Bubble States Leading US Defaults
The
Central Valley Business Times. "More than 37,000 homes went into the foreclosure process in California in the third quarter, a 171 percent increase over the same period in 2005, according to RealtyTrac. The California number was up 35 percent from the second quarter of 2006."
"Nationally, 318,355 properties entered some stage of foreclosure during the third quarter of 2006, a 17 percent increase from the previous quarter and a 43 percent yearly increase from the third quarter of 2005."
"'Higher interest rates and a general softening of the real estate market are the two key factors contributing to the 43 percent increase in foreclosure filings from the third quarter of 2005,' says James Saccacio, CEO of RealtyTrac. 'What our third quarter research appears to be showing is that the first wave of adjustable rate mortgages is having a negative impact on the number of homes going into foreclosure. With the volume of these loans, more than $1 trillion of them due to adjust over the next 15 months, this is a trend that definitely bears watching.'"
"Colorado posted the highest foreclosure rate in the nation for the second consecutive quarter, reporting one new foreclosure filing for every 127 households, 2.9 times the national average. After declining almost 13 percent between the first and second quarter of the year, foreclosure activity in Colorado was back up 24 percent from the second to the third quarter, with 14,374 properties entering some stage of foreclosure, the eighth highest foreclosure total in the nation."
"Nevada moved up from having the sixth highest rate in the second quarter to the second highest rate in the third quarter. The state reported 5,561 properties in some stage of foreclosure during the quarter. Florida, which had the ninth highest foreclosure rate in the country for the second quarter, took over the No. 3 spot from Texas during the third quarter."
"With 40,136 properties in some stage of foreclosures during the quarter, Florida reported the highest number of foreclosure filings during the quarter, barely beating out Texas, which held the No. 1 spot for the previous two quarters."
"Other states with foreclosure rates ranking them in the nation's top 10 for the third quarter included Georgia, Michigan, Texas, Indiana, Utah, Ohio and Illinois."
"Appears To Be No End" To Denver Defaults
The
Rocky Mountain News reports from Colorado. "Prompted by local business leaders' concerns over the area's real estate market, economist Patty Silverstein has issued a report that says Denver's high foreclosure rate will continue, somewhat abated, into 2007. 'A lot of conditions are improving, but we're not out of the woods yet,' Silverstein said."
"Residential foreclosures in metro Denver are on pace to hit a record high in 2006 of about 19,200. Through the third quarter, 14,132 foreclosure cases were opened in the seven-county region, a 34.2 percent increase over the January-September period in 2005."
"What's happening, Silverstein said, is a longer lag between the negative job-loss news and the foreclosures, when compared with Denver's problems in the 1980s. During the last great foreclosure boom, it was roughly two years between Colorado's job losses and its high foreclosures, Silverstein said. Colorado's recent job- loss peak, in 2002 and 2003, is now three to four years in the past."
"'Given the severity of it and the slow growth since then, we've had a longer lag,' she said."
"New or recently popular mortgage products also have played a role, Silverstein notes, and ARMs represent a disproportionate share of Colorado foreclosures: In the second quarter of 2006, 52.5 percent of the loans in foreclosure in Colorado were ARMs, compared with 35.7 percent nationally."
The
Denver Post. "Despite solid growth in jobs, incomes and population, metro Denver's foreclosure rate is on track to hit 1.7 percent of all homes this year, according to an analysis. That rate is a midpoint between last year's 1.3 percent and a record 2.1 percent set in 1988, when an oil bust drove up unemployment levels and more people were leaving the metro area than moving in."
"The high foreclosure rate in Colorado, which has led the nation for the past seven months, is part of a downward trend in the overall housing market."
"Builder incentives and price cuts are putting pressure on the median prices of existing single-family homes, which fell 2.2 percent in the metro area and 2.5 percent nationally year-over- year for September. There were 31,450 unsold properties in the metro Denver market in September, compared with 27,248 a year earlier."
"For the past five years, home prices haven't appreciated in a "foreclosure belt" stretching from Weld to Adams to Arapahoe County, said Lou Barnes, a mortgage banker in Boulder. Overbuilding has dampened price appreciation, which has contributed to high foreclosures in those areas because homeowners have less equity and aren't able to sell quickly, Barnes said."
"Economist Patricia Silverstein links the genesis of the current foreclosure cycle to the loss of 61,200 metro-area jobs in 2002 and 2003. Many workers had difficulty replacing the incomes they lost in the downturn and appear to have turned to higher-risk mortgage products such as no-money-down and adjustable-rate loans to stretch their finances."
"Broker Phil Heter, whose
company only sells foreclosed homes on behalf of lenders and Fannie Mae, said that while there are huge differences between now and 1989, there appears to be no end to the number of foreclosed homes hitting the Denver-area market."
"'We were busy before, but it was like they just opened the faucet wide open 90 days ago,' Heter said."
More Condos Headed For Auction
Scipps News
reports on some auction tricks. "As the nation's residential real estate market cools down, condo auctions are heating up. A penthouse in Denver's Cheesman Park that had been languishing on the market for two years was recently auctioned off in less than 5 minutes for $1.935 million."
"According to the National Auctioneers Association, the number of residential auctions was up by 8.4 percent in 2005 and another 4.4 percent in the first half of this year."
"Across the country, developers and owners are opting to hire professional auction houses to sell residential condominiums rather than wait indefinitely for them to sell by traditional means. While sales of single family homes dipped 1.6 percent in September, condo and cooperative housing sales dropped 3.2 percent, according to figures just released from the National Association of Realtors, signaling that the condo market is lagging other types of housing in a recovery."
"In a changing market where last year's prices might no longer make sense, auctioneers say public auctions can determine today's true market value. 'An auction is a great way to avoid long-term carrying costs on a property,' says Scott Kirk, senior marketing consultant with Grand Estates Auction Co."
"'The sellers know when the property will be sold,' he says, 'so they have an end date, and they can set a reserve price and feel comfortable that they will not be forced to sell below that.'"
"About that reserve price, sellers should be sure they would be willing to accept it as the final sales price, says Alan D. Wallace, a real estate attorney in Sherman Oaks, Calif. 'If a condo is worth $200,000,' Wallace says, 'many auctioneers will tell the seller he has to set a minimum bid of $130,000 in order to get enough people to come. Theoretically, in the auction frenzy it will be bid up to a price much higher than that. But, it could end up selling for a lot less than the owner thinks it's worth.'"
"An alternative to a reserve auction is an absolute auction. In that scenario, the property simply goes to the highest bidder, regardless of price. The absolute auction obviously exposes a seller to more risk, but from a buyer's perspective, the tantalizing possibility of getting a really good deal can be irresistible."
"The buyer's burden: Auctions are fast-paced, competitive events, says Annette Elms, owner of Jupiter, Fla.-based Christenson-Elms Auction Group, '"buyers can get caught up in the hoopla. So they need to do their homework and come prepared.'"
"Bidders must present a cashier's check in order to qualify for a given auction, she says, and the winning bidder has to put down 10 percent of the price in hard cash on the day of sale."
"'We have open house every Sunday afternoon for three successive weeks,' Williams says. Be sure of what you're getting, he says. A buyer 'might want to bring in a building inspector, because ultimately, due diligence is the buyer's responsibility. If it's going to be your house, you need to be doing the checking.'"
"'At most auctions, when the gavel goes down, the sale is final,' Wallace says. 'When you buy at auction, there is no contingency. That's a big difference.'"
"A buyer's research should include legal issues as well as the property's physical condition, says Helio De La Torre, an attorney with Siegfried, Rivera, Lerner, De La Torre & Sobel in Miami.'Make sure the title is clean,' he says, 'and know what the conditions of the auction are.'"
Auction Business "Booming" In Indiana
The
Star Press reports from Indiana. "The rising rate of foreclosed homes in Delaware County has already prompted more sheriff's sales, and now a private auction company has scheduled a foreclosure sale. Large national auction company Hudson and Marshall will conduct an auction of foreclosed homes Thursday."
"Seventeen homes will be auctioned in Muncie, but business is booming for the auction company, which is selling more than 400 single-family homes in several states in the next few days."
"The Star Press previously reported on the growing number of sheriff's sales of foreclosed homes in Delaware County. Through September, 564 homes were listed for sheriff's sales compared to 594 in all of 2005."
"Texas-based Hudson and Marshall, a 40-year veteran of the auction business, has scheduled auctions of more than 400 homes in Indiana, Illinois, Ohio and Pennsylvania through Nov. 1."
"The Star Press has reported that the area was high in state and national rankings for risky loans that can sometimes lead to foreclosures. Hudson and Marshall cited those loans in its press release announcing Thursday's sale."
100% Loans Defaulting In Marin Co., CA
The Marin
Independent Journal reports from California. "Home foreclosures in Marin County were up nearly 60 percent in the third quarter compared with the same period last year, Dataquick reported. Eighty-nine foreclosures were reported in the quarter ending Sept. 30, up 58.9 percent over last year, when there were 56."
"The foreclosure numbers were also a steep jump from the second quarter, when 58 were reported. But Marin's foreclosure picture was still rosier than most of the other eight counties in the Bay Area, where overall foreclosures surged 89.2 percent in the third quarter."
"'I'm not surprised by those numbers because of all the products that have come out - no down (payment), interest-only loans,' said Russell Colombo, chief of Bank of Marin, which does not offer residential loans. 'A lot of these people go in with the expectations of appreciation, but in Marin County that has not happened recently.'"
"According to DataQuick figures released this month, Marin's median single-family home price declined 3.3 from September 2005 to September 2006."
"'But in this type of market, with the adjustable rates out there, I'm not surprised that the foreclosures would jump,' said Kathy Schlegel, president of Marin Association of Realtors. 'And they probably will in the next quarter.'"
"'The biggest problem has been the 100-percent financing,' she added. 'They're the ones that are really the most vulnerable for the foreclosures. There's just not that amount of equity that gives them a cushion.'"
Statewide, foreclosures hit a four-year high in the third quarter, DataQuick said. Lenders sent homeowners 26,705 default notices, up 28.3 percent from the prior quarter and 111.8 percent from the third quarter of 2005.
"In Sonoma County, third-quarter foreclosures rose 83.3 percent, from 126 to 231."
"Notices of default are recorded at county recorders offices and mark the first step of the formal foreclosure process. On primary mortgages, homeowners were a median of five months behind on their payments when the lender started the default process, the research firm said."
Auctions 'Familiar Sight' In Virginia
The
Virginia Pilot. "Auctions of homes in foreclosure have become familiar sights at courthouses throughout Hampton Roads. John J. Allen warns that many more are in the works. At Child & Family Services of Eastern Virginia, the number of cash-strapped homeowners seeking help to avoid foreclosure has jumped sharply during the past six months, said Allen, vice president of the agency."
"During the frenzied pursuit of homeownership in 2004 and 2005, many Hampton Roads home buyers used adjustable-rate mortgages as a way to buy a home that they could not otherwise afford, Allen said. 'There will be a continued increase in foreclosures during the next two to five years,' Allen predicted, because 'ARMs are not going to be adjusting downward any time soon.'"
"Earlier, many homes at risk were concentrated in neighborhoods with modest household incomes, such as the Portlock section of Chesapeake and the Lafayette Manor neighborhood of Norfolk. More recently, homes in several sections of Virginia Beach, including the affluent Wolfsnare area, have become seriously delinquent and risk foreclosure."
"It isn’t clear what triggered the foreclosure on a year-old second mortgage at 8700 Tidewater Drive, and the owner could not be reached for comment last week. The home, with a 'No Trespassing' sign in one window, appeared vacant, and the owner’s phone number has been disconnected."
"Like this mortgage, many in Hampton Roads that are seriously delinquent or in foreclosure were taken out within the past two years."
"Individuals determined to get into a house often failed to plan for the higher monthly payments that would begin once the 'teaser' rates on their adjustable-rate mortgages expired, Allen said."
"Meanwhile, homeowners tapped the sudden increase in their home equity by taking out second mortgages to repay credit-card debt. Some, however, failed to curb their use of credit cards and ran up their debt a second time, said Sharon Neuhaus, for (a) credit-counseling service. 'Now they have a second mortgage on top of their credit-card debt' and find it difficult to make their mortgage payments, Neuhaus said."
"Another notable change in mortgage lending has been the availability of costly home loans to borrowers with a tarnished credit history. Some individuals seeking help rushed to buy a home and relied on these subprime mortgages to do it, said Luxmy Panzardi, a housing counselor."
"Throughout Virginia, fewer investors are showing up at foreclosure auctions, and more homes end up in the hands of lenders, said Eric White, VP of a Virginia Beach law firm. That trend may be taking hold in Hampton Roads as well, where investors are known to be especially aggressive at courting homeowners who default on their mortgages."
"Dean Taylor, who buys homes to renovate and resell, arrived at the auction with a deposit check in hand. He said he decided against bidding because there might not have been any profit available after paying at least $57,738 for the foreclosed second mortgage, another $78,000 for the first mortgage and an unknown amount for repairs to the house."
"The auction was over in minutes. Standing outside the Norfolk Circuit Court on Tuesday, attorney Richard A. Knee quickly read a description of the property and asked for bids."
"He was selling the modest, 64-year-old house on behalf of a lender owed $57,738. When two prospective bidders didn’t respond, Knee declared that the lender, CitiFinancial Inc., was the successful bidder and made note of the sale."
"After the auction, Taylor described investors’ reduced appetite for foreclosed homes this way: 'A year ago, there would have been 30 or 40 people here.'"
Houston Foreclosures Up 23%
The
Houston Chronicle reports from Texas. "As of Oct. 3, the Harris County had 7,339 foreclosures, which eclipses last year's total of 7,132. That's 23 percent higher than the same period last year. The reasons, according to experts, include overextended borrowers, lax lending practices and rising interest rates."
"Billy Addison could soon join the thousands of area homeowners who've catapulted Harris County foreclosures past last year's numbers. Addison finds himself in over his head two years after buying a two-story, three-bedroom home in Houston's Northridge Park West for $165,856."
"The 27-year-old contractor, who was recently notified that his lender had begun foreclosure proceedings, stopped making mortgage payments in March because rising property taxes made the home unaffordable. He now hopes to sell the home before the foreclosure becomes final."
"'I bought a home because I wanted to see my money go into something I would own,' said Addison, who was also attracted by a big backyard and a 100 percent financing option. 'Now that I see the other side of it, I kind of think maybe I shouldn't have.'"
"Although foreclosures are mounting, experts don't see any major effect on the local economy. But they do say the rising numbers could affect housing prices and make it harder to sell homes."
"In recent years, borrowers have had access to an unprecedented variety of products: low or no down-payment loans, interest only loans, adjustable rate mortgages, low documentation loans and 100 percent financing."
"'In most cases they could get a home regardless of their credit,' said Wilfred Broussard Jr., a real estate broker in Houston who constantly gets calls from financially strapped homeowners trying to sell their residences. 'Often these people probably weren't educated enough about homeownership and loans and terms. They just dream the American dream to buy a home.'"
"That dream became a nightmare for those who watched monthly payments swell as interest rates rose or those who saw tax bills jump after their first year in a new house. Addison was no exception. At closing, Addison's monthly payment was $1,489 on a fixed-rate loan with an interest rate of 6.5 percent. But the next year, his property taxes jumped and his monthly payment reached $2,314."
"At the time of sale, the Harris County Appraisal District valued only the land on which his newly built home sat. But the next year, an updated appraisal included the home, and Addison had to pay for both the current year and previous year, which pushed his monthly payment up by $800."
"Addison signed a document at closing acknowledging his payments could go up, he said, but he wasn't told it could be that much. 'If I knew it was going to go up that much, I would never have bought it,' he said. 'No one ever explained anything to me.'"
"But even if Addison's taxes hadn't gone up, he may never have been able to afford the house. A review of the mortgage application that he provided the Chronicle shows he made $3,316.25 a month, a third of that coming from overtime. However, his monthly debt, including the underestimated mortgage payment, totaled $2,118 — putting his debt-to-income ratio at 64 percent."
"The ratio tells lenders how much of an applicant's income will go to pay debts. While lenders use different ratios for different kinds of loans, the Federal National Mortgage Association, which buys loans from lenders, uses a benchmark ratio of 36 percent. It considers loans with ratios of 45 percent or higher to be at a significantly higher risk of default."
"KH Financial, the lending arm of Kimball Homes, approved Addison's loan. Kurt Geist, Texas regional manager for KH Financial, said privacy laws prevent the company from talking about any individual borrower's loans."
"Like Addison, borrowers may try to sell the home before it's lost. But Texas' quick foreclosure process, compared to that of other states, leaves little time for borrowers to save their homes. It could take as little as 41 days after a default for a homeowner to receive a notice of foreclosure from the lender. It takes an average 21 days after that to lose the home, according to the state's study."
"Homes facing foreclosure can also be hard to sell if a homeowner doesn't have enough equity in the home to attract investors. And the selling price tends to include closing and commission costs, which can often push prices above the home's market value."
"Houston, like much of Texas, has had appreciation rates of 2 to 3 percent over the last four years, said Barton Smith, a University of Houston professor of economics. 'What we've got is a market in which people have overextended themselves in a housing market that's not providing them the ability to bail out,' said Smith, who predicts foreclosure rates to rise at least through next year. 'When they get into trouble, the only way to get out is to walk or come up with extra money to close the gap.'"
"Addison is trying to sell his home for far below what he paid to avoid foreclosure and salvage his credit. His home has been on the market since March, and he has had to steadily drop his asking price from $148,900 to $129,000, as he watches others around him walk away from their homes or succumb to foreclosure, pushing home prices in the neighborhood down."
Texas Foreclosures 'Pick Up Steam'
The
Star Telegram reports from Fort Worth. "For the third month in a row, Tarrant County has registered more than 1,000 foreclosures, and the number of homes posted for the November auction appears to be a record high."
"The 1,222 foreclosure postings is the highest number recorded by Foreclosure Listing Service of Addison, company President George Roddy said Thursday. He said his firm wasn’t tracking Tarrant foreclosures in the late 1980s when the real-estate market crashed, but he noted that the county had significantly fewer homes then."
"'They’ve definitely picked up steam, if you look at this month,' Roddy said. 'It’s unbelievable.'"
"Foreclosures are up 47 percent from last November, when 830 homes were posted. Foreclosure Listing Service counted 1,220 postings in September and 1,063 in October.
'That gets your attention — that’s extremely high,' Roddy said. 'For the last three months, we’ve seen some abnormally high foreclosure numbers.'"
"The November postings also ensured that 2006 would be a record year of postings. The year-to-date total for 2006 is now 10,979, already ahead of 2005’s full-year total of 10,387. The foreclosure postings are approaching the stratospheric levels of the 1980s real-estate crash. In Dallas County, there are 1,886 homes posted for foreclosure next month. In 1989, about 2,000 foreclosures were posted a month, Roddy said."
"Many people in real estate who work with people facing foreclosure say many of the homeowners are being squeezed from all sides. Homeowners who have financed 100 percent or more of their home purchases often find themselves owing more than the value of the home. Borrowers who took advantage of teaser short-term rates are now seeing the rates ratchet upward."
"Some unfortunate buyers combined ARMs with 100 percent financing. Randall Dunn, who buys homes from homeowners facing foreclosure, hears from them all the time. 'Those are the ones who say, 'Please buy my house,' Dunn said. 'But they have no equity, so how can I buy their house?'"
The
Dallas News. "Home foreclosure postings in the Dallas-Fort Worth area have surged to their highest level since the 1980s. Home foreclosure postings reached about 35,300 so far this year, increasing 20 percent over the same period a year ago. That figure has already surpassed the total for 2005, which was about 32,500."
"A likely culprit: aggressive lending, in which mortgage companies sell homeowners products that might not be suitable in the long term. Many homeowners appeared to be struggling with adjustable rate mortgages, which accounted for about a third of foreclosure postings this month, Mr. Roddy said. That category includes nontraditional mortgages that offer low payments the first few years, often followed by sharply increasing payments."
"It's not the most worrisome performance ever for foreclosures in the Dallas area. In 1989, foreclosures in Dallas County reached as high as 2,000 a month in a smaller overall market, Mr. Roddy said. This month's figure for Dallas County was 1,886."
"The latest rise in foreclosures has added to concern about the local real estate market, which has cooled in recent months. In September, local home sales dropped, the number of homes for sale increased, and prices declined slightly as homebuyers pulled back to see what would happen to the national housing market."
Still, there are also positive signs, said Craig Jarrell, president for the Dallas region at Pulaski Mortgage Co.
"Foreclosures this month rose by 49 percent in Dallas County, 47 percent in Tarrant County, 65 percent in Collin County and 37 percent in Rockwall County. About 80 percent of the properties posted for foreclosure are worth $200,000 or less, with an average value of about $115,500 for Dallas, Tarrant, Collin and Denton counties, Mr. Roddy said."
"Still, a small portion of homes have values over $500,000. 'It's safe to say that all walks of life in the D-FW area are affected,' he said."
The
Financial Standard reports from Australia. "The latest quarterly figures from the Insolvency and Trustee Service Australia (ITSA) have shown record levels of bankruptcies in NSW with accountancy specialist Hall Chadwick warning 'more bumps' are ahead."
"Compared to an already high 1,900 bankruptcies for NSW last year, the numbers have risen by 10 per cent to 2,153 this year. This is the highest number of bankruptcies to occur for any state over a three month period since 1986."
"'Nervousness about fundamental household variables such as falling or stagnant housing prices, high petrol prices and the possible threat of rising interest rates have made the Australian public a lot more uncertain about their future,' said Paul Leroy, partner at Hall Chadwick."
"Bankruptcies in the otherwise booming local economy of Western Australia are on the rise too. 'The 2005/06 period had particularly low bankruptcies (314) compared to 382 for 2004/05. They have now returned to where they were (383),' said Leroy."
"With the holiday season just around the corner, Leroy advised consumers against maxing out their credit cards. 'Proceed with caution – there may be a few more bumps on the road ahead.'"
Defaults Surge In California
The
Contra Costa Times from California. "Solano and Contra Costa counties, where much of the Bay Area's once-booming housing market soared in recent years, now have the third- and fourth-highest rate, respectively, of foreclosure in California. A year ago, Contra Costa County ranked 11th on the list."
"The numbers are rising at a time when many borrowers who took out adjustable-rate loans years ago are now paying bigger mortgages after the end of introductory rates. 'I think that's the biggest trigger,' said real-estate agent Earl Rozran. 'All of a sudden, payments have jumped a couple hundred dollars.'"
"Statewide, 14,806 properties in September were in some type of foreclosure proceeding. 'I think what we are starting to see in California is the effect of (rising) adjustable-rate mortgages. The whole state has risen pretty dramatically over the last six months in terms of the number of properties in foreclosures,' said Rick Sharga, VP at RealtyTrac.com."
The
North County Times. "Foreclosure activity has shown a dramatic increase in San Diego and Riverside counties, far outpacing most of California and the rest of the nation, according to a foreclosure tracking firm. San Diego County had 4,069 properties in some stage of foreclosure for the quarter that ended in September, compared with 970 properties for the same quarter in 2005, an increase of 319 percent."
"Riverside had 4,403 such properties for the most recent quarter, versus 1,297 for the same quarter in 2005, an increase of 239 percent."
"Alan Gin, professor of economics at the University of San Diego, blamed the trend on the region's high cost of housing. 'The housing prices are so much higher here that people got stretched getting into a home,' Gin said. 'If you got into a $600,000 home in San Diego, you're much more likely to default than someone in a $200,000 home in Dallas.'"
"Mark Fabela, director-elect for the board of the North San Diego County Association of Realtors, said the foreclosure increases were because of dropping housing prices. When housing prices decline, some people can't refinance their way out of high mortgages. 'People actually overextended themselves,' Fabela said. 'They get to the point where they can't make the payments.'"
The
Daily News. "The state's foreclosure activity has risen more than 40 percent over the last two months. 'I think a lot of buyers unfortunately got into some risky loans that may not have been in their interest,' said James Joseph, (broker) in Whittier."
"Increased foreclosures are a product of a market slowdown, said David Reid, a licensed real estate broker and licensed contractor. The market was moving so fast for a few years that homes would sell before they went to foreclosure, he said. But now that the market has slowed, homes are not selling and are foreclosed."
"In recent years, people had to decide within hours whether or not to buy a home, he said. 'Maybe those who bought the homes stretched because they had to make a quick decision,' Reid said."
'Caravan Auction' For 400 Homes
A ca is planned. "Getting a deal on a home purchase seemed to be a thing of the past but the surge in foreclosures nationwide offers buyers the chance to purchase real estate at a discount. Over 400 single family foreclosure homes in Illinois, Indiana, Ohio, and Pennsylvania will be auctioned for several of the country's national lenders from October 23rd-November 1st at multiple locations."
"Homes are valued from $5,000 to more than $450,000 and will likely sell well below their market value in a competitive bidding environment. In large 'caravan' auctions such as these, sellers accept almost every offer in order to recover costs of defaulted loans."
"'Real estate auctions allow buyers to capitalize on the market and buy property at great prices. This is a unique opportunity for first time home buyers to get a toe-hold in the housing market or investors to take advantage of a cooling market by purchasing multiple properties at significant discounts,' remarked Dave Webb, principal, Hudson & Marshall."
"'The housing market always experiences ups and downs but investors who purchase property in a declining market usually realize sizeable returns on their investments, as the market rebounds, making foreclosures a good buy,' added Webb."
"Risky loans, such as adjustable mortgages and interest only loans, which perhaps allowed consumers to buy more house than they could afford are resetting to higher rates, resulting in numerous homeowners defaulting on their mortgages. Realty Trac's(TM) August 2006 US Foreclosure Market Report found 115,292 homes entered some stage of foreclosure, jumping 53% compared to a year ago."
Colorado Zip Code Sees One Third In Default
A
shocking report from Colorado. "Local economists have been tracking El Paso County foreclosures. They say 25 percent of all foreclosures between 2003 and last July were in zip codes 80911, 80916 and 80906. In zip code 80864, in southeastern El Paso County, almost one-third of all homes are in various phases of foreclosure."
"UCCS economist Fred Crowley said residents of the area have higher commuting costs, and many purchased homes when variable mortgage rates were low."
This county is where Colorado Springs is located.
27% Of Nations Defaults In Florida
The
Tampa Bay Business Journal from Florida. "Florida is leading the nation in foreclosure activity, according to a report by Bargain Network. Florida has approximately 28,000 properties in some form of foreclosure, accounting for 27 percent of the nation's total. With one new foreclosure filing for every 254 households, the state's foreclosure rate was more than four times the national average."
"Foreclosure activity in the third quarter of 2006 rose by 14 percent compared to the second quarter of the year. It was 39 percent higher than the same period last year."
"Five states; Florida, California, Michigan, Texas and Colorado, accounted for an estimated 66 percent of September's foreclosure filing activity, Bargain Network said. California had the second highest total of foreclosures, followed by Texas and Colorado."
"'Florida and the western states are known for their predominance of negative amortization loans in which mortgage holders pay only interest, not equity, on their properties,' stated Tom Adams, CEO of Bargain Network."
"Industry forecasters recently estimated that more than $200 billion worth of adjustable rate mortgages will 'reset' at higher rates in 2006 and more than $1 trillion will reset in 2007, the release stated. This situation, compounded by the expected slowing of the economy and the housing market, which according the National Association of Realtors includes a growing inventory of unsold homes, may edge more homeowners into the foreclosure process."
'A Lot Of People Didn't Look To The Future'
The
Danvers Herald reports from Massachusetts. "Property foreclosures increased by more than 70 percent nationally for the first quarter of 2006 compared to that of 2005, a trend reflected in Danvers and across the North Shore. Further evidence from the Salem Registry of Deeds shows a significant increase in foreclosed properties in Danvers and other North Shore communities. The North Shore has a high number of foreclosures per community as compared to all 351 cities and towns in the commonwealth."
"Dan Bennett, owner of Dan Bennett Real Estate on Page Street, and others in the real estate mix appear to agree that a combination of factors are responsible for the upswing in the number of foreclosures plaguing the market, beginning about nine months ago. Most attribute the increase to a sluggish economy and a flooded market."
"However, the resounding reason for property owners now falling on hard times is attributed to creative financing - loans offered with little or nothing down and variable interest rates having reached maturity."
"Many people yearning for a lovely, new single-family home took a walk out onto a financial limb a few years back with low, variable rate loans, a decision some same that may not have been well thought out, experts said. 'A lot of people didn't look to the future,' Bennett said."
"Others hoping to own their very own lot of greener grass took advantage of interest-only loans, which in some cases placed them in dire financial straits even sooner. 'There's fine print in some of those loans,' Corbett said. 'I had a customer (with an interest-only loan) who came back to refinance a mortgage for $342,000 only to find out the payoff was at $354,000 nine months later.'"
"John Paskowski, who owns Atlantic Mortgage Group on Elm Street, agreed that many took a risk by engaging in creative financing to purchase property over the past several years without considering all the factors. He attributed this to the economic make-up of Danvers property owners. 'We have lots of blue-collar, two-income families working hard to pull it together for the short-term,' Paskowski said. 'We may now be at the point where it's becoming an issue.'"
"Professional auctioneer Jeff Mann in Holbrook conducts property foreclosure auctions and is on board with the realtors. 'It's a compounded problem,' Mann said this week, 'with a lot of people taking advantage of 100 percent financing. They find out they can't meet those payments. In this market a lot of times we are actually auctioning off property that's worth less than the mortgage.'"
"Many who signed on for lower, 4 percent variable rate loans a few years ago now have reached the point in the terms of their mortgage where they have to lock in a higher fixed rate of at least 6 percent, Paskowski said. 'Adjustable rates are adjusting,' Paskowski said, 'and those who signed up should not be surprised. It is disclosed with these types of mortgages.'"
New Homes Auctioned In Michigan
The
Oakland Press from Michigan. "Chicago builder Neumann Homes Inc., facing the sluggish metro Detroit housing market, has hired a real estate auction house to sell 85 metro Detroit properties. Benj. E. Sherman & Sons, also based in Chicago, will have a Nov. 19 auction to se 23 single-family homes, 22 condominiums and 40 home sites throughout the market."
"'We have experienced the same slowdown that other builders have experienced throughout the country,' said Neumann Detroit division president Laurie Tarver. 'The auction will also allow us to reduce our inventory of residential home sites to comply with our company-mandated three-year supply. Historically, we have not offered home site our communities to residential buyers, so this is a special opportunity for the buying public.'"
"Properties in Rochester Hills, Novi, Clarkston, Milford, South Lyon, Pontiac, Lake Orion, Southfield and Highland Township will be offered."
"'The auction will be a wonderful opportunity for residential buyers to purchase a quality home, condominium or residential home site in some of the most desirable neighborhoods in metro Detroit at substantially discounted prices,' said Robert Roggeveen, president of the auction house's Auction Services Group. 'Many of the properties will be offered on an absolute basis, regardless of price, or with low minimum bids.'"
"In Oakland County, builders were issued 1,548 permits from January through August this year. That's down 50.1 percent from the 3,105 permits builders received in the same period in 2005. For metro Detroit's ninecounty region, permits declined 46.2 percent, to 7,429 in the January through August period this year, versus the 13,815 permits issued in that stretch a year earlier."
Denver Condos Sold For Under $20,000
The
Rocky Mountain News reports from Colorado. "Real estate foreclosures in the Denver area rocketed by 32.3 percent in the first nine months of the year, as condo overbuilding, risky loans and inflated appraisals drove the number of loan defaults to near record territory."
"Through September, 14,205 foreclosures had been filed in the metro area, compared to 10,735 in the first three quarters of 2005. The record for foreclosures was set in 1988, when 17,122 were filed from Boulder to Douglas counties."
"'It shouldn't be too hard to surpass our record,' economist Tucker Hart Adams said Tuesday. Adams said many of the foreclosures seem to be in the suburban condo market."
"In one troubled condo project in southeast Denver, some one-bedroom units are being sold in foreclosure for as little as $18,000 to $20,000, while they sold for $110,000 to $120,000 at their peak, said broker Rob Murphy."
"Many owners walked away from their mortgages after being slapped with huge assessments. 'The problem is it has a ripple effect,' Murphy said 'Appraisers are already under fire because a few bad apples were overinflating them. Now, appraisers can't justify units down the street selling for $80,000 to $90,000, when they use this for a comparable.'"
"Mary Wenke, public trustee for Arapahoe County, said that her office is dealing with so many foreclosures that she recently automated the process."
'Really Relaxed' Standards Behind Defaults
A
foreclosure report from North Carolina. "There are four houses in all, valued between $79,000 and $178,000. Each represents a piece of the American Dream. They are all up to be sold at foreclosure auctions Monday at the Forsyth County Hall of Justice. Barring a postponement, an additional 42 are to be auctioned off there this week."
"There's a wave of foreclosures sweeping through the Triad. On average, foreclosure proceedings begin against five Forsyth homeowners every day, according to the N.C. Administrative Office of the Courts. For the Triad, it's about 22 homes a day."
"The foreclosures come at a time when the economy is still strong, new neighborhoods seem to spring up from every pasture with good road access, and nearly two-thirds of Americans own a home. In recent years, residential developers, lenders and potential home buyers have pursued increasingly creative, and risky, mortgage strategies, said Chris Estes, the executive director of the N.C. Housing Coalition."
"Tony Plath, a finance professor at the University of North Carolina at Charlotte, said that 'really relaxed' mortgage-underwriting standards means that 'just about anybody can qualify for a 100-percent, loan-to-value mortgage on a house.'"
"Unfortunately, Estes said, 'this pursuit is getting people into homes with little, or no, financial cushion.'"
"The housing boom has pushed the average selling price for an existing Triad home to $180,103 in August, up from $145,327 in January 2004, according to the N.C. Association of Realtors. But Joseph Smith Jr., the state's banking commissioner, said during an N.C. House hearing on foreclosures in February that changes in mortgages since the mid-1980s have created a 'good, bad and ugly' market for loans."
"'The good is a significant increase in the availability of mortgage credit that has resulted in a material increase in homeownership at all levels of income,' Smith said. 'The bad is an increased rate of foreclosures, and the ugly comprises two evil twins - predatory lending and mortgage fraud. The rate of mortgage foreclosures has gone up dramatically in recent years, and mortgage issues account for a substantial majority of the complaints my office receives.'"
"Foreclosure filings in the Triad surged from 2,480 in 1998 to 7,701 in 2005, according to the Courts. Filings in Forsyth rose from 567 to 1,784 over the same period. Through Sept. 18 this year, there have been 1,287 filings in Forsyth and 5,738 in the Triad."
"'One of the fallacies of foreclosures is it only affects poor people,' said Rick Sharga, a vice president of marketing for an Internet real-estate clearinghouse. 'It's beginning to affect more well-to-do families. While they may have a $300,000 to $500,000 home, some still live paycheck-to-paycheck because of their lifestyle.'"
"Some people dig themselves into a deeper financial hole by not attempting to sell their home as they near mortgage default, economists said. Other homeowners don't have that option because they live in neighborhoods whose housing values already are depressed from earlier foreclosures."
"Alternative-mortgage products such as interest-only loans traditionally have been offered by banks, mortgage lenders and mortgage brokers 'as a financial-management tool to wealthy and sophisticated borrowers,' the federal General Accountability Office said in a Sept. 20 report to Congress."
"'In recent years, however, alternative-mortgage products have been marketed as an 'affordability' product to allow borrowers to purchase homes they otherwise might not be able to afford with a conventional, fixed-rate mortgage,' the report said."
"The General Accountability Office said that it is too soon to tell 'to what extent payment shocks would result in increased delinquencies or foreclosures for borrowers and in losses for banks.'"
"But economists said that it won't be much longer before that question is answered. According to the Mortgage Bankers Association, about a fourth of the nation's mortgages are ARMs that are scheduled to reset at least 2 percent higher by the end of 2006 or during 2007."
