 'Don't worry, we can get you financed' and the buyers go along with it. It's almost like a sense of entitlement people have, they feel they deserve that home or that new car, even if they can't afford it.'"

Friday, October 21, 2005

A Winner In The S&L Bust

This page in a Forbes piece on Tom Barrack is a flashback to a previous era of massive defaults. "Barrack's biggest payday was around the corner. In the late 1980s he'd arranged for Bass to buy a portfolio of bad loans from American Savings, a failing thrift that the federal government had taken over. Bass paid about $1 billion, less than half the face value of the construction notes, mortgages on office buildings, and other troubled credits."

"Bass and Barrack were able to turn around and sell many of the loans back to the original borrowers at 70 cents or 80 cents on the dollar, earning about $400 million. It was only the beginning of the S&L bust, and Barrack knew the opportunities would be huge. 'He kept saying to me, 'The government will have to take over all these loans,' recalls Bill Rogers, then one of Bass's partners. 'He said we needed to be raising money to get ready for an incredible buying opportunity.' Barrack formed Colony Capital, the first vulture fund for S&L debt, in 1990."

"His timing was perfect. The newly formed Resolution Trust Corp. was desperate to dispose of $350 billion in nonperforming loans, most secured by real estate. Barrack was poised to write a check in 1991 forking over $1 billion for the first major loan package the RTC disbursed."

"Over the next four years he bought package after package. It turned out even better than American Savings had. Owners who were eager to keep their properties bought back their debt for 70 cents or so on the dollar. Any loans Barrack couldn't unload he bundled together and sold on the public markets as mortgage-backed securities."

"As the real estate market recovered, newly formed REITs also devoured his office buildings and shopping centers. By 1995, Barrack had reaped a profit of $2.5 billion. Barrack rolled on, picking up bargains from Japanese investors who had overpaid for prestige U.S. properties."

Private Auctions An 'Amazing Trend'

Newsday has an article on auctions and tax liens. "Real estate auctions of all kinds, though not new, have become a popular alternative to conventional house-hunting, real estate experts say. Besides the lure of snagging a good deal, investors like seeing properties most buyers may not know about, says Barbara Karnes."

"'Private auctions are very popular and effective,' Karnes said. 'Within the last year it's been an amazing trend.'"

"Whether you are attending private high-end auctions or public foreclosure auctions, or auctions held by estate, tax assessor or public administrators, experts say it's important to do your research before you raise your bidder's card."

"The planning begins with how much you think the property is worth and what you're willing to pay for it, said Michael Fine. 'Decide before the auction how much you're willing to spend on the property and stick with it,' says Fine, adding that at an auction you have to be prepared to decide within minutes what you're going to spend."

"Bidders also have to factor in the auction commission. In private auctions, the seller typically pays the auction commission, but the seller can tack on a buyer's premium fee that's added on to the bid, usually in the 4 percent to 10 percent range, as stated in the documents given to the bidder before the auction."

"Pre-auction planning means researching the stats, specs and history about what you hope to buy. For foreclosures, Karnes recommends going to the county clerk's office and researching the deed and mortgage information on the property, making sure there are no outstanding liens or tax bills you may wind up inheriting with the purchase."

"Another advantage for buyers at auctions is that they can find out immediately how much their competitors are willing to pay for a property, something they never know when they are making offers to sellers in a traditional home-buying process."

Thursday, October 20, 2005

The 90 Day 'Red Flag' For Late Payments

This Motley Fool article looks at what it takes for lenders to take notice. "It has long been understood that if you pay your bills late, your credit score will suffer. Well, it turns out that's not entirely true. Yes, payment punctuality counts for about 35% of your overall credit score. And, yes, creditors get antsy when customers start slacking on sending in their checks. But according to credit industry insiders, lenders give consumers a bit more leeway than you might think."

"As it turns out, the method that lenders use to calculate the impact of late payments is less like a strict scorecard and more like the honor system. There is one thing that credit card companies, mortgage lenders, landlords, employers, insurers, and utility companies have in common: All of their scoring systems are calibrated to suss out borrowers who may pay at least 90 days late (or worse) in the 24 months after their score is calculated. In the eyes of creditors, these consumers are the biggest credit risk."

"In fact, a single 90-day late payment is as damaging as a bankruptcy filing, a tax lien, a collection, a judgment, or a repossession. It doesn't matter if you're late paying a $50 bill or a $5,000 one, all that matters is that you were 90 days behind in paying your due balance."

"The difference between 30 and 60-day late payments and one that is reported as 90 days past due is that the latter will continue to be reported, whereas the two former will drop off once the bill has been settled. Once you've passed that threshold a single time, the credit reporting industry assumes you are much more likely to do it again and therefore keeps the red flag waving."

"Even if you settle the debt with the lender for an amount less than what was due, the fact that the debt was not covered entirely will continue to be reported. Same with repossessions or foreclosures. These events indicate that the consumer did not fulfill his or her contractual obligation with the lender and will be reported as a serious delinquency for up to seven years."

Tuesday, October 18, 2005

Prepare For Higher Losses Lenders: FDIC

Reuters has this report on a FDIC official. "Residential mortgage lenders should be prepared for an increase in credit losses as interest rates rise and pull the reins on a years-long boom in the U.S. housing market, the chairman of the Federal Deposit Insurance Corp. said on Tuesday."

"Donald Powell said record home price increases have led to nontraditional mortgage products, such as loans that require little documentation and interest-only loans. But as interest rates begin to climb, borrowers will face higher debt service on some of those products."

"'Credit losses are very low now, but mortgage lenders need to be prepared for higher losses,' Powell said. Powell said bank regulators are evaluating the risk to lenders, and would issue guidance where appropriate."

"The U.S. housing market has expanded for five years, with home sales and construction striking annual records. In some areas, home prices have climbed by double-digit percentages on an annual basis."

"The FDIC said it has never seen as many metropolitan areas experiencing a housing boom simultaneously, and estimated that the 'boom cities' include about 40 percent of the value of all U.S. residential real estate."

Monday, October 17, 2005

Profiting From 'Disillusioned Landlords'

This Canada East editorial sees some real estate buyers as being unprepared. "Part of the growing demand for properties also occurs from the real estate investor who is eager to invest in properties solely for personal economic gain. They see real estate solely as an investment, but beware of exactly what this investment entails."

"Real estate is a great asset to own, but take the time to understand what is involved in owning an income property. The truth is when you invest in a 'rental income property' you're really buying a business with all the responsibilities that it entails. These responsibilities include administration, reporting, hiring, and lots of paperwork, to mention a few."

"The industry tends to have two groups of players the professional property managers and the disillusioned landlords. The professional property managers have all the knowledge on what it takes to make this type of investment work. They know the values of the properties, they know what numbers make the investment work from cap rates, to required return on investment to make the deals work."

"Then there is the disillusioned landlord. These are they ones with minimum experience who don't do their homework and invest into a rental property usually for a short period of time (generally less then two years) and then scramble to sell off the mismanaged property for liquidation prices hoping in the end to minimize losses!"

"Some of the best deals the property managers ever buy are from the disillusioned landlords whose comments always seem to sound about the same 'there is a lot more work than I thought' or 'the business part always takes much more time than I first imagined.'"

"In fact some property managers tend to prosper merely from buying 'mismanaged properties' from this second group."

Dallas/Ft. Worth Foreclosures Up 44% YOY

Realtor magazine reports on what is behind the defaults in Texas. "Home foreclosures in the Dallas-Fort Worth metro area have increased 44 percent through October over the same period last year. Foreclosures rose 4 percent in October with a total of 2,687 properties listed for possible foreclosure."

"George Roddy Sr., blames loose lending practices, especially 110 percent and higher financing, for the abnormally high number of properties reverting back to lenders. With these types of loans, which require no equity investment by a buyer, 'the owners are upside down in their mortgages,' says Roddy. 'When something happens, the first thing people do is sell their homes. If they can't do that, they just walk away.'"

Storm Area Defaults Just Beginning

The Clarion Ledger finds that the hurricane damaged areas may not be the boomtowns some are reporting. "As Mississippi Gulf Coast residents fight mold, insurance companies and piles of debris, another obstacle lurks in the distance, foreclosure. Insurance claims usually pass on to mortgage companies, but many residents complain they are not getting enough, or any, relief from their homeowners' debt."

"'There are so many people who still owe $100,000, $150,000, $200,000 and don't have a house,' said Diamondhead resident David Hector. 'The flood insurance is just not enough.'"

"Mortgages among homeowners on the three coastal counties total 48,285, or 64.8 percent of residences, according to the 2000 census. About 17 percent, or 8,140 homeowners, have either second mortgages or home-equity loans."

"Any foreclosures are at least six months away, said Mike Fratantoni, economist for the Mortgage Bankers Association. Many mortgage companies granted a three-month grace period on payments after Hurricane Katrina, Fratantoni said. Firms could wait another three months of no payments before considering foreclosure. 'The timing is going to stretch out over a number of years,' he said."

"The frequency of delinquent payments and foreclosures were expected to rise in upcoming quarters nationwide, even before recent hurricanes, he said. Rising interest rates, the age of mortgages on the market and increasing energy costs were contributing factors."

"'Hector, whose home on the south side of Jourdan River was washed away, said only about 30 of his 300 neighbors have shown an interest in rebuilding. He said his friends have not considered the possibility of foreclosure because they are still negotiating with insurance companies. Hector did not have a mortgage on his home."

"'There are so many others who are going to be in a bad situation,' he said."

'A Disaster From The Beginning'

The Detroit Free Press has some numbers on homeowners. "Mike Shannon is a realtor and foreclosure specialist in Dearborn Heights. He handles foreclosure sales for more than 60 banks in southeast Michigan. He acknowledges that the state's stagnant economy and the struggling auto industry are driving the high number of foreclosures, but he also cites poor consumer decisions, such as lack of budgeting and overspending, for the problem."

"Another culprit, Shannon said, is the prevalence of sub-prime lending programs, those that help borrowers with bruised credit obtain mortgages at higher interest rates, and no-money-down, interest-only mortgages."

"'The leniency in lending leaves people in jeopardy, especially when they're doing 100% financing, using 80% as the primary mortgage and a 20% equity line,' he said. 'It really becomes a problem if that financing is based on a two-person income household and something happens.'"

"Nationally, 10% of subprime borrowers are late with their mortgage payments, while 3% of all sub-prime borrowers are in foreclosure, according to the mortgage bankers group. In Michigan, nearly 16% of sub-prime borrowers are delinquent and 9% are seriously delinquent or in the foreclosure process."

"'The real issue today is not about being able to qualify for the financing. The issue is an inability to accumulate the money for a down payment or closing costs,' (mortgage broker Tim) Ross said. 'That is why these products have appeal to many.'"

"Shannon said many people fail to adjust to a new home and mortgage payments before they start racking up credit card and other debt. 'If you go in many of these houses in foreclosure, you're going to find new furniture, you're going to find big-screen TVs with cable, you're going to find newer cars, a BMW and Lexus in the driveway,' Shannon said. 'What these people don't realize is that they were upside down from day one. They've gotten into the house with less than 3% down, and sometimes they're putting no money down at all. They've even rolled the closing costs into the mortgage.'"

"'Even if they wanted to sell to get out of a bind they can't, because they owe more than they have equity,' he said. 'It was all a disaster from the beginning.'"

Sunday, October 16, 2005

Poor Economy Makes Housing Future Uncertain

This story from Indianapolis shows the psychology at work in an area with high foreclosures. "Larry Taylor got a bitter surprise when he put his Plainfield house on the market last month. No one came to the open house in the Glen Haven subdivision. No one has asked for a tour. The few people who call immediately demand to know the price, which is $145,000, and then hang up."

"Taylor thinks he knows why. Stepping into the street from his manicured lawn, Taylor sweeps a hand toward several vacant, foreclosed houses and points to one right across the street, a brick-and-vinyl ranch similar to his, that brought $104,000 at a government auction recently."

"Now Taylor worries he won't even get the $121,000 he paid when his house was built four years ago, money he needs to move to an apartment. Taylor's frustration at watching his house shrink in value is shared by thousands of area homeowners. From 2000 to 2004, the median sale price for existing homes fell in 28 of 87 metro area townships."

Here is a problem for anyone interested in these properties. "Prices dived so far in one township that an assessor warns she has little choice but to reassess at lower values, raising the specter of higher taxes on homes that haven't declined."

"In the nine counties, values are rising slower than inflation, meaning that people's housing investment isn't even keeping up with the cost of living. Lenders, real estate brokers and other observers say housing prices here are being undermined by a soft economy, an explosion of new, inexpensive tract homes and a surge in foreclosures."

"When housing values fall in nearly a third of townships, it's hard to sugarcoat the harsh realities of the region's real estate market, said David Goodrich. 'These statistics don't lie,' Goodrich said. 'There are a lot of people who are going to be in trouble because they have banked on appreciation.'"

"Indiana is also No. 2 in the nation in the rate of house foreclosures. Last month, the national MBA reported 2.8 percent of Indiana mortgages were in foreclosure in the second quarter of 2005. Only Ohio had a higher rate."

"Until the economy generates better jobs and consumers learn to manage debt better, foreclosure rates could remain high, said Scott Bowers, spokesman for one of the area's largest builders. 'People don't want to talk about personal accountability of homeowners,' Bowers said."

Saturday, October 15, 2005

Michigan Defaults An 'Epidemic'

This report out of Michigan reveals that state is having serious problems. "Job losses, lagging home values and more relaxed lending rules have contributed to the state's mortgage delinquency and foreclosure rates, which are higher than the national average."

"The nation rebounded from an all-time high foreclosure rate in 2002. But Michigan continues to experience some of the highest levels of foreclosures in the country. As of Sept. 1, 40,110 Michigan families were seriously delinquent on their mortgages or in foreclosure."

"Nationally, about 1.8 percent of surveyed loans were seriously delinquent or in foreclosure in the second quarter of 2005. But in Michigan, 2.8 percent of the mortgages surveyed were seriously delinquent or in foreclosure.

"Relaxed lending rules and creative financing have overextended homeowners, who often are able to buy more house than they can afford later. Amid a weak Michigan economy, lagging home values prevent homeowners with second mortgages or home equity loans from selling their way out of foreclosure."

"'Foreclosures are hitting people at all walks of life here,' said (realtor) Marjorie Whetstine in Northville. 'It really is becoming an epidemic.' Only Texas, Georgia and Ohio have higher foreclosure rates than Michigan."

Ohio Leads The Nation

The Dayton Daily News reports on the rush at the courthouse. "So far in October, expected to be the boom month because of sweeping changes in federal bankruptcy laws that go into effect Monday, Ohio leads the nation in filings. The Southern Ohio Bankruptcy Court includes Dayton, Cincinnati and Columbus."

"Court Clerk Michael Webb said he doesn't know why the state is ahead in the bankruptcy game, but said home foreclosures generally herald a rise in bankruptcies. In September, the state attained the No. 1 ranking in the country as the leader in mortgage failures and house foreclosures, with Montgomery County leading the state."

"Webb said last-minute filings remind him of the approach of the annual April 15 tax-filing deadline. As Friday afternoon wore on, lines formed at each of the four clerks' windows nearly out the door, he said."

"'This is historic for us,' Webb said. 'We knew we were going to get crushed, we just didn't know it was going to be this significant.' For the first time in Webb's 31 years with the court, weekend hours will be in effect. Filings will be accepted until midnight Sunday."

"Webb said the last couple of days' filings have been without the assistance of lawyers. Tiffany Johnson was one of those. She said she figured there was no other way to get out of debt after her divorce. 'I've had three mortgage companies on my credit report,' she said. 'They foreclosed on the house. I decided to go ahead and do it. To file.'"

Friday, October 14, 2005

New Law For Bankrupt Homeowners

The Associated Press looks at the new bankruptcy law and its effect on homeowners. "Most of the big changes in bankruptcy rules, which backers say are designed to prevent abuse of the financial system and ensure that affordable credit is available for all, take effect on Monday. But the provisions affecting home ownership, which override state laws, went into effect in April when President Bush signed into law the federal Bankruptcy Abuse Prevention and Consumer Protection Act."

"Some of the law's supporters said they were trying to force changes in Florida and Texas, which have been called debtor's paradises and deadbeat havens because of their liberal allowances for homestead exemptions, the amount of a home's value that is protected from creditors. Those states, along with Iowa, Kansas and South Dakota, allow people in bankruptcy to protect their primary residences from creditors no matter how much the property is worth."

"The revised bankruptcy law now restricts unlimited homestead exemptions to people who have lived in their primary residence for at least three years and four months. For people in their homes for less time than that, the law allows them to keep up to $125,000 of their home's value."

"With housing prices skyrocketing in some areas of the U.S., the changes are not just affecting the rich. Middle-class homeowners also could lose their residences to creditors if they declare bankruptcy. Median home prices in August were $246,500 in Florida and $139,700 in Texas, well past the exemption limit."

'Easy Money' Drives Defaults

A pair of reports find more housing markets with debt problems. "There are 830 Tarrant County homes posted for foreclosure at the Nov. 1 auction, a 4 percent increase from the same month a year ago. With one more month left in the year, there have been 9,333 Tarrant County foreclosure postings, a 5 percent increase from a year ago."

"There is no economic bright spot that would indicate foreclosure numbers are headed downward in the near future, experts said. They pointed to homebuyers squeezing into homes with the lower payments on an adjustable rate mortgage, interest-only loan or mortgages that roll closing costs into the loan. As the interest rates rise, as they are already starting to do, the adjustable rate mortgages will ratchet upwards."

"'The reasoning is the same as we saw six months ago,' said George Roddy Sr. 'A lot of the factors point to the ease of getting money and the ability to refinance more than the selling cost.'"

"People are also running into trouble by buying houses and having little or no money saved in escrow, said Jim Brown. At the end of the year, the tax bill comes due and many people are taking out new loans to raise the money for the tax shortfall. Lenders used to never allow borrowers to waive the escrow; now they do, Brown said. 'I never thought I would see the day when the lender would waive the requirement for the escrow,' he said."

And in Ohio. "Vacant houses have popped up across Northeast Ohio, raising concern about the future of neighborhoods and communities. Many of the homes end up in foreclosure. Cuyahoga County is No. 1 in foreclosures in a state that is among the nation's leaders. Ohio also ranks high in the number of foreclosures involving subprime, or high-interest, loans."

"With the number of new foreclosure filings in Cuyahoga County on pace to top 12,000 this year, public officials and others have clamored for reforms to clear up a logjam of cases."

Thursday, October 13, 2005

Debt, Flat Incomes Cited In Massachusetts

The Salem News has an update on foreclosures in Massachusetts. "Of all Massachusetts counties, Essex County had the largest increase in foreclosures, up 46 percent, between the second quarter of 2003 and 2005, which ended in June. Suffolk County came in second with a 45.13 percent increase and Norfolk County is third with a 39.73 percent increase."

"As of yesterday, 230 foreclosures were posted..for Essex County with the highest amount, 35, listed in Lynn."

"Lawmakers like state Rep. Ted Speliotis blame the spike in foreclosures in part on debt. 'The number of foreclosures has increased this year because a lot more people are charging more and taking on more debt,' he said. 'We're also seeing revenue increasing across businesses, people are spending money, but you are not seeing any corresponding rise in salaries.'"

Texans Most Likely To Default: Experian

The Dallas News reports that many Texas debtors aren't in good shape. "With the tougher bankruptcy law taking effect Monday, this is the last news you'd want to hear: According to credit bureau Experian, Texans are the most likely to file for personal bankruptcy in the next 12 months. For the first time, the bureau studied average bankruptcy scores by state and found that Texas' average score was worst among the 50 states."

"Howard Marc Spector, a Dallas bankruptcy attorney, said Texas is in a unique situation when it comes to bankruptcy filings. 'We're not the poorest state, and we have the best protections of any state,' he said. 'We don't have wage garnishments, they can't take your house, they can't take your car, so you don't need a bankruptcy to protect yourself from your creditors.'"

"One thing that's not in dispute about Experian's study is that Texas households, on average, are strapped. Soaring prices for gasoline, natural gas and electricity are hitting consumers who have no cushion. The savings rate has been negative for three months, and household debt levels have never been higher."

"'Most people either fail to set a budget or aren't disciplined enough to stay within their budget, primarily because of the ease of using credit cards,' said William Norton III, author of Norton Bankruptcy Law and Practice."

"Bernard Weinstein, of the University of Texas, said the large number of young families in Texas increases debt levels. 'They're starting out and they're taking on debt at a very, very fast clip if they're forming a household,' he said. 'This is a state where debtors have always had the upper hand.'"

Wednesday, October 12, 2005

Foreclosures Up In The Heartland

The Kansas City Business Journal has this report. "Missouri had 2,513 foreclosed residential properties available for sale in September, up 13 percent from 1,902 properties in September 2004."

"Kansas had 1,076 foreclosed properties available for sale in September, up 45 percent from 742 properties in the same month last year. In Kansas, 324 of the properties were new foreclosures, up from 284 in September 2004."

And this from Pittsburg. "Last year, there were 11,000 foreclosures in Allegheny County. This year, they've already logged 9,000. Sgt. Fersch of the sheriff's department thinks that there needs to be a safety net for senior citizens before a foreclosure is imminent."

Tuesday, October 11, 2005

HUD Action Skews Foreclosure Totals

Yahoo has this report on September default numbers. "According to data released today by, 87,717 foreclosed residential properties were available for sale in the United States during September, a six percent decrease from August. The total number of new foreclosures listed for sale in September was 20,347."

"The decrease can be primarily attributed to the removal of all HUD real estate owned (REO) properties in 11 states following Hurricane Katrina, including Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee and Texas. On September 29, HUD identified all the properties it set aside for the victims of the storm and started re-listing all available inventory on October 6."

"To represent national foreclosure trends for the month of September, commissioned a study of the 39 states that were unaffected by the removal of HUD properties. In those 39 states,'s data showed a 3.2 percent increase in new foreclosure activity, and a half of a percent decrease in the total number of foreclosures for sale across the nation."

"'With nearly 90,000 foreclosed properties still for sale in the United States, a wealth of investment opportunities still exist. By closely tracking geographic spikes in inventory such as those currently occurring in Colorado and Indiana, investors will be well positioned to uncover strong opportunities and significant bargains on homes,' said Brad Geisen."

The link includes a state-by-state detail of the numbers at the bottom of the page.

CFC Charges Ahead With Riskiest Loans

Countrywide Financial is setting records that may come back to haunt the firm. "Mortgage loan fundings at Countrywide Financial continued to climb in September, reaching $49 billion, a 58 percent increase from the same month a year ago. For the third quarter, Countrywide's mortgage loan fundings were a record $146 billion, up 59 percent over last year's third quarter, and year-to-date mortgage loan fundings were $358 billion."

"Adjustable-rate loan fundings for the month were $24 billion, up 14 percent from September 2004. Home equity loan fundings for September advanced 21 percent over last year to $3.8 billion, bringing home equity production for the quarter to $12 billion, which was up 28 percent over last year's third quarter."

"On a consolidated basis, Countrywide funded $9.9 billion in pay-option ARM loans and $8.8 billion in interest-only loans for the month of September 2005. This compares with $2.8 billion and $6.3 billion, respectively, for the same periods a year ago."

"Delinquencies in the servicing portfolio increased 35 basis points from August 2005 to 4.03 percent at the end of September. The increase was caused primarily by customers in areas affected by Hurricane Katrina and seasonal fluctuations, the company said."

Sunday, October 09, 2005

Soaring Foreclosure Rates 'Everywhere'

Several reports from around the US point to an escalating debt problem for homeowners. Colorado, "The cycle has become vicious, and it's showing up in Weld County's foreclosure rate, which is reaching all-time highs. Last year, Weld had 1,155 foreclosures on the books, almost 50 percent higher than neighboring Larimer County. By July 25 of this year, Weld reached 779 foreclosures, just one more than the entire year for Larimer in 2004."

"The foreclosure rate is on track to continue to skyrocket. As of Oct. 3, there were 1,084 foreclosures in Weld, 26.5 percent more than at the same time last year. But, it's not just Weld; the foreclosure rate is up everywhere, said Rhonda Corman, a northern Colorado economist. Foreclosures in New York, for example, are at record highs, she said. Denver, too, is seeing a 15 percent increase from last year."

"'We're seeing an over-extension of our consumerism and we're using our homes' equity, or perceived equity, as a way to finance it,' Corman said. 'A lot of people tend to walk away rather than face the debt.'"

In Texas, "In Tarrant County (Ft. Worth), more than 8,500 homes have been scheduled for foreclosure this year. That number is up more than 50 percent from three years ago. George Roddy, president of Foreclosure Listing Service, said borrowers are upside down on 15 percent to 20 percent of the homes that go to foreclosure in a typical month."

"Another sign that Michigan's protracted economic downturn is taking a high toll on people are reports that show local real estate foreclosures are skyrocketing. The number of real estate foreclosures this year has jumped, both locally and statewide. The Kalamazoo County Register of Deeds Office expects to handle nearly 600 foreclosures this year, up from the 74 cases it handled a decade ago."

"What's more, the average value of foreclosed homes has jumped as well. One local asset-recovery specialist reports that the average price of a foreclosed home five years ago was around $30,000. This year, the average value of a foreclosed home is around $150,000."

"That suggests that homeowners facing foreclosure aren't just low-income people with tenuous work histories."

"'It's startling,' said Frank Sampsell, deputy register in the Deeds Office. 'On any given day, my desk holds about 350 sheriff's deed files, and each is a family or resident of our county under extreme financial duress. Lisa Blake, a real estate executive, said that five years ago she handled about 20 repossessed listings annually. In each of the past two years, she's processed and sold more than 100."

"'Instead of just rental properties in tough areas, I'm getting $200,000 and $300,000 homes that families are living in and losing,' she said."

"Local critics of the sub-prime lending industry say a spike in home foreclosures in Greater Cleveland is a sign of a growing sub-prime market here. Ameriquest and sub-prime lender Argent Mortgage Co. are subsidiaries of ACC Capital Holdings. Argent, which entered the Cleveland market in the last couple of years, was accused last month by the state of Georgia of violating state mortgage laws."

"Iowa Attorney General Tom Miller is leading a 30-state investigation, Ohio is not included, into Ameriquest's lending practices."

Saturday, October 08, 2005

Multiple Issues Face Borrowers

In Business Las Vegas has this report on borrowers. "Some eye-catching economic statistics were posted last week when the American Bankers Association announced that credit card loan delinquencies reached a record high of 4.81 percent in the second quarter. The delinquency rate in the previous quarter was a nearly-as-dismal 4.76 percent, which had recently been revised upward from an originally reported 4.03 percent."

"'The last two quarters have not been pretty,' James Chessen, the ABA's chief economist said in a statement. 'Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations. ... With gas prices still rising, the third quarter is not likely to be any better."

"In the mortgage industry, results were mixed. The Mortgage Bankers Association said mortgage delinquencies reached 4.34 percent at the end of the second quarter, up 3 basis points from the first quarter results. It was down, however, by 22 points from the second quarter 2004. Foreclosures, however, were less frequent in the second quarter, sitting at 1 percent at the end of the period. That's down 18 basis points from the same 2004 quarter and 8 points lower than the first-quarter numbers."

"Still, fears about the impact of two major hurricanes and the familiar specter of energy costs has the MBA taking a cautious outlook heading into the future. 'We expect an uptick in delinquency rates over the next few quarters in the states impacted by Hurricane Katrina,' MBA economist Doug Duncan said. 'The first effects of Katrina on delinquencies should be seen in the 30-to-59-days delinquent category reported in the third quarter, with more complete impacts reflected in the fourth quarter numbers. In addition, higher energy costs may exacerbate delinquency rates starting in the fourth quarter.'"

"The national concerns over high costs are also being felt in Southern Nevada. Last week, advocacy groups told utility company executives and regulators that rising costs are threatening cash-strapped residents. 'My concern is that we are also going through historic times in terms of housing costs,' said Daniele Dreitzer. 'There is no affordable housing out there.'"

"She pointed to the recent..local trend that has seen many apartments converted to condominiums, putting pressure on rents at the remaining apartments. After the meeting, she also pointed out that low-income residents are also facing higher minimum credit card payments..and tougher bankruptcy laws for those who fall behind."

"'I urge you to consider that these are not the only source of increases these people are facing,' she said."

Friday, October 07, 2005

Mass Defaults: 'Starting To Look Like A Trend'

Some new reports have more detail on the Massachusetts situation. "Mortgage foreclosures continue to climb in Bristol and Plymouth counties, outpacing a burgeoning state rate. 'It is starting to look like a trend,' said Dr. Clyde W. Barrow at UMass Dartmouth."

"Refinanced mortgages account for the bulk of the mortgages that are foreclosed, said Jeremy Shapiro, president of ForeclosuresMass. 'The current factor is more of the people who are pulling the equity out of their houses are spending over their heads and now unable to pay their mortgage,' Mr. Shapiro said."

"However, homeowners who gambled and tried adjustable rate mortgages or other specialty mortgages..on their homes will comprise most of the next wave of foreclosures projected in the coming months as the once low rates climb beyond their ability to pay them, he said."

"Bay State homeowners are beginning to feel a hangover from the long-running real estate party, with foreclosures doubling in Boston and parts of the North Shore. 'It's through the roof at this point,' 'said Shapiro (who) yesterday reported that foreclosure filings rose 95 percent in Suffolk County, which includes Boston, and 107 percent in Essex County in August. Statewide, default filings rose 66 percent from August 2004."

" Want to avoid foreclosure? Shapiro recommends that all homeowners build up enough emergency savings to last several months. 'One question I always ask folks is: `How many paychecks away from foreclosure are you?' he said."

HUD Foreclosure Inventory: 'Plenty To Go Around'

Market Watch had this blurb in a recent report. "Under a proposed rule submitted early last month, firefighters and emergency medical technicians would join police officers and teachers in a new 'Good Neighbor Next Door' sales program that would allow them to purchase foreclosed houses in designated neighborhoods at half their appraised values."

"Under the new rules, they cannot have owned any other residential property for one year prior to submitting an offer..The prohibition against owning any other residences during the occupancy term is being dropped as 'an unduly burdensome restriction on business activity.'"

"Participants must agree to live in the homes they purchase under the program as their sole residence for 36 months, starting on the day they close on the sale..In another change, HUD is limiting the number of homes sold under the new program to no more than 5% of the houses taken in foreclosure by the Federal Housing Administration, the agency which insures government-backed home loans."

"The nationwide cap is necessary to make sure sufficient numbers of HUD-acquired properties are available for other property-disposition initiatives. But since the department has an inventory of more than 60,000 foreclosures, there should be plenty of houses to go around."

Thursday, October 06, 2005

Massachusetts Defaults Are Snowballing

If you are looking for a foreclosure in Massachusetts, you have more to choose from. "ForeclosuresMass released its September 2005 ForeclosuresMass Market Analysis Report today, with data that shows Massachusetts foreclosure filings to be 32% percent above 2004 levels. Increases are evident in every county except Dukes."

"'We have seen a remarkable spike in the past few months,' said Jeremy Shapiro. 'Looking forward, it will be interesting to see how unprecedented increases in the cost of home heating fuel and gas, coupled with other pressures on mortgagees will impact foreclosures in the months to come.'"

"Highlights of the report include: Actual statewide increases for January through August are 32.78% above 2004 levels. Greatest changes from year-to-date 2004 and year-to-date 2005 were in Essex County (+46%) and Suffolk County (+ 45.13%).Compared to August 2004, August 2005 had a much higher volume of foreclosures, with increases as high as 275% in Franklin (4 to 15), 212.5% in Berkshire (8 to 25), 107.69% in Essex (65 to 135) and 95.08% in Suffolk 61 to 119)."

The report can be found here in PDF, dated October 6, 2005.

Wednesday, October 05, 2005

13,000 Bankruptcy Filings Per Day Last Week

The Washington Post has this bombshell report on defaults. "Two weeks before a new, more restrictive national bankruptcy law goes into effect, financially strapped Americans are rushing to file for protection from their creditors, with filings climbing to an unprecedented average of 13,000 a day last week."

"Week after week records are toppled. Last week's 68,287 filings surpassed the record set the week before by 24 percent, and this week's total is likely to be higher. Daily filings averaged 10,367 in September, compared with an average of 6,079 in September 2004."

"Richard and Alice Lee of LaPlace, La., whose three-year-old house was damaged by Katrina, were among those who suddenly found themselves contemplating bankruptcy. They probably could have afforded repairs on Richard Lee's salary, which had been about $100,000 a year. But the storm took its toll on the Harley-Davidson dealership where he was manager, cutting his salary by half, he said."

"With five children, finances were tight before the hurricane, Lee said. 'We had never missed a payment and were always on time with our bills, but we couldn't afford for anything to go wrong.' Now, the Lees are getting ready to file for bankruptcy. 'We know it's going to have to happen, and we'd do a lot better now. We do it after the law changes, it would be harder.'"

"Louisiana lawyer Carolyn Patrick anticipate an even greater rush to file for bankruptcy from hurricane victims after the new law takes effect after mortgage companies start threatening foreclosure. Now, Patrick said, many mortgage firms have allowed homeowners to suspend monthly payments until January, but have said that all four monthly payments will be due then. When that happens, 'people who never thought about filing for bankruptcy will walk in the door,' Patrick said."

"That will only be the beginning, according to a recent study by a University of Nevada law professor, which found that bankruptcy filing rates in areas hit by hurricanes increased sharply two to three years after the hurricane."

Tuesday, October 04, 2005

Borrowers 'Stampede' Honolulu Bankruptcy Court

The Star Bulletin looks at the surge of defaults in Hawaii. "Debt-ridden consumers are stampeding Honolulu's bankruptcy court to beat an Oct. 17 deadline, when a new federal law will make it harder for people to wipe out their credit card debts and other obligations by filing for bankruptcy protection. The total number of bankruptcies filed statewide in September surged to 574, nearly triple the 204 filed in September 2004."

"During the quarter ended in September, more than 1,200 people or companies filed for protection in Honolulu. That was a 78 percent increase over the same quarter in 2004."

"'We've been seeing three to four times as many people as we generally do,' said Dawn Smith, a Honolulu bankruptcy lawyer who said the number of clients she is seeing has risen from six per day, at most, to 15 to 20. 'We're basically open all the time now, practically.'"

"Smith said she had a client who had a monthly income of $400 but still managed to rack up $60,000 in credit card debt. 'Charge cards have made it so easy to charge, but once you've done it, you're in their clutches,' she said."

Monday, October 03, 2005

Defaults Grow In Hot And Cold Markets

Realtytrac has the latest on foreclosures. "Dallas-Fort Worth foreclosure rates stabilized in August," said James J. Saccacio, RealtyTrac CEO. 'It's interesting that the metro area's rates dropped while the rest of the state's rates increased, as did all four of the other metro areas that we measure.' Dallas County foreclosures increased 6.1 percent, with 1,591 properties entering some stage of foreclosure or being foreclosed on in August."

"The state of Texas, with 13,453 properties entering some stage of foreclosure or foreclosed on, a 33 percent increase, Texas replaced Florida as the state with the most foreclosures reported and accounted for 17.8 percent of the nation's total foreclosures."

"While Philadelphia foreclosures remained virtually static, Pennsylvania reported a 17 percent increase in the number of foreclosure properties in August."

"Los Angeles foreclosures jumped 19 percent in August, with more than 1,200 properties entering foreclosure during the month. While the foreclosure rate in Los Angeles is still low compared to other major cities, the city's foreclosure numbers have trended upward over the past three months,' said Saccacio. 'Since May, when there were only 771 foreclosures, the city has reported more than 1,000 foreclosures each month.'"

"Statewide, 4,810 properties entered some stage of foreclosure or were foreclosed on in August, a 21 percent increase from July."

"More mortgages fail in Ohio than any other state, according to the Associated Press. Across the state, more than 59,000 foreclosure notices were filed last year. Through the first half of 2005, 3.3 percent of state home loans were in foreclosure, more than triple the national average."

"Our figures have gone up a bit simply because people don’t pay their taxes or don’t want to,” said Glenn Owens, at the (Stark) county treasurer’s office. 'It’s kind of a sad commentary. A lot of people are letting their property go without attempting to pay.'"

"Owens said some homeowners operate under the mistaken impression that they can work out a deal with the treasurer’s office to avoid a foreclosure. 'Some have the idea they can settle with us,' he said. 'It’s a shame it has to happen but people have to realize we don’t go away.'"

Saturday, October 01, 2005

Scams Target Poorer Homeowners In Virginia

The Times Dispatch examines steps to fight foreclosure scams in Virginia. "Starting on a street corner in Highland Park, a small group mobilized to rid Richmond neighborhoods of illegally posted signs that read 'We buy houses' and 'Stop foreclosure.'"

"'What I want you to do today is treat it like a treasure hunt, because each sign could save a family from foreclosure,' HOME's marketing director Mike Burnette, instructed those gathered. HOME representatives said individuals and companies behind some illegal signs promising to bail homeowners out of foreclosure end up tricking them into giving up their homes."

"Paula Sherman, lending protection coordinator for HOME, said, 'We tell people that when you see these signs, you really need to investigate. Most homeowners, when they are in a desperate situation, will pretty much take the first offer to keep the home.'"

"The group focused on areas with frequent foreclosures, where some residents 'have fewer sources of mainstream credit,' said Susan Scovill."