Pre-Foreclosures May Be Best Bet Now
Bankrate.com has this
Q and A on buying a foreclosure. "Dear Real Estate Adviser, I am thinking of buying a foreclosure home to live in and possibly another for an investment some time in the next year or so. I am wondering: Is this a good time to look?"
"It might be the best time in years, which would mean it's perhaps the worst time for thousands of financially strapped U.S. homeowners struggling to hang onto their homes."
"Many economic experts are predicting that mortgage delinquencies will rise, up to 15 percent in 2006, among homeowners with higher-cost or 'subprime' loans. About 19 percent of all U.S. home loans are now subprime in contrast to just 5 percent 10 years ago. A lot of those homeowners with adjustable-rate subprime loans will see their loans reset at higher interest rates in the coming months and that will spell trouble."
"Foreclosure buying is a very competitive game right now, with so many real estate gurus advocating the strategy in books and seminars, and on TV and the Internet. Just do a Web search under 'foreclosure opportunities' and you'll see what I mean."
"While there's not space here to go through all the strategies, buying a 'pre-foreclosure' from a defaulting or financially strapped owner might be the best way to go on the consumer end. The county clerk's office keeps lists of such pre-foreclosures. Seek out titles where a 'lis pendens' notice has been filed by the lender."
"The foreclosure-property auctions that you see advertised are usually the realm of more heavily bankrolled professional investors who stand ready to pay cash for a property."
"If you are brave and well capitalized, you might try your hand at it. You might want to attend one or two for observation before acting. Whichever approach you try, don't give up if your first few efforts don't pan out."
Dallas Condo Market Tanking, Defaults Picking Up
The
Dallas News shakes down the condo craze. "I refer to the data on condominiums, those tall towers of speculation that so personify this housing bubble. After peaking at a 963,000 annualized rate in June, U.S. condo sales are off by 11 percent; they hit 857,000 in November. Speculators' tempered enthusiasm has driven price gains down to 10 percent from 18 percent in June. Most notably, condo inventories have doubled in a year and a half."
"Local real estate types tell me that out-of-staters are behind much of the oversupply that's set to flood the market next year and the year after. They say some of the behemoths under construction have been sold to more speculators than future residents. I've got news for local developers: Speculators are dumping condos from Vegas to Miami. Some buyers are breaking contracts before construction is complete."
"That leaves Dallasites to hold up the value of these yet-to-be-completed high-rises, just when the market is playing dead. Here's as brief a snapshot as I can offer on the health of the local market. D-FW foreclosures rose 4 percent in 2005 to a cycle record of 32,513. The only year that was worse was 1989, an ugly time. The percentage of foreclosees who owed more than the property was worth rose to 16.2 percent from 14.4 percent in 2004. Foreclosures linked to home-equity defaults leaped 52 percent, to 5.6 percent of the total, from 3.7 percent in 2004."
"The reality is, local buyers are in no shape to ride to the rescue of the current oversupply of condos, much less any elephants-to-be reaching for the sky."
Getting Your Day In A Massachusetts Court
The
Valley Advocate had this blurb in their year end wrap-up in Massachusetts. "A luminous white headband (nothing sectarian here!) to the National Consumer Law Center in Boston for pushing for a law that would give people facing home foreclosure in Massachusetts a day in court."
"Foreclosure filings in Massachusetts for the first four months of 2005 were up nearly 28 percent over this time last year (with Springfield second only to Boston in number of foreclosures), partly because homeowners here can be foreclosed on without the court process nearly half the 50 states require."
"Another good reason for court hearings: they often bring to light information about mortgage scammers and other bad actors in the lending business."
Gulf State Debt Mess 'Not Going To Work'
The
LA Times reports on the foreclosure mess in the gulf states. "Across the nation, an average of 4.44 percent of all mortgages were behind by at least one payment, while in Mississippi the figure was 17.44 percent and in Louisiana 24.63 percent."
"As unpaid home-loan bills pile up, mortgage companies and owners of hurricane-ravaged property are still unsure what federal assistance they might get, and uncertain if they can salvage their investments."
"After Katrina and Rita struck, the mortgage industry granted victims an initial 90-day reprieve from payments, late fees and damaging reports to credit agencies. Most home lenders, including the two biggest, Countrywide Financial Corp. and Wells Fargo & Co., have added another 90 days of forbearance for borrowers who need more time. But strains are showing in the fourth month since New Orleans' levees gave way."
"Perhaps 80,000 to 100,000 homeowners whose homes were inundated had no flood insurance, according to Mortgage Bankers Association. Thousands of borrowers have yet to contact their lenders, increasing the odds of foreclosure, bankers and regulators said."
"What's more, Louisiana officials said they have received hundreds of complaints about lenders demanding large balloon payments to bring loans current."
"'This is a big, big deal,' said Rep. William Jefferson, D-La. 'Many of the homeowners are not in their properties and cannot get back into them. Meanwhile they are being required to make lump-sum payments for properties they can't live in. The combination is not going to work.'"
"Demands are coming from certain so-called 'subprime' lenders, who specialize in mortgages for people with credit problems, and other pockets of the market that are not underwritten with the prime lending standards used for traditional loans."
Tax Lien Buyer Gets To Play Scrooge
This
report from Philadelphia shows the tax lien angle isn't a slam-dunk. "Two dozen Philadelphia homeowners and foreclosure-relief advocates gathered outside yesterday's biweekly sheriff's sale in West Philadelphia to urge a New York company to relax its demands for cash from owners of thousands of city homes on which taxes are long overdue."
"MBIA had guaranteed a $75 million bond issue by the Philadelphia Authority for Industrial Development in 1997. The bonds were supposed to be financed by revenue from taxes through liens filed against delinquent taxpayers. But 'the performance of the tax liens was much worse than projected,' MBIA told the SEC in a financial report last year."
"As a result, MBIA had to pay $46 million to cover the unpaid Philadelphia taxes when the bonds came due in the summer of 2004. By paying off the bonds, the company gained the right to collect the taxes, and offset at least part of its costs, from Philadelphia property owners. The firm told its shareholders that it hoped to recover at least $20 million 'in net future collections that will be used to reimburse MBIA' for part of its losses. In the fall, the firm's attorneys sent out letters demanding payment and threatening foreclosure."
"A majority of the homes are vacant, agreed protest organizer John Dodds, of the Philadelphia Unemployment Project. But thousands of the homes are still occupied, and the letters threaten to foreclose on some of the city's poorest homeowners, who inherited losses greater than their properties' values, in some cases, when they took over the homes from former owners."
"Gloria Sanchez said she and her husband bought the rundown shell of a Howard Street home in Kensington for $1 last year from her former landlord. But after her husband's death later in the year, Sanchez received a letter from attorneys for MBIA saying they owed $10,000 in back taxes that previous owners had racked up before 1997. 'We didn't have that money,' Sanchez said, 'and we didn't know where we were going to get it.'"
"Dodds said one elderly homeowner in Germantown was told she ought to stop her cable-television service and use the money to help pay her taxes. He called that demand unreasonable, arguing that cable TV was important to maintaining the largely homebound woman's quality of life."
Colorado Defaults Second Only To 80's Bust
The
Rocky Mountain News has this wrapup on 2005 foreclosures in Colorado. "More than 14,400 properties in the Denver area are expected to go into foreclosure this year, eclipsing 2004 as the second-worst year ever. This year's tally, estimated at 14,461, about 2,000 more than in 2004, represents the most foreclosures filed in the metro area since 17,122 were recorded in 1988."
"At that time, the metro area was suffering from a loss of jobs from the collapse of the energy business, as well as a change in the tax laws that had fueled overbuilding."
"What happens next year with foreclosures 'all depends on what happens with interest rates and the economy,' economist Tucker Hart Adams said. 'If the economy slows a bit, as I expect, and if mortgage rates continue to move up, which they should, it's not going to be good for foreclosures. That we're having our worst year (in 16 years) with (almost) the lowest rates in 40 or 50 years is not a good sign.'"
Hurricane Bailout Bill 'Stalled'
The Times
Picayune has an update on the storm related bill in congress. "Last-minute opposition from the Bush administration stalled legislation to create a federal corporation that would buy homes damaged or destroyed by Hurricanes Katrina and Rita, according to the bill's sponsor. But Rep. Richard Baker, R-Baton Rouge, said the administration is willing to move the bill forward early next year if some changes are made."
"Congressional staffers said too many questions were unresolved concerning the overall costs of the housing buyouts. Under Baker's bill, a Louisiana Recovery Corporation would be created and authorized to buy damaged homes, paying homeowners no less than 60 percent of the equity they had in their homes before the hurricane hit. Lenders would get no more than 60 percent of what was owed them. The corporation then would make necessary repairs before selling the property to private developers through a competitive bidding process."
"Baker said he thinks it's the fairest system to give homeowners some return on their investments, banks some return on their loans, and the federal government an opportunity to get some of its spending back as property is sold under a competitive bidding process. Baker said he thinks the White House now concurs."
"Why was it so late in the process before the White House weighed in with objections? Baker said it may well be that administration officials didn't expect such a complicated bill to advance as far it did."
Foreclosures Surge In LA, Riverside
The LA
Business Journal reports on a surge of foreclosures in California. "Los Angeles foreclosures increased 38 percent in November from the previous month but the city’s foreclosure rate stayed lowest among the nation’s five largest metropolitan areas, according to RealtyTrac’s Monthly U.S. Foreclosure Market Report."
"L.A. County reported 1,657 properties entering some stage of foreclosure in November, up from 1,201 in October. The figures are another indication that the region’s red-hot housing market appears to be cooling. Other recent housing data indicate home prices in the Los Angeles area have reached a plateau over the last several months."
"California’s foreclosures jumped 29 percent, with 6,051 properties entering some state of foreclosure in November, the most reported in any month so far in 2005 and the third-highest number reported by any state in November. Only Florida and Texas had more foreclosures. But California’s foreclosure rate of one foreclosure for every 2,019 households stayed below the national average."
"Foreclosures in Riverside County soared 107 percent over October, with one foreclosure for every 766 households. That rate was the highest in California and nearly two times the national average."
Defaults Follow 'Flat' Hoousing Markets
Inman News has
the latest on which cities are seeing defaults rise. "Real estate foreclosure activity has edged up in California, New Jersey and in the Las Vegas area of Nevada at the end of the third quarter, according to data from a real estate information publisher. 'We saw increases in defaults month to month at the end of the third quarter in eight of 13 northern California counties that we cover...and in four of five southern California counties,' said Alexis McGee."
"McGee cited a steady rise in mortgage interest rates, flattening of home-price-appreciation levels and the increased use of high risk loans for expensive homes as factors putting homeowners at risk of possible foreclosure."
"Meanwhile, new foreclosure filings in Clark County, Nev., increased to 1,743 in the third quarter from 1,498 in the second quarter. And new filings of foreclosure cases in New Jersey started to creep up to 3,668 at the end of the third quarter from 3,228 in the second quarter."
North Carolina Sees Statewide 'Jump' In Defaults
The
Business Journal reports on rising foreclosures in the Triad area. "North Carolina has seen jumps in residential mortgage foreclosure filings in the past few months, with Guilford and Forsyth counties posting even larger increases than the state average. Statewide, there were 3,776 properties in the process of foreclosure as of Nov. 30, an increase of only 1.2 percent from the month before."
"However, the number of new foreclosure filings statewide was up 27.3 percent to 1,310 in November, the highest single-month total since December of last year. In Guilford County, there were 90 new foreclosures listed in November, nearly double the 47 that came on the market in October and also the highest figure since last December. In September, there were only 40 new foreclosures listed."
"The year ahead may see more stress on residential mortgage holders, according to a recent analysis from investment analyst Fitch Ratings as reported by The Washington Post. That report predicted that mortgage delinquencies will rise in 2006 as more holders of costly subprime loans with adjustable rates find themselves falling behind. About 19 percent of home loans nationwide are subprime, up from about 5 percent a decade ago."
Southern California Defaults Rise
A
foreclosure tracking firm has this on California. "A Fair Oaks CA real estate information publisher reported today that a predicted increase in notice of default filings in the Golden State had begun. 'We saw increases in defaults month to month at the end of the third quarter in eight of thirteen northern California counties that we cover,' said FAlexis McGee 'and in four of five southern California counties.'"
"Ms. McGee went on to say that many factors were converging to put homeowners at risk of possible foreclosure, citing the steady rise in interest rates, the flattening of the price appreciation curve, and the increased use of high risk loans by homeowners seeking to qualify for ever more expensive homes."
"She added, 'we're seeing flat appreciation in San Francisco, and even a slight decline in prices. In Orange County, prices dropped $4000 in October, for the second consecutive month. Defaults at the end of the third quarter, reached 1000 versus 582 in the third quarter of 2004. That's almost a 42% increase.'"
More On North Texas Foreclosures
The
Dallas News has more confirmation of foreclosures in north Texas. "North Texas will start out the New Year with a 4 percent increase in home foreclosure postings. More than 2,800 homes are facing foreclosure in January's auctions. While that's down from December's record postings, it's still up from a year ago."
"'Residential posting activity continued to climb in all but one of the urban metro counties,' said George Roddy. 'Preliminary numbers indicate that January postings of Collin County homes were down 17 percent compared to the same month in 2005.'"
"Mr. Roddy said that concerns about the change in bankruptcy laws caused a spike in foreclosure postings in recent months. 'This month the foreclosure postings have dropped off some, but to still unhealthy numbers,' he said. 'It looks like it will be ongoing for the near future.'"
"Foreclosure postings were up sharply in Denton County and Rockwall County compared with a year ago. For all of 2005, more than 32,000 North Texas homes were posted for foreclosure, an increase of 4 percent. Not all of the homes posted for lenders' auction are sold each month. In many cases the sales are delayed or the borrower reaches a new agreement regarding the debt."
North Texas Foreclosures 'Spiral Upward'
The
Star Telegram reports on the foreclosure situation in the Dallas/Ft Worth area. "The number of Tarrant County homeowners in financial trouble continues to spiral upward, with no end in sight. There are 899 Tarrant County homes posted for the January foreclosure sale, up 5.9 percent from the 849 postings a year ago."
"The numbers are high and they don't appear to be coming down, said Jim Brown, who has been compiling a foreclosure list for more than 30 years. 'To me, it will be in the 900 to 1,000 range at least for the next several months,' he said."
"Interest rates have been generally climbing since September, which could be adding financial strain to strapped borrowers with adjustable-rate mortgages. 'Anyone who is looking at an interest-only or adjustable-rate mortgage has seen their payments go up significantly in the last six months,' said Rick Sharga."
"The number of Tarrant County homes facing foreclosure is 78 percent higher than in January 2002. Other North Texas counties are also seeing increases in foreclosure postings, according to the service. Dallas has 1,350 properties facing auction in January, up 4 percent from a year ago. Denton County has 291 homes posted, 21 percent more than January 2004."
"Part of the reason may be how quickly lenders foreclose on a home in Texas, Sharga said. It can take as little as one month in Texas, compared with more than a year in New York."
New Penalties Tie Up Bankruptcy Volume
This
East Valley Tribune provides some insight into how the new bankruptcy law works. "Bankruptcy filings have plummeted across Arizona and the Valley since federal legislation took effect in mid-October making it harder to erase consumer debt. 'The only explanation I can give is all the people who would have filed if there was no law change were condensed because they were in fear of the impact of the new legislation on their situation, on whether they have success in going through the bankruptcy process,' said Terrence Miller, clerk of the U.S. Bankruptcy Court of Arizona."
"With the new law in effect, people with incomes above a certain level will be required to repay credit card charges, medical bills and other obligations under a court-ordered bankruptcy plan. 'I think that once the bankruptcy attorneys become familiar with all the intricacies of the new law, they’ll have to start to see some additional clients and they’ll start to file some cases,' Miller said."
"Nearly half of the Chapter 13 cases filed since mid-October have been dismissed, and there are penalties that now come into play."
"'Since the law changed, if you’ve had one bankruptcy case dismissed within the preceding 12 months, the automatic stay, which protects you from foreclosure, repossession, garnishment and levy, will expire in 30 days,' said Anthony Clark, a bankruptcy attorney with offices in Mesa and Phoenix. 'If you had more than one case dismissed within the preceding 12 months, no automatic stay goes into effect.'"
Most Foreclosures Occur 'Without A Whimper'
Broderick Perkins at
Realty Times looks at how people react in a foreclosure. "Homeowners facing default on their mortgage too often take the head-in-the-sand approach and leave their No. 1 asset exposed to foreclosure. Even after the mortgage servicer calls delinquent homeowners about late payments, too many of them too often turn to denial and procrastination, death knells for home ownership."
"Unfortunately, in more than half of all foreclosure cases, the borrower never contacts the lender and loses the home without a whimper. A survey found that 75 percent of delinquent borrowers recall being contacted by their mortgage servicer, the company (the lender or the lender's agent) that collects mortgage payments. Among those aware enough to recall the contact, 68 percent never called back, 28 percent because they were in denial claiming there was no reason to talk to their servicers or that the servicer could not help."
"Likewise, 17 percent said they didn't need any help with their payment, even after a call about delinquency, and 7 percent played the procrastination game and didn't return the call because they didn't have enough money at the time to make the payment."
"Others said they didn't return the call because they were just plain embarrassed (6 percent) about it all; they were afraid (5 percent), or they claimed they didn't know who to call (5 percent)."
"The survey is real cage rattler for home owners who don't want to lose their homes and for servicers who don't want their lender in the business of selling foreclosed homes. What's more, the survey comes at a time when experts are forecasting the potential for more foreclosures due to flattening home prices and home owners have tapped out their equity."
"'The results of the Freddie Mac/Roper survey are a wake-up call to delinquent borrowers everywhere,' said Ingrid Beckles, (with) Freddie Mac."
Timeshare Defaults Over 20%
Readers
may recall this blog is tracking some timeshare companies for potential default bargains, "Sunterra Corporation today reported net income for its fiscal fourth quarter ended September 30, 2005, of $7.2 million. For the year ended September 30, 2005, the company reported a net loss of $34.7 million."
"Sunterra offers consumer financing to individual purchasers of Vacation Interests, primarily in North America, and records a provision for estimated loan losses each period via a charge equal to a percentage of each loan. The company’s provision for mortgages and contracts receivable losses rose to $3.7 million for the fourth quarter of 2005, and rose to $12.2 million for the year ended September 30, 2005."
"During the fiscal year ended September 30, 2005, approximately 14.6% of North American Vacation Interest revenues were cash sales and required no financing by us. Of the remaining 85.4%, we financed approximately 70.3%."
"The default periods below represent 12-month periods by which defaults recognized in the first twelve months after origination are included in the '1' period. Amounts represent cumulative defaults to date, and do not include estimated defaults to be recognized."
Sold in 1998
Year 1, 7.3%
Year 2, 14.7%
Year 3, 18.4%
Year 4, 20.8%
Year 5, 22.4%
Year 6, 23.6%
Year 7, 24.4%
So by the 4th year these loans have defaulted by over 20%. Sunterra is having to borrow against these loans, as my last post on the firm indicated. Stay tuned, as there will be some bargains as this sector falls out.
Banks 'Afraid' To Foreclose: Slate
The Slate
reports that banks don't want to foreclose. "At least one group of kind-hearted folks in the finance industry is willing to give customers a break when things don't go their way: America's heart-of-gold mortgage lenders, who are behaving with curious benevolence toward suffering clients."
"These moves aren't motivated entirely by the spirit of charity. Across the nation—even in the parts that remained dry last summer—the mortgage industry is working hard to avoid coming down too hard on overextended borrowers."
"Homeowners today are plainly stressed, especially those with less-than-pristine credit. According to the MBA, in the second quarter of 2005, the delinquency rate for residential mortgages was 4.34 percent. Some 1.83 percent of loans were classified as 'seriously delinquent,' meaning that payments were either 90 days past due or the loan was in the process of foreclosure. The delinquency rate for borrowers with adjustable-rate mortgages was 10.04 percent, and the delinquency rate for subprime fixed-rate borrowers was 9.06 percent."
"In order for the rate of home ownership to rise as it has, more marginal buyers have been drawn into the market. And they tend to fall behind on their payments rather quickly. The delinquency rate for subprime borrowers would seem to set the stage for a huge rush of foreclosures. But the big lenders have plenty of (mostly short-term) reasons and incentives to avoid taking back the houses of their nonpaying customers. And they're doing everything they can to keep their customers in their homes—even if they're not paying the mortgage on time."
"Foreclosure can also prove damaging to mortgage lenders' earnings—and hence to stock prices. When lenders classify a loan as delinquent, they're still holding out the hope that it will be paid back in full. Once a loan is marked as uncollectible—if a lender forecloses or sells it off for pennies on the dollar to a corporate repo man—the bank has to write down the value and take a hit to earnings. According to the Federal Reserve there were $8.82 trillion in home mortgages outstanding in the third quarter. So, even a small uptick in the foreclosure rate would cause the lending industry to write down billions in lost value."
"The hesitancy to foreclose says something about the evolution of the lending industry. Today, when people fall behind on their debts, the industry views it as an opportunity for new business. Mortgage brokers and lenders continually encourage strapped borrowers to roll over their mortgage into a product that allows them to reduce payments but still 'remain current.'"
"All of which means the housing boom is being fueled by the willingness of lenders to let borrowers get behind—and stay behind—on their payments. Homeowners go deeper and deeper in debt and become less and less home 'owners,' but they get to keep the roof over their heads. It used to be that only gigantic banks and corporations like Citigroup and Chrysler were regarded as too big to fail. Today, the humble homeowner enjoys that status as well."
Subprime Borrowers 'Embracing Debt'
The
Argus Leader reports on subprime lending. "In financial circles, they're called subprime borrowers. In many cases, they're the people just down the block. The couple who missed a credit card or college loan payment here and there through the years. They are average Americans with not-so-squeaky-clean credit histories who are turned down for decent-rate loans by banks."
"To meet the need of this growing class of borrower, subprime lenders are opening up shops at an alarming pace. There are now 22,000 payday lending outlets nationwide, and the number of money lenders increased 30 percent in Sioux Falls in two years."
"'We're such a low-wage state,' said Reynold Nesiba, an economist at Augustana College. 'There are so many people who are living paycheck to paycheck. That's why you see so many families with two or three jobs trying to make ends meet, so those types of lenders are definitely catering to meet that niche.'"
"There's also been a cultural change in what's considered a necessity. 'I don't think our parents 12 years ago would have ever considered taking out a home-equity loan to buy a new car,' Nesiba said. Today, a two-car household is considered a necessity."
"The housing fringe market also is thriving as the nation enjoys the highest number of homeowners in history. Home mortgages approved for low-income borrowers increased 75 percent from 1993 to 1998. During that same period, the subprime mortgage market ballooned by 880 percent."
"'The dynamic is true for virtually every sector in the fringe economy,' Howard Karger said. 'A customer's paying off a loan or purchasing a good or service outright is far less profitable than an ongoing financial relationship. Consequently, the profitability of the fringe economy lies in keeping customers continually enmeshed in an expensive financial system.'"
Subprime Loans Plus Flat Prices Equals Defaults
The
Middletown Journal reports on the unfolding default crisis in Ohio. "The number of foreclosure filings in Butler County has more than tripled in the last decade as Ohio has become the nation’s leader in home loan defaults. According to Butler County Clerk of Courts records, one of every 187 county residents experienced foreclosure last year."
"Between 1994 and 2004, foreclosure suits filed in Butler County grew 266 percent from 487 to 1,782. A JournalNews study of last year’s filings showed that Hamilton and Middletown led the county with 492 and 422 filings, respectively."
"There are multiple reasons for the increase. Between 2000 and 2004, as companies like Champion and International Paper closed local operations and others such as AK Steel cut hundreds of jobs. But foreclosures can’t be explained by job loss alone. Growth in foreclosure filings, both in the county and at the state level, took off in the middle to late 1990s. This was at a time when unemployment rates were falling and household incomes were growing."
"'This was when the economy was really riding high, in the late 90s, when this rate took off and skyrocketed,' Policy Matters Ohio Research Director Zach Schiller said. 'One thing that was happening at this time was major growth in the subprime market.'"
"Another factor is Ohio’s low home appreciation rates. Statistics from the Office of Federal Housing Enterprise Oversight show that states with the lowest appreciation rates also have some of the highest foreclosure rates."
"Of the 10 states with the lowest appreciation rates, four (Ohio, Mississippi, Indiana, and Michigan) were among the nation’s top 10 in foreclosure rates. Those with the highest appreciation rates, Arizona, Florida and Hawaii, all more than 20 percent, had foreclosure rates ranging between half and a quarter of the national average."
"Record Foreclosures' In Michigan
The
Kalamazoo Gazette reports on the gloomier social mood that accompanies defaults in Michigan. "More Portage residents polled in the city's recent annual survey said Pfizer Inc.'s restructuring has hurt the community and the quality of life in Portage has declined to some degree. Nearly double the percentage of Portage residents polled for this year's community survey said that quality of life in Portage has declined. Of those polled, 14.6 percent noticed a drop in the city's quality of life, up from 8.2 percent in 2004."
"'I would say that with the current state of the economy, people feel, overall, that the quality of life has slipped, even if things have really stayed the same,' said Councilwoman Margaret O'Brien."
"O'Brien, a Realtor, pointed to Michigan's faltering economy and '`record foreclosures,' with many occurring even in the area's affluent neighborhoods."
New Homes Lead Defaults In Austin Area
A
TV station in the Austin, Texas area reports on defaults there. "Although the number of foreclosures nationwide is going down, the number in Williamson County is still five times higher than the national average. Every where you look, you see new homes under construction."
"Unfortunately, there are more homes up for sale due to high number of foreclosures countywide. 'We've got a lot of growth. Anytime you got growth, you are going see some foreclosures,' realtor Glenda Nielsen said."
"Nielsen says it's a good market for homebuyers. So why so many foreclosures? Many qualify for much more of a home loan than they can afford. 'Three out of five were new homes, and they didn't realize that the taxes were going up the next year then when they went up, they couldn't afford it,' Nielsen said."
Many Subprime Loans Will 'Reset' In 2007
A trio
of reports looks at default rates. "Of the states with the highest number of foreclosure listings, only Georgia had an increase in new foreclosures from October to November Georgia had 1,584 new foreclosed residential properties available for sale in November, bringing its total to 5,311."
"The dramatic increase in
foreclosure activity in Massachusetts is continuing unabated,' said Jeremy Shapiro. 'Based on our analysis, foreclosures are now running 35% higher in 2005 than in 2004, and we expect this to continue into the foreseeable future.'"
"Counties with the biggest YTD increases are Essex, with a 50.07% increase, Suffolk with a 45.60% increase, with Plymouth at 43.46% and Bristol at 43.01% close behind. Communities with the greatest YTD increases include Reading (250%), Burlington (200%), Seekonk (163%) and Newburyport (163%). Of towns with at least 50 foreclosures in 2004, the greatest increases were in Lawrence (113% above last year), Wareham (103% above last year), Salem (75% above last year), Methuen (73% above last year) and Medford (67% above last year)."
The
Washington Post, "Mortgage delinquencies among homeowners with high-cost loans will rise by 10 to 15 percent in 2006, a new report from investment analyst Fitch Ratings predicts. 'We think borrowers will be under more stress and have more propensity to be delinquent,' said Glenn Costello, managing director of Fitch, which follows the market for bonds backed by residential mortgages. Recently, prices of such bonds have been falling, particularly those with lower-credit-quality loans."
"Costello said the increase in subprime lending meant more people could 'come under financial pressure' than in the recent past, when home values were rising. Bigger problems for borrowers will come in 2007, because many of the subprime loans that feature adjustable-rate mortgages 'reset,' or change rates, that year. People who will be 'stressed' will be those who were unable to refinance before their rates begin rising or whose home prices have fallen so that it becomes too difficult to sell and get out from under the mortgage, he said."
Some States May Have 'Early Signs Of A Trend'
Some
foreclosure news is out this morning. "According to data released today, 85,375 foreclosed residential properties were available for sale in the United States during November, a decrease of 2.7 percent from October. The total number of new foreclosures listed for sale in November, 20,951, also decreased 2.7 percent."
"In the states with the highest number of foreclosure listings, including Colorado, Georgia, Indiana, Michigan, Ohio and Texas, only Georgia experienced an increase in new foreclosures from October to November. In addition, Massachusetts, North Carolina and Tennessee recorded a substantial rise in the number of new foreclosures for the second straight month, indicating early signs of a trend in those areas."
"'Most areas of the United States experienced relatively stable foreclosure inventory during the past year,' said Brad Geisen. 'Even though new foreclosure inventory is on an even pace compared to last year, we are closely watching areas of the country such as the Northeast and South where foreclosures are beginning to increase.'"
San Antonio Foreclosures Near Peak
As
My San Antonio reports, the Texas housing market has been in a funk for years. "Property foreclosures in Bexar County have decreased slightly in 2005 for the first time this decade. The year's average of 699 foreclosures a month reversed a troubling trend and was a significant drop from last year's peak of 740, part of a steady annual climb since 1999."
"The peak in December foreclosures represents tough times for some homeowners, but it's an opportunity for investors, said Gregg Stanley. Most investors make their bids at auction from February to November, he said."
"Decisions on which properties are worth a bid start with the difference between the loan amount on a home and the market value. For the December residential properties, the total loan amount was $56.8 million compared with a Bexar Appraisal District valuation of $70.6 million."
"San Antonio and other urban Texas markets are attractive to investors looking for bargains, Stanley said. There are more foreclosures in Texas than any other state; 20 percent of all new foreclosures in the nation were in Texas."
"Texas is prone to higher numbers because it has the second largest population in the nation, but a low property appreciation rate and a higher-than-average share of higher-risk government-backed FHA loans. Unlike other populous states such as California, Florida and New York, there is often less equity in a troubled Texas property and it is harder for the homeowner to sell before it gets to foreclosure."
"It helps that properties are not substantially overpriced here, Stanley said. He noted that PMI's Market Risk Index had San Antonio ranked 45th of the 50 major urban cities surveyed. PMI estimated the San Antonio market to be 6 percent overvalued, but its Risk Index of 62 was far below the national average of 218."
"By comparison, most California markets had Risk Index measures between 440 and 536 and were considered to be from 19.5 to 33.7 percent overvalued."
'National Lending Explosion' Eyed In MA Defaults
The
Sentinel and Enterprise has this report on foreclosures in Massachusetts. "David Anderson has seen his share of families facing trouble with late bills and expensive mortgages, as a counselor for people about to lose their homes. But lately Anderson, got a surprise, a big jump in foreclosures in the area."
"'It used to be that people in foreclosures find themselves in a catastrophic situation, something medical or a losing a job,' Anderson said. 'But it seems to be now I get a lot of desperate calls from first-time homeowners who have done a 20-80 mortgage or a zero interest mortgage, what some would call predatory lending.'"
"Homeowners across the state are losing their homes at a growing rate, forcing lawmakers to face a hard reality on Beacon Hill, the state's economy is far from a healthy recovery. The number of foreclosures in Massachusetts has increased by more than 33 percent in the past year."
"By this time last year, Fitchburg had 64 foreclosures compared to 106 so far in 2005. The rate in some smaller communities, such as Lunenburg, have doubled, with a jump from 14 to 28 foreclosures in one year. Anderson said he has already received 33 calls just since July from families about to lose their homes in northern Worcester County."
"Bob Forrant, a professor at UMass Lowell, said foreclosures are on the rise because high real estate prices and loose mortgage requirements clashed with a lack of well-paying jobs in the state. 'The state is not generating enough well-paying work ... and people have been buying more house than they can afford,' he said."
"William Wheaton, an economist and professor at the Massachusetts Institute of Technology in Cambridge, said the spike in foreclosures is 'not an economy thing.' 'The economy is improving, not very dramatically, but we are on a recovery,' Wheaton said. Wheaton blames the national lending explosion, where more people than ever before had been able to qualify for a mortgage."
"'It used to be that you had to have good credit to get a mortgage, but now no matter who you are, you can get a mortgage,' he said. 'You get a huge number of young people able to buy homes, but they are at a very high risk (of defaulting on loans)..so the foreclosure rates there will be very high. It won't be getting any better for awhile.'"
Homes Used In 'Vicious Cycle' Of Debt: Study
The
Orlando Sentinel reports on how households are using home equity in their revolving credit. "The growing use of credit and credit cards in America has changed the way we look at money, manage our debts and handle our mortgages. It has even changed the way we look at our homes. A new national study shows that more people are making mortgage payments with their credit cards and are using their homes as checking accounts, according to Ellen Schloemer."
"'One out of three households reported using credit cards to cover basic living expenses on average four months in the last year,' the study says, adding that this includes 'rent, mortgage payments, groceries, utilities or insurance because they did not have money in their checking or savings account.'"
"Schloemer says the study does not show the exact number of people who put mortgage payments on their credit cards. 'This is the first study of its kind. We are looking at new patterns. One of the things that was striking about it was the number of people who were using their credit cards to pay off their mortgage and their home equity to pay off their credit cards.'"
"The study shows that credit-card debt 'has almost tripled since 1989, and has risen 31 percent in the last five years, with Americans now owing close to $800 billion in credit-card debt.' Americans cashed out $333 billion in home equity between 2001 and 2003 in an attempt to free up much-needed cash, and '"40 percent of homeowners had refinanced during the last three years, with over half using the proceeds to pay off credit-card debt,' the report adds."
"A vicious credit cycle traps more Americans, Schloemer says. 'When life gets tough, money becomes tight, and the bank account dwindles, we use credit cards to live on. Then, we refinance our homes to get the cash to pay them off, and then we do it again.'"
"If you fall behind on your credit-card payments, it's hard for a lender to repossess what you bought: gasoline, meals, clothing and so on. But if you fall behind on payments on a loan where your house serves as collateral on a secured loan, the lender can take the home."
"But housing prices can only climb so high, so fast, and sometimes they decline. So homeowners who don't rethink their spending and borrowing patterns risk losing their castle and their capital. 'We have a saying at the office,' Schloemer says. 'Your home is not an ATM. You cannot continue to take cash out of it, because at some point home values are not going to go up enough to let you do so.'"
Some Homeowners 'Overextended' In Chicago
The
Chicago Defender reports on high-risk borrowing in that city. "Option adjustable-rate mortgages, interest-only mortgages, no-money-down and piggy-back loans have provided enticing financing for borrowers with little money of their own to invest in a home. One mortgage lender said inquiries he receives for these types of loans come mainly from first-time home buyers who may not be in a position to assume the risk."
"Leo Fronimos, mortgage specialist for Village Bank and Trust in Arlington Heights. He said nine of 10 calls he gets are for interest-only loans. 'College grads making $20,000 to $30,000 are buying condos at $150,000,' Fronimos said."
"Fronimos said that homebuyers are seeking interest-only loans for all the wrong reasons. 'They are overextending themselves, getting double the house they should be. I've got people whose mortgage rates have doubled and they can't afford it. They're selling everything they own, cars and antiques, just to pay the mortgage,' he said."
"'There's a use for those products if you're financially astute or if
you're wealthy,' said Bill Fisher, lending officer (in) Elmwood Park. 'What we have seen and read is that's not who is taking these loans. It's people who the bills are getting the best of them, so they're looking for the easy way out. When we advertise a 1 or 2 percent rate, they see the low interest and not the pitfalls.'"
"To be sure, lenders argue there is a place for exotic loans. Interest only loans, 'allow people more staying power. Since it's taking longer to sell a home, they can afford to hold out for the right price because the monthly payment is smaller,' said Jan Constantine a senior vice president at Lake Forest Bank and Trust, Lake Forest."
"'There would not be much of a principal pay down,' said Constantine. So the only benefit above renting, 'is the mortgage interest deduction.'"
Gulf Coast Homeowners Running Out of Time
The
Washington Bureau reports that time is running out for homeowners facing default in the hurricane damaged areas. "Federal bank regulators on Wednesday urged lenders to give thousands of homeowners along the hurricane-ravaged Gulf Coast more time before requiring them to resume making mortgage payments. The joint advisory from the Federal Financial Institutions Examination Council and other regulators comes as the initial 90-day grace period offered by most banks after Hurricane Katrina was about to expire and bills were being put in the mail."
"Since the storm, banks and regulators have urged borrowers to call their lenders to work out repayment plans and most lenders have been willing to give deferments of 60 to 120 days. Fannie Mae, the largest buyer of home mortgages in the country, faces up to $550 million in storm-related losses, said it is willing to grant deferments up to 18 months."
"Those in the banking industry say that lenders have an interest in cutting slack to borrowers. The alternative is to foreclose on a flooded-out home and take ownership of a property that has little value. 'Lenders want to rebuild these communities,' said David Boneno, general counsel to the Louisiana Bankers Association. 'Banks don't want to be in the real estate business.'"
"Still, some saw the regulators' statement as a sign of the precarious financial situation in which many property owners along the Gulf Coast find themselves. Rep. Richard Baker, R-Baton Rouge, said the regulators' advisory was an indication that some lenders were poised to ramp up the pressure on borrowers to settle their debts sooner rather than later."
"'The unfortunate reading is that there are lenders on the verge of taking steps to foreclose,' Baker said. 'To me it says that someone out there in significant numbers had plans to send out mortgage bills.'"
"Baker has proposed legislation to help homeowners and lenders. His Louisiana Recovery Corp. would use federal bonds to buy homes in storm-damaged areas with prices based on the amount the owners have paid in mortgage and improvements to their property. It also would pay lenders some percentage of what is owed by the borrower. The corporation would then package the properties and sell them to developers in hopes of reviving flooded-out communities and recouping some of the taxpayers' money."
