'Everyone Agrees Disclosure Process Broken'
The
Charlotte Observer continues the series on loan reform. "Mortgages and other financial products need to carry clear and simple disclosures so borrowers can make better financial decisions, a federal banking regulator said Thursday. Existing disclosures don't help people understand what they're buying, or compare it with another product, said Julie Williams, chief counsel to the comptroller of the currency."
"She contrasted the failure of financial disclosures with the success of nutritional labeling. 'Shouldn't we all be concerned if I'm getting a more meaningful, comprehensible disclosure when I buy a bag of potato chips than when taking out a mortgage to buy a home?'"
"The Observer reported in January that foreclosure rates in Mecklenburg County quadrupled in recent years because of defaults on unconventional mortgage loans."
"Williams said federal regulators will unveil a study today on improving privacy disclosures on financial forms so that more people will understand their rights. For example, she mentioned lending companies that prominently advertise the introductory interest rate on a loan, but not the fact that the rate will adjust in the second year. A proper disclosure would give equal weight to both pieces of information, she said."
"The financial industry is open to improvements but cautious about the particulars, said Donald Lampe, an attorney who represents various banks. 'Everyone agrees that the disclosure process now is broken,' said Lampe. 'The question is how to fix it.'"
And the Detroit
Free Press has an update on defaults in that city. "In Wayne County, the number of potential foreclosures is more than double what it was at last year's deadline for 2002 tax bills. As of Wednesday morning, the most recent count available, 10,284 properties in the county had delinquent 2003 taxes, including 2,237 occupied residences. Of the 10,284 Wayne County properties at risk for foreclosure, 9,185 are in Detroit."
"Real estate agents are increasingly coming across homes in foreclosure, for tax or mortgage reasons. Chris Cotzias, broker in the Pointes, said about 60 of the 630 homes for sale in the Grosse Pointes are in foreclosure. 'In 28 years of doing this, I've never seen it like that,' he said."
More Foreclosures In New Hampshire: Officials
New Hampshire
public radio has this report on foreclosures. "Several counties in New Hampshire are following what seems to be a national trend. They're reporting increases in real estate foreclosures in early 2006. That pattern is causing some economists to worry that bigger and more exotic mortgages may be the cause."
"Real estate foreclosures haven't been a problem in New Hampshire since the early 1990s. That's when Leo Lessard first took over the job of Registrar of Deeds in Strafford County. He says he sees a trend developing now that reminds him of that time. "'Last year we had 40 foreclosures. and what disturbed me is this year, the first two months of this year, we've seen 19. So we almost had half the number of foreclosures in the first two months of this year than we had all of last year.'"
"Other counties in Southern New Hampshire are also seeing the same kind of increases. Rising interest rates have hurt other property owners, because they signed up for adjustable rate mortgages. There have been 10 foreclosures in Merrimack County in the first two months of 2006. Kathi Guay, Merrimack's Register of Deeds, says that's several more than there were in the same period last year."
"Mike Fratantoni, Senior Economist of the Mortgage Association, says the report found New Hampshire to be better off than the rest of the nation. In the 4th quarter of 05, the total past due rate, so, at any level of delinquency, was 3.59 percent for NH, compared to 4.7 percent for the country as a whole. and a similar relationship in terms of foreclosure rates. the foreclosure inventory for the country as a whole was 0.99 percent, and it was 0.43 percent for new hampshire."
"New Hampshire's delinquency and foreclosure rates are also among the lowest in New England. But they have inched up a bit since the end of 2004. Federal data indicates house prices in the state have increased about ten percent since then, and that could be adding to the foreclosure increases."
"Adjustable rate mortgages could be heading even higher, and soon. The Federal Reserve Board has raised the federal fund rate a quarter of a percent. If Fratantoni is correct, that could soon send some holders of adjustable rate mortgages to the bank to refinance their loans. If the Mortgage Association predictions are off, however, more families with these mortgages may find their houses suddenly unaffordable."
Defaults News For Florida, Texas, California
A trio
of reports on foreclosures. "A distressed property investment advisory firm reported today that several once hot housing markets in the southeastern U.S. have cooled down, and the inventory of unsold homes is increasing. Alexis McGee said that her firm's researchers had always seen a correlation between flat or declining home prices and an increase in mortgage defaults."
"Ms. McGee said that in Cape Coral, FL home prices had been flat for six months and had fallen 2.5% in the last 30 days. While in six months, the inventory of unsold homes had increased by 155.6%. While in Tampa, FL prices were down 4.3% from six months ago and the inventory was up 129% over the same period. 'Too many people, during the recent boom in home prices, have been using their homes as ATM machines,' said Ms. McGee."
"Readers of The Houston
Business Journal learned last week that Houston real estate foreclosures were down in March from February. Unfortunately, a day after the article posted, foreclosures were up again for the April auction, above even February's numbers."
"Houston real estate investors who read this newspaper learned that the March auction had just over a thousand properties for sale and the April auction is scheduled to have more than 1,200 properties for sale."
"Alexis McGee said that
home prices in Phoenix, AZ had been flat for 60 days and had actually declined 6.7% from six months ago levels, and that home prices in the recently overheated Las Vegas, NV market had dropped for two consecutive months to a median price of $309,000 at the end of February."
"Ms. McGee went on to say that northern California markets were cooling down as well, with San Francisco Bay area home sales volume declining in all nine Bay Area counties and the price appreciation slowing. She went on to say that the picture was the same in southern California. Ms. McGee said that the major risk of increasing defaults lay in the use of high risk loans issued by lenders during the recent historic price boom as lenders sought to compete with each other during the five year buying frenzy that is now fading away."
"'In San Diego County,' said Ms. McGee, '50% of mortgages issued between 2003 and 2005 were either interest only, or so-called option adjustable rate mortgages with start rates as low as 1%. According to Dr. Christopher Cagan of First American Real Estate Solutions, when these loans convert to full amortization, the payment shock could be in excess of 300%.'"
Equity A Goal, Not A Guarantee
The
Columbus Dispatch has this report on the Dominion Homes matter. "After months of blaming the economy and home buyers for high mortgage default rates, Dominion Homes is now pointing the finger at itself. 'We made mistakes with our customers,'Senior VP Thomas L. Hart told The Dispatch. 'We have some major things to fix, but they are fixable.'"
"The company crafted a plan to rebuild its reputation, which was hurt by depreciating house values and foreclosures in many of its subdivisions, investigations of its business practices and three class-action lawsuits."
"Some changes will be big and bold: replacing its in-house mortgage company with a new venture led by Wells Fargo Home Mortgage. Others will be less visible but equally dramatic: changing the way it pays its sales representatives and rewarding them when customers succeed at homeownership."
"Many Dominion home buyers have said they were coaxed into houses they couldn’t afford. The sales agents earned paychecks based on sales volume. The sell-at-all-costs culture made licensed real-estate agent Amy Smith uncomfortable when she joined Dominion in Louisville, Ky., in 2004. 'We’d sell houses to anyone who had a job, even if they worked at McDonald’s,' she said. 'We got a lot of people into houses they can’t afford.' Smith quit after six months."
"The publicly traded company came under fire after a Dispatch investigation in September detailed Dominion’s lending practices and high default rates. Dominion’s stock price dropped nearly 40 percent between September and November, and it has not recovered. Visits to model homes fell 25 percent."
"From now on, Dominion will sell one thing: houses. Sales representatives won’t pull credit reports. They won’t tell customers how much house they can afford. They won’t pitch the benefits of housing as an investment."
"Hart suspects that some Dominion customers who have fallen on hard times have overextended themselves with second mortgages to build decks, buy lawn mowers and purchase other housing extras. In Dominion’s Galloway Ridge neighborhood on the Far West Side, 68 houses have fallen into foreclosure since 2002. Less than a third of the homeowners had a second mortgage. The median amount those 21 borrowed was $14,500."
"Too many customers bought with an eye on building equity and moving to larger houses within a few years. But residents in more than two dozen Dominion subdivisions in central Ohio say they can’t sell their houses for what they paid and that their property values, as set by the Franklin County auditor’s office, declined."
"Dominion’s William G. Cornel wants customers to understand that homeownership carries risk. 'We are not selling investments,' Cornely said. 'We are sensitive to the appreciation issue,' Cornely said. 'Our interests are typically aligned with the homeowners’. We like to see appreciating values because we can sell houses for more money.'Equity is a goal, he said, not a guarantee. 'If you want to be a real-estate investor, don’t buy a new home.'"
More States Join In Race To The Bottom
Foreclosure reports
from around the US. "Michigan's slumping economy has waylaid most industries. But it's boom time for the field mortgage service business. The crush is not hard to explain. Home foreclosures are soaring throughout Metro Detroit and Michigan amid high unemployment, overtime cutbacks and budget-busting bills for everything from gasoline to groceries. Wayne County ended January with more than 3,300 homes in active foreclosure, the highest of any county in the nation."
"In Oakland and Macomb counties, and across the state, active foreclosures have doubled in the past two years. In a sign of the broad reach of economic hardship in Metro Detroit, Farmer and Malone are more and more frequently assigned cases in upscale neighborhoods. 'We've been to $3 million homes in Bloomfield Hills,' Malone says. 'We've been to homes by the lakes. We've been to houses in new developments where new homes are still being built on the same street. It is crazy how busy we are.'"
"It's a No. 1
distiction Texas would rather not have, but the state is now leading the nation in foreclosures. Industry analysts say rising interest rates and skyrocketing monthly payments on adjustable rate mortgages are to blame. Some say the problem is worse in Texas because a foreclosure can happen in just 27 days. It takes longer in some other states."
"Ohio's
foreclosure picture turned dimmer in February as the number of properties entering some stage of foreclosure rose 19 percent from January, a monitor of foreclosures reported Wednesday. 9,873 properties in the state entered foreclosure in February, one new foreclosure for every 484 households."
"The highest rate in the nation for the month was posted by Georgia, which saw 9,421 properties enter some stage of foreclosure, a 28 percent increase from January and more than twice the number of new foreclosures from February 2005. At one foreclosure for every 329 households in February, Georgia recorded the highest foreclosure rate for the second consecutive month. Joining Ohio and Georgia among the top five states with the greatest number of properties entering or in foreclosure during that month were Texas (13,616), Michigan (10,343) and Florida (10,019)."
"Living in the
Rust Belt seems to be squeezing Hoosier homeowners in a very uncomfortable way. Layoffs and bankruptcies are forcing Indiana’s home foreclosure rate to an alarming height. During the last quarter of 2005, lenders opened foreclosure proceedings against 7,575 Hoosier homeowners, almost 1 percent of the total mortgages in the state."
"Indiana’s abominable foreclosure rate is caused by job losses, personal bankruptcies, stagnant home prices and aggressive lending practices. Mike Cevarr, spokesman for the Mortgage Bankers Association. But overly aggressive lending and the slow appreciation of home values in Indiana are also culprits."
'Unendurable Strain' From ARM Resets
A
pair of reports on foreclosures. "Looks like Florida homeowners are feeling pressure keeping up with their mortgages. The most recent data from the Mortgage Bankers Association shows that past-due mortgage loans in Florida climbed to the highest level in five quarters, to 4.66 percent. Part of the reason? Those adjustable-rate mortgages that start with low teaser rates but eventually jump to market rates of 6 percent or more."
"Knowing that delinquencies are on the rise, it will be interesting to see what happens with actual foreclosures, the proceedings that lenders can start once loans are past due. In Orange, Osceola and Seminole counties, more than 6,300 homeowners went into foreclosure last year."
And
from Colorado. "More than one-fourth of recent Colorado home buyers and refinancers have less than 5 percent equity in their homes and almost half have less than 15 percent, putting them at risk of financial hardship when adjustable-rate mortgages ratchet up in the next few years."
"That's among the conclusions of a new study that ranks Colorado second among states with the highest percentage of risky properties. The report raises questions about whether too many Colorado buyers are stretching themselves too thin and relying too heavily on appreciation rates to bail them out."
"An example: A homeowner with a 1 percent introductory adjustable-mortgage rate on a $300,000 home would see monthly payments jump to $1,799 from $965 when the schedule is reset to a market rate of 6 percent. That could become an 'unendurable strain' on some households, Cagan said."
"States with the lowest percentage of high-risk properties -- where borrowers have more equity and are less likely to experience the effect of adjustable-rate mortgage increases, include New York, Hawaii, Massachusetts, Connecticut and New Jersey, the study reported. States with the highest percentage of risky properties were Tennessee, Colorado, Minnesota, Alabama and Arkansas."
"The increasingly precarious financial position of some homeowners who have little or no equity, and recent poor performance of some adjustable-rate mortgage loans, have caught the attention of mortgage lenders, investors and regulators, said Tom Ninness. 'For us as lenders, we're seeing that we have to be more diligent in how we underwrite loans,' Ninness said. 'That's why the investors are now tightening up their requirements to have a certain amount of monies left over after they [borrowers] pay their closing costs and prepays.'"
"'Price appreciation in the real estate market has slowed and, in many areas, leveled off,' Jason Berman, president of the Colorado Association of Mortgage Brokers said. Low interest rates have made adjustable-rate mortgages attractive, and 'aggressive financing products that incur negative amortization may also be contributing somewhat to the effect.'"
"Moody's Economy.com estimated about one-fourth of all mortgage loans outstanding, more than $2 trillion worth, come up for resets in 2006 and 2007."
"Ninness said the study reinforced why it behooves him to make sure clients are making prudent financing decisions. It's not uncommon for him to see borrowers who qualify for a $200,000 principal-and-interest payment loan opt for an interest-only loan that allows them to get into a $250,000 home. 'I've actually had people who have walked away from me and have gone to another lender because they could buy more home than I could give them,' Ninness said."
A Trio Of State Default Reports
Some
foreclosure news from three states. "More Bay State homeowners are behind in their mortgages than at any point since 2003, while loan-foreclosure rates remain at an eight-year high. The Mortgage Bankers Association reported yesterday that 3.68 percent of Massachusetts borrowers fell at least 30 days behind on the mortgage in the fourth quarter."
"The MBA also said banks began foreclosure, the process of seizing a home for mortgage non-payment, against 0.28 percent of Bay State borrowers. That ties the third quarter’s home-seizure rate, when foreclosures reached their highest levels since 1997."
"MBA Chief Economist Doug Duncan said borrower woes include rising interest rates on mortgages and credit cards, as well as greater use of risky adjustable-rate and interest-only loans."
"Indiana led
the nation with the highest rate of mortgage foreclosures for the final three months of 2005, according to the MBA. Nearly 1 percent of all Indiana mortgages tipped into foreclosure for the quarter, topping No. 2 Ohio and No. 3 Michigan.
Indiana trailed only Ohio in the percentage of mortgages delinquent 90 days or more."
In
Texas. "Foreclosures are down 11.9 percent in Tarrant County for the April auction but are up more than 5 percent for 2006. George Roddy said he didn't expect the numbers to keep dropping. 'I wouldn't read into the downturn very much,' Roddy said. 'It's certainly encouraging not to see an elevation, but the negative numbers might be short-lived.'"
"The figures for the first four months of the year are more sobering. There have been 3,825 homes posted so far this year, up 5.2 percent from a year ago. Foreclosures have grown dramatically in recent years, propelled by job losses, underemployment and people overextending their credit. The average number of Tarrant County homes posted per month was 866 in 2005."
"The average number of monthly foreclosures in Tarrant County has steadily risen in recent years."
2000: 365
2001: 448
2002: 559
2003: 728
2004: 826
Houston Foreclosures See 'Significant Increase'
Here
is a site to help you find foreclosures in Houston, Texas. "We now bring Houston Real Estate Investors Harris County foreclosure data as a news item. This month, the trustee foreclosure auction boasts more than 1200 foreclosures, a significant increase to last month."
"The auctions always occur on the first Tuesday of the Month at the Harris County Family Law Center."
Of those, 10 were apartments and 1,157 were residential.
New Model Figures Out 'Who To Stay Away From'
A
report on the latest credit scoring model. "It's the multibillion-dollar question that every credit-card company, auto lender, and mortgage outfit wants to know: If they lend you money, will you pay it back?On Mar. 14, the Big Three credit-reporting companies unveiled what had been a tightly guarded secret plan to knock Fair Isaac from its throne and become the dominant provider of credit scores to lenders."
"Creditworthy people who were unfairly lumped in with deadbeats are more likely to get credit now, and at lower rates. Of course, poor risks who were accidentally given loans are more likely to be rejected if accuracy improves."
"VantageScore was announced jointly by the top credit-reporting giants: Equifax, Experian, and TransUnion. The companies say that using VantageScore reduces by about 30% the wide 'dispersion' in scores that the different bureaus generate. On the not-so-bright side, that means that 70% of the dispersion remains. That's because VantageScore can't overcome the problem of incomplete or inaccurate information."
"Its authors say their tests show it makes better predictions about loan applicants who have 'thin files,' such as young people with no credit history. It should also help lenders better segment less creditworthy 'subprime' borrowers, so they can figure out which ones to market to and which to stay away from, says Dana Wiklund, senior vice-president for predictive sciences at Equifax."
An alert reader
caught this from the VantageScore website. "The VantageScore credit model was developed from a national sample of approximately 15 million anonymous consumer credit profiles pulled from across the three major credit reporting companies. Advanced segmentation techniques..results in a stronger separation of good and bad accounts and the ability to classify more bad accounts into the worst-scoring ranges."
Storm Related Delinqencies Pile Up
The
Time-Picayune reports on delinquencies in the storm-torn gulf. "Almost 123,000 borrowers in Louisiana and Mississippi, most of whom took advantage of delayed payment plans in the weeks after Hurricane Katrina, were behind on their mortgage payments during the last quarter of 2005, a banker survey released Tuesday showed."
"The percentage of mortgages in the two Gulf Coast states that were 30 or more days past due remained significantly higher than either state had reported in recent times, yet fewer of those mortgages were being turned over for foreclosure than in the past, according to the Mortgage Bankers Association survey."
"The percentage of Louisiana loans past due 30 or more days past due rose to 24.6 percent in the third quarter, which ended one month after the storm hit, but by the fourth quarter some borrowers had resumed payments and the delinquency rate dropped to 20.8 percent."
"A similar pattern developed in Mississippi. In the third quarter of 2005, 17.4 percent of all mortgages were delinquent. That number dropped to 16.9 percent in the fourth quarter. Between the two states, 76,000 mortgages were considered 'seriously delinquent,' 90 days or more past du, in the final quarter of 2005. During nondisaster times, seriously delinquent loans would be subject to foreclosure."
"'Given the numbers, some number of delinquent loans will end in foreclosure,' Jay Brinkmann said. But 'in the immediate aftermath, you don't want to hold foreclosure over their heads because it would exacerbate economic development' problems."
"The delinquency numbers in Louisiana were substantially higher for those holding Federal Housing Administration loans or subprime mortgages. In Louisiana, 33.9 percent of subprime loans and 31.8 percent of FHA loans were at least 30 days past due at year's end."
Foreclosures Soar In Western States
Inman News
reports on the latest foreclosure numbers. "The number of new foreclosed residential properties available for sale nationwide increased 9 percent from February 2005 to February 2006, while the total number of foreclosed properties available for sale dropped 7 percent from January 2006 to February 2006. About 88,093 foreclosed residential properties were available for sale in the United States in February. There were 21,402 new foreclosures listed for sale in February, a 10.8 percent drop from the prior month."
"'Foreclosure inventory numbers in February are often low, partially because legal filings in December usually drop off around the holidays and reduce foreclosures in January and February,' said Brad Geisen. 'The year-to-year comparison, however, tells a different story. If new foreclosures in 2006 continue to track 9 percent higher than in 2005, the country will reach higher inventory levels than it has in recent years.'"
"While most areas of the country experienced a decrease in new and active foreclosure listings in February, inventory increased in parts of the West. In California, which has historically had few foreclosures, there was a 150 percent increase in the number of new foreclosure listings in February compared to January."
"In Arizona, foreclosure listings increased 161 percent from January to February, and listings increased 99 percent in Nevada during that period."
"Texas had 11,856 total foreclosure properties in February, Ohio had 7,694, Michigan had 7,494, Colorado had 6,753 and Georgia had 5,963. Texas also topped the list for new foreclosures in February at 2,795, followed by Ohio with 1,803, Michigan with 1,781, Georgia with 1,610 and Indiana with 1,437. Wayne County, Mich., and Dallas County, Texas, continue to top the country in county-level foreclosures, though both experienced a reduction in new foreclosures in February."
"Other counties with significant increases in foreclosures in February include: Maricopa County, Ariz.; San Diego County, Calif.; Los Angeles County, Calif.; Hennepin County, Minn.; Clark County, Nev.; and Salt Lake County, Utah."
"'Foreclosure rates in the western half of the nation are shifting. Texas, which continues to have the highest number of foreclosures in the United States, has recently been showing a decrease in its foreclosure numbers. But states such as California and Nevada have experienced a rapid increase in foreclosure inventory over the past six months,' said Geisen. 'This is primarily because of a decrease in investment and speculative real estate activity in those markets. That investment activity has been moving away from California and into Texas, where the housing market has not yet peaked.'"
ARM Loans Folding In New Hampshire
Some
reports on New Hampshire. "Housing experts say the downturn that some predicted would decrease the value of a home by as much as 20 percent in New Hampshire hasn’t materialized. In fact, the housing market is thriving and healthy here for buyers and sellers. And home prices did not and are not likely to decline, experts say."
"Economist Dennis Delay said another indicator, foreclosure rates, also shows a vibrant market in New Hampshire."
The
Boston Globe. "A growing number of homeowners in New Hampshire are being forced out of their homes by foreclosure. The number of foreclosure filings in the state jumped from 188 in February to 263 in March. In Strafford County, there were 19 foreclosures in January and February, compared to 40 during all of 2005."
"'There is an alarming trend occurring here,' Strafford County Registrar of Deeds Leo Lessard told Foster's Daily Democrat. Lessard and others who watch housing trends say the increases probably are due to rising interest rates and high home prices."
"For years, declining home mortgage rates drew people to take out high-risk interest-only or adjustable-rate mortgages on homes they never would have been able to afford otherwise, Lessard said. Now, some homeowners can't afford the payments with mortgage rates going back up. 'Home prices were so high, people borrowed so much money that if there was a blip in the economy, foreclosures were inevitable,' Lessard said."
"ForeclosuresNH says 52 percent, or 98 of February's foreclosure notices went to homeowners who purchased or refinanced their homes in the past two years. Co-founder James Kenney said the numbers demonstrate that people who bought or refinanced with adjustable-rate mortgages now cannot afford payments that increased 'anywhere from 20 to 40 percent.'"
"Gerald Little, president of the New Hampshire Bankers Association, cautioned homeowners against taking out interest-only, adjustable-rate loans. Unless people have 'a strong idea that something is changing in the not-too-distant future,' like a home relocation or 'a major bump in income,' homeowners need to consider more moderate purchases that can get them more stable loans, he said."
"'It's always a concern if people borrow to their absolute maximum of capacity. Should the environment turn, they may not be prepared to meet their debt load,' Little said."
'Be Ready To Move' When Defaults Hit
The
MSN RE site has this report on foreclosures. "Risky borrowing is catching up with a number of homeowners across the U.S. Foreclosures rose 45% in January compared to a year ago, and experts only expect the pace to accelerate. The number of homes entering some stage of foreclosure, from notice of default to bank ownership, increased 45% in January from the same period a year earlier."
"The areas of the country with the highest foreclosure rates on a per capita basis were Georgia, Nevada and Colorado. One out of every 422 households was in some stage of foreclosure in Georgia in January, an 88% jump from the previous year. Georgia also came in at No. 5 for the highest total number of foreclosures. Nevada was second, with 1,795 properties entering foreclosure; 2 1/2 times the number reported the year before and one for every 483 households. Colorado came in at No. 3, with a 36% rise to 3,747 properties, or one in every 488 households."
"Economists speculated that lost jobs in and around the Atlanta and Denver areas were the main culprits. Realtors say the hardest-hit areas appear to be houses in lower-income urban neighborhoods. 'There are definitely more foreclosures out there,' said Duane Duffy in Littleton, Colo. Indeed, when Duffy recently took a client looking at homes in southwest Denver, 'one out of every four homes we were looking at seemed to be a foreclosure.' But, foreclosures, he said, are becoming much more commonplace across Denver County."
"In the last few years, many buyers took out interest-only, variable-rate loans, and in some cases put no money down to afford a house, said Frank Nothaft, chief economist Freddie Mac. He estimates one out of every three loans issued in 2005 was an adjustable rate mortgage. Now that we’ve seen 14 consecutive interest-rate increases since June 30, 2004, many of these loan rates are bumping up, increasing the size of mortgage payments."
"Nothaft estimates that $500 billion in variable rate mortgages will reset, or rise, sometime this year, leaving many with a payment they can no longer afford. 'Those would be the candidates for, delinquent status,' he said."
"In the months ahead, analysts expect delinquencies to rise, putting a greater number of these foreclosures on the market for buyers to choose from. That’s bad news for owners who live in these areas, analysts say, because rising foreclosure rates typically mean falling home prices. But it’s good news for buyers looking for some relief from the high prices of the last several years."
"In addition to driving neighboring home values down, foreclosures themselves tend to sell at a discount to the market, said Rick Sharga. Typically, Sharga says, buyers can shave 10% to 30% off the market price with a foreclosed home, depending on demand. The best deals can usually be negotiated with an owner, when a property is in default, but hasn’t been put up for auction or turned over to the bank."
"'Sometimes you can negotiate both ends, with the property owner and the bank,' Sharga said."
"There are more drawbacks and risks to buying property at auction. First of all, most buyers will need to come up with 100% of the purchase price on the day following the auction. Second, many times a property can’t be fully inspected, and in some states, the previous owner has the right to buy it back for what you paid within a certain period. 'Like any other investment, the higher the reward, the higher the level of risk,' Sharga said."
"Real estate economist John Tuccillo recommends that buyers educate themselves about the foreclosure process now, so they can be ready to move when they see something they like. 'Start doing a lot of research and monitoring of those markets now,' Tuccillo said. With interest rates expected to rise 3/4 of a point to a point this year, 'In six months, you will be able to do more picking and choosing.'"
S. Califonia 'Decline Was Bound To Happen
Here's a
press release on southern California. "The number of foreclosures spread throughout Southern California, with San Diego leading the way up 8 percent. 'The real estate bubble has not burst in Southern California, but it sure is deflating,' said Serdar Bankaci. 'The decline was bound to happen and so is the continued rise in foreclosures, the market is just adjusting itself right now.'"
"While San Diego had the highest foreclosure rate, Riverside County was a close second up seven percent, followed by San Bernardino up six percent. 'If you are the first to approach the homeowners, these properties can provide an excellent opportunity for real estate deals with a possibility for great returns,' said Bankaci."
"Bankaci pointed out the main reason for the dramatic increase in foreclosures in San Bernardino more than a month ago. According to Bankaci, the home appreciation rates are beginning to decrease and homeowners are no longer able to satisfy their debt by using equity built up in their homes."
"'Many of the homeowners used 'aggressive financing' to buy homes they could not afford,' said Bankaci. 'So, now many of the homes we see going into foreclosure have little equity left in them. I am sure the number of homeowners defaulting on their loans is going to rise as the appreciation rates on homes continue to slow down.'"
New York City Foreclosures Up
The
New York Post has this report on foreclosures. "Foreclosure rates around the United States are rising from last year as more homeowners are caught in a web of rising interest rates and gimmicky mortgages. New York City foreclosures jumped 65 percent in January with 2,632 filings this year compared to 1,595 during the same month last year, according to RealtyTrac, which watches rates nationwide."
"The 2005 city total was 20,443 with 0.639 percent of the city households in foreclosure compared to a nationwide rate of 0.732 percent. Of the five boroughs, Brooklyn and Queens have the highest percentages of households in foreclosure with 0.820 percent and 0.884 percent, while Manhattan has the lowest at 0.065 percent."
"A New Hampshire company that tracks foreclosure rates there just saw a spike from 28 percent to 55 percent in the number of foreclosures. Those who refinanced or bought homes in the last two years using interest-only, adjustable rate or introductory variable rate loans are now much vulnerable to foreclosure."
"'Now when people's loans adjust, with the new interest rates they are seeing their mortgages skyrocket 20 to 25 percent,' said James Kenney."
Foreclosure Business Is 'Hardball'
An update
on Florida. "The number of foreclosure- related lawsuits increased by more than 25 percent in February in Broward County. 'The real estate market is cooling down and now foreclosures are heating up in Broward (up 25 percent), Miami-Dade (up 15 percent) and Palm Beach (up 17 percent),' said Serdar Bankaci."
"'With foreclosure activity on the rise, pre-foreclosure properties are an excellent opportunity to approach homeowners before they go into foreclosure,' said Bankaci. 'Finally, the home prices have hit the roof and people are not willing to pay those prices. Investors are figuring out there are other great places to live in Florida.'"
The
Detroit News 'slams the door' on foreclosures. "Detroiters love a bargain. Which is why I am warning you all to stay away from dabbling in foreclosed property. After reporting last week that home foreclosures have doubled in the state, and that Wayne County led the nation in foreclosures during January, I received a stream of e-mails and calls from readers wanting to know where they could snap up the bargains. The answer: Nowhere."
"The fact is that most of these foreclosures would never get to the sheriff's sale if there was any equity left. Either the owners have borrowed too much to buy them in the first place, or they've wrung out every dime of equity in loans, or the home values have declined to the point where the house is, in the best case, barely worth more than the bank is owed. 'Everybody comes in thinking all you have to do is put down a dollar and they can buy a house,' sighs Bob Schneider, a foreclosure expert with in Troy. 'It isn't that way. This is hardball.'"
"For starters, foreclosed homes don't auction for less than $1 over what the bank is owed. Then you'll wait six months and a day, under state law, to see if the homeowner can scratch up the dough to redeem the property or arrange a sale. If the foreclosed property does finally pass to the successful bidder, chances are good that the property is not in what you'd call 'move-in' condition. In some cases, Schneider notes, bidders offer 'cash for keys:' an upfront payment to prompt an owner to move out and walk away."
"At the Wayne County Sheriff's auction I witnessed, 379 properties came up for auction. Three received bids, all for just $1 over what the bank had into the place. The rest all went back to the lenders."
"In some cases, brokers like Schneider work with the owners to arrange a sale. He tries to get the owners some money out of the property, but it's rarely the 30-35 percent discount a real estate investor seeks. Sometimes, he arranges what's called a 'short sale,' where the bank settles for something less than what's owed, but not for a substantial amount less than what the property really is worth. 'It's not 30 grand. It's five, 10, maybe 12 thousand dollars.'"
"And just because the properties go back to the lender doesn't mean the bank is ready to hold a fire sale. Every property gets appraised, Schneider says, and if any of them are offered at a discount, it's because that's all they're worth. 'You think the bank is stupid?' he asks. 'The bank is fighting tooth and nail not to lose that 30 grand. All these late-night, two-o'clock in the morning TV ads that say buy with zero down and make $30,000 a deal, they're in fantasyland.'"
Foreclosures In RI Fastest Growing In The US
The
Boston Globe reports on foreclosures in Rhode Island. "More Rhode Islanders losing their homes as the number of foreclosures on high-risk mortgages increases. Mortgage companies give people with less-than-perfect credit subprime loans that carry higher-than-average interest rates. Rhode Island has the largest portion of subprime loans in the nation. More than one in four mortgages issued to Rhode Islanders in 2003 carried terms that are considered subprime."
"The foreclosure rate on subprime loans jumped 0.41 percent in the third-quarter last year, the largest increase in the nation. Economists and housing experts say the increase is partly due to a slow down in the housing market. When home prices were rising fast, people could take out home equity loans or sell their houses at a profit when they had trouble paying their bills. They are less able to do so now."
"John and Nicole Pilozzi of Cranston know this from firsthand experience. Together, they earn about $69,000 a year. They bought their three-bedroom home in Cranston in April 2000 for $131,000. Their $104,800 mortgage carried a 9.35 percent adjustable interest rate, nearly 3 percent higher than average."
"About 18 months later, interest rates fell, and the couple refinanced, taking out a $123,000 loan at an adjustable rate of 8.57 percent. By the following summer, they had accumulated car loans and mounting credit card bills. In June 2002, the Pilozzis took out a home equity loan of $25,000. They were not alone. About one in four dollars that home owners took out in home equity loans at that time went to pay off other debts, according to the Federal Reserve."
"The Pilozzis refinanced for a third time in February 2004. They rolled their home equity loan into a new $187,000 mortgage with an initial interest rate of 7.08 percent. The $1,600 to $1,700 per month mortgage and insurance payments were crushing. They began missing payments when John was transferred to Massachusetts. Gas cost more than $120 a week, he said."
"In January, the Pilozzis' home was sold at a foreclosure auction. 'I make decent money,' John Pilozzi said. But, 'I just couldn't do it.'"
Home Reposessions Up In DC Area
A
Washington DC area TV station has this report. "Experts said the once red-hot housing market is starting to cool, meaning home foreclosures are on the rise. But the news isn't bad for everyone. Home repossession men recover homes after a bank foreclosure. Kevin McFalls owns a Baltimore based property eviction service. He said the number of home repossessions he has overseen in the Washington area is starting to increase and that's good for business."
"According to McFalls, after an extremely slow year of repossessions in Montgomery and Prince George's counties once every few weeks, his company now takes over homes in those counties several times a week. He believes it is because of the cooling housing market, so homes aren't always selling right away."
"Doug Duncan with the Mortgage Bankers Association said he expects to see a slight rise in the number of foreclosures. Duncan also advises to be sure one has money in savings, saying people who are only paying interest-only loans now need to prepare to pay principal down the road, and should also try refinancing if they need to lock in a lower interest rate."
A Look At 'Mortgage Field Services'
The
Wall Street Journal has this report on a 'little known profession.' "For the past few years, business generally has been slow for the 10,000-odd members of Mr. Seabrease's profession, known among people in the industry as mortgage field services. Until recently, home prices were rising so fast in much of the U.S. that most people who fell behind on their payments could easily sell their homes for more than they owed the lender and thus avoid foreclosure."
"Now the people in this little-known trade hope that a cooler housing market will create more work. House prices have fallen modestly in some places, and inventories of unsold homes are rising. Kevin McFalls says he already has noticed an uptick in business in the Washington and Baltimore areas. Mr. McFalls expects a surge in assignments from lenders over the next few years. Rick Taggard, the owner of a field-services company in Porterville, Calif., agrees: 'All of us are just waiting, and when it turns around, it's rags to riches again.'"
"Field-services companies provide several types of service for lenders. One is the kind of 'preservation' work. Another is inspection. When borrowers fall more than a month or two behind on payments, lenders hire field-services companies to check whether the home is still occupied and to note any major damage. Field-service businesses also provide labor to clear out debris after evictions by sheriffs or other law-enforcement people. Usually the people who lived in the house are long gone by the time the foreclosure occurs."
"His mission is to preserve the value of the house while the lender prepares to sell it. In the basement, Mr. Seabrease twisted a valve to turn off the water supply. He then used an air compressor to blast the remaining water out of the pipes so they wouldn't freeze. Mr. Seabrease took digital pictures of each room, fixed the door frame and installed a new lock. The total charge for about an hour's work, excluding travel time, was around $125. Mr. Taggard says that in a good year someone running a field-services business can earn a six-figure income."
"Still, field-services work can be dangerous. While one of Mr. McFalls's crew was dragging junk from a house in Baltimore several months ago, three men emerged from the basement, and one brandished a gun. After a scuffle during which one of the workers was cut just above the eye, the gunman and his companions fled."
"In some homes, says Robert Preston, who runs a field-services business in Grand Rapids, Mich., his crews have found decomposed bodies. About a decade ago, while Mr. Preston was helping with an eviction in Indiana, a man being forced from his home shot himself to death, Mr. Preston says. 'After a time, you just become desensitized,' says D. Scott Smith, who ran a field-services business in Baltimore for about eight years before changing careers. He now invests in real estate."
"Mr. McFalls says he feels sorry for some of the people whose belongings his crews cart away. But he thinks many people get into trouble simply because they have made bad choices, buying expensive cars and other luxuries instead of paying off their mortgages. 'The majority of them are just living far beyond their means and putting themselves in that position,' he says."
Lenders 'Learned To Profit Even When Loans Fail'
More reports on
foreclosures in two eastern states. "New Hampshire’s primary foreclosure reporting service, has discovered a disturbing trend in the foreclosure market and boldly predicts that this trend will continue through the end of the year. In the seven-month span from August 2005 to February 2006, the percentage of foreclosed properties in N.H. that were purchased or refinanced in the last two years has jumped from 28 percent to 52 percent."
"This dramatic increase in foreclosures for these homeowners is a direct result of homeowners who couldn’t afford their home but were able to obtain financing with interest-only, adjustable-rate or discounted-rate mortgages. Also contributing to this trend is the softening of the housing market, which is making it more difficult for homeowners facing foreclosure to sell their home."
"'This statistic speaks volumes about the state of the housing market,' says James Kenney. 'It’s becoming more evident, especially over the past seven months, that N.H. homeowners who financed their home with an interest-only, adjustable-rate or discounted-rate mortgage were unprepared when their mortgage payments increase anywhere from 20 – 40 percent.'"
In
North Carolina. "A special committee of the N.C. House received a two-hour education Tuesday on all that can go wrong when a person borrows money to buy a home. The payments may be more than the borrower can afford, experts told the legislators. The borrower may not even understand the loan terms."
"The hearing is the first step for the committee, which is to come up with ways to reduce the number of N.C. foreclosures. The committee, created in response to an Observer investigation published in January, plans to propose reforms to the full House by May, leaders said. 'I don't think there's anyone in there today that walked out thinking we don't need to do anything,' said vice chair Becky Carney, D-Mecklenburg."
"The number of foreclosures filed by lenders against N.C. residents tripled between 1998 and 2003, and stayed at roughly the same level the last two years. The Observer reported an even steeper increase in foreclosures in Mecklenburg County."
"The committee, gathered in a drab chamber in the Legislative Building, heard several state officials and consumer advocates talk about the reasons. It is easier than ever to get a loan, they said, even for people with bad credit or lower incomes. That's largely because the lending industry has learned how to profit even when some of its loans fail."
