Loans, 'No-Fear Factor' A 'Mixture For Failure'
Some
updates on defaults. "Delinquencies and foreclosures were on the increase in some southeastern markets. 'While there is less overvaluation in these markets, relatively low employment in states like Virginia, West Virginia and Kentucky are putting more homeowners in financial distress,' said Alexis McGee. As an example, she pointed to the fact that the unemployment rate in Louisville, KY exceeded 6% in the 4th quarter of 2005. She added, 'These states are heavily dependent on the manufacturing sector of the economy, and that sector continues to lag behind others.'"
"McGee also cited a report by PNC Bank that showed an increase in personal bankruptcies in the Louisville metro area to nearly 11,000 at the end of 2005. 'We realize that there was a spike in filings before new laws took effect on October 1, 2005, but filings continued to rise to the end of the year.' She went on to say that filing bankruptcy was a common tactic used by homeowners in distress to forestall foreclosure. 'That move will delay foreclosure,' said McGee, 'but it won't stop it altogether.'"
"Housing markets along the eastern seaboard are a mixed bag as the shift from a seller's market to a buyer's market continues and the risk of foreclosure increases. McGee pointed to a 35% year over year increase in foreclosure activity in Massachusetts at the end of 2005 as confirmation that slowing housing markets produce an increase in mortgage defaults."
"'Our research has always shown a correlation between foreclosures and a flattening home price appreciation curve,' said McGee. She went on to say that while a seller's market continues in parts of Pennsylvania and New Jersey, she did not expect that to last as eastern markets cycle over the top and that local economic changes would also impact the foreclosure picture. 'In Delaware, for example, severe job loss is expected as a result of Bank of America's acquisition of MBNA,' said McGee."
The
Des Moines Business Record. "The Polk County sheriff’s office received notice of 365 foreclosure situations and sold 250 of those houses, with the rest going back to the mortgage holder. By last year, the numbers had exploded to 1,153 foreclosures and 769 homes sold by the sheriff’s department."
"'Everybody predicts the foreclosure rate is going to increase,' said Linda Busick, an independent appraiser who serves on the Des Moines Area Association of Realtors board of directors. 'Part of it is because of low interest rates. People can afford to buy a lot more house, but when you borrow 100 percent of the price, then you get a divorce or lose your job, you have to walk away. You’ve got no equity, and you have to pay somebody to sell it.'"
"Another web site recently showed 216 Polk County homes in foreclosure. The majority are valued at the lower end of the market, but the list included three homes in Johnston valued at more than $300,000."
"From a lender’s point of view, 'the reasons why property goes into foreclosure are out of your control when making a loan,' Busick said, referring to the divorce and job-loss factors. 'Lenders don’t consider collateral. If you make enough money to make the payments, and your credit record is good,' you’re likely to get the loan you seek."
"'There are some lenders who are on commission and have an incentive to get the deal done and get people in the house,' said Dan Vessely, president of Iowa Bankers Mortgage Corp. 'That may not be in the best interest of the customer in the long term, with no room to breathe in case of a financial crisis.' On the other side of the table, however, 'it seems like most people want to buy as much house as they can possibly afford,' Vessely noted. 'It seems like in the last couple of years there’s been a lot of that. I think it’s a mentality of more young people owning homes who have that no-fear factor; they don’t have the experience, and they want to buy as much home as they can possibly qualify for. Couple that with creative financing, and it’s a mixture for some failure.'"
Shocking Rate Of Foreclosure In Michigan
Foreclosure news from
Michigan. "The number of homes undergoing foreclosure in Michigan doubled from February 2004 to February 2006. Homes in Michigan are going into foreclosure at a rate that is two-and-a-half times the national rate."
"Katherine Ben-Ami
closed on 11 homes a minute Wednesday. If she were the world's fastest real estate agent, that would be good news, but the sad fact is Ben-Ami is an attorney for the Wayne County Sheriff's Office, and in 35 minutes she supervised the auction of 379 foreclosed Wayne County homes. 'Wednesday's always been a big day,' she said, 'but not this big.'"
"For hundreds of people each week, Michigan's sputtering economy literally hits home. After recording more than 9,000 foreclosures in 2005, Wayne County ended January with 3,364 homes in active foreclosure, the highest of any county in the nation by more than 1,000."
"While Wayne County is ground zero, foreclosures are rising throughout Metro Detroit and Michigan. Active foreclosures in Oakland and Macomb counties and the entire state have doubled in the past two years. Lenders, stuck with the homes, lose up to $50,000 per house as they clear them out at below-market prices. That can lower property values in neighborhoods, pushing more homeowners to move out, and eventually hurt property tax collections for local governments."
"'Foreclosure depresses an area in a variety of ways,' said LaSalle Bank chief economist Carl Tannenbaum."
"Taken together, Wayne, Oakland and Macomb counties account for more than half of the state's 8,284 active foreclosures. By itself, Wayne records 40 percent of the state total. 'This is the worst I've ever seen,' said Gary Meyers, a foreclosure specialist who made his first trip to the Wayne County courthouse Wednesday. 'I've been all over the U.S., and the most I've ever seen in a day is 30.'"
"Real estate and mortgage experts say much of Wayne's problem is caused by defaults in Detroit. The city suffers from high taxes and insurance, as well as many fee-laden, high-interest sub-prime mortgages."
"Even with so many foreclosed homes, few actually sell at auction; most end up going back to the lender. In most cases, explained Ben-Ami of the Sheriff's Office, the homes are worth no more than what's due to the bank. At Wednesday's auction, three of the 379 houses brought bids, all for just $1 over the amount owed."
"'Last week, we sold one property to an outside bidder,' Ben-Ami said. 'When they find out what the people owe, they're shocked.' With the auction ended, she helped bundle the foot-high stacks of legal forms to be officially filed. She would return Thursday to watch as another 148 homes went to foreclosure."
Chicago Area Foreclosures 'Plateau'
Chicago Business has
this report on foreclosures. "The pace of foreclosures on Chicago-area homes plateaued in January, reversing a December surge and bucking a trend of rising foreclosure rates across the nation. The number of properties either entering the first stage of foreclosure or moving to a more advanced stage in the six-county Chicago region rose 0.7% to 3,168 in January from 3,146 in December. That's down from the 47% jump in December, and well below the 8.5% statewide and 27% nationwide increases in January."
"'We have a greater cushion because we didn't have the speculative overexuberance that some areas had,' says (economist) William Hummer. 'And we're less vulnerable because of that. I think this is a trend that can stay in place.' Still, Chicago's foreclosure rate of one for every 968 households is higher than the national rate of one per 1,117 households. Georgia posted the highest January foreclosure rate among the 50 states at one for every 422 households, followed by Nevada, Colorado, Texas and Indiana."
"Chicago-area properties entering the first stage of foreclosure, or notice of default, rose 0.7% in January, a slowdown from the 51% spike in December. For the year, Chicago-area foreclosures rose 11%, compared with a 28% increase for Illinois and a 45% jump nationwide. 'There's been a lot more speculative buying in Las Vegas, Florida and California,' says Rick Sharga. 'Relative to the other major metro areas, Chicago is doing pretty well.'"
Defaults Rise in Strong, Weak Economies
Reports of more
foreclosures are popping up in a variety of states. "It's a sign of the state of Michigan's economy; home foreclosures are on the rise. The Kent County Register of Deeds office reports that in 1999, 540 property foreclosures were recorded with the county. That number's grown annually. By 2005, foreclosures had nearly tripled, to more than 1,427."
"Foreclosures continue to rise. The Kent county Register of Deeds office says so far this year, workers are processing 40 to 50 per week. If that rate continues for all of 2006, it could mean more than 25-hundred foreclosures for the year."
"From
first quarter to fourth quarter, New Jersey had a 100 percent increase in property foreclosures in 2005, putting it in the top 10 states with high foreclosure rates. Pennsylvania fared a little better with a 70 percent increase. The number of foreclosures nationwide increased by 25 percent over the year, to a total of 846,982 properties."
'Upside-Down' Loans Grow Among Texas Defaults
My
San Antonio reports on Texas defaults. "Bankruptcy reform appears to be catching homeowners unaware and playing a role in accelerating first-quarter foreclosure rates in Bexar County and around the state. February foreclosure postings in Bexar County were the highest since December 2004. And the monthly average this quarter was 753 compared with a monthly average of 699 in 2005."
"'For some time now, lenient lending practices and employment issues have plagued the foreclosure market,' said George Roddy. 'With the recent changes in bankruptcy, credit card payments, and the cost of goods and utilities, families who were barely making it a year ago will in all likelihood be pushed over the edge.'"
"Leslie Linfield, executive director of the Institute for Financial Literacy, noted a new phenomenon in Texas and Georgia, two states with monthly Tuesday auctions. 'The Monday of the week before, credit counseling organizations in those states are incredibly busy,' Linfield said. 'Many of the emergency sessions we are doing are to try to stop foreclosure. We will give priority to them to get them counseling so the bankruptcy attorney can file immediately.'"
"The housing boom increased the number of mortgages going to buyers with risky credit. Of the 684 residential mortgages on the county's March foreclosure auction list, more than 23 percent were for loans less than two years old."
"Still, the 2 percent increase in Bexar County foreclosures from the first quarter of 2005 was modest compared with other urban Texas counties. Dallas County was up 19 percent and Tarrant County rose 17 percent. Creditors file notices three weeks before auction day, making quarterly statistics available the second month of each quarter."
"Home buyers who took riskier mortgages, such as adjustable-rate or FHA loans, are heavily represented in the March auction. Adjustable-rate mortgages account for 15 percent of loans and 35 percent are FHA, which often go to people who put little or no money down. About 17 percent of loans in the quarter and 31 percent of loans in March were upside-down, meaning the loan exceeded the taxing district's assessed valuation of the property. This occurs when no down payment is required and closing costs are included in the loan."
"'Both homeowners and lenders are in a no-win situation with these upside-down properties,' Roddy said. 'The homeowner is unlikely to sell the home for what he or she owes, especially prior to the foreclosure deadline. And after repossession, the lender is unlikely to sell the asset for all that is owed against it.'"
"Texas routinely reports the highest number of foreclosures in the nation. Foreclosure.com counted 12,251 Texas properties in January, followed by 8,400 in Ohio, and 8,284 in Michigan. As with newly constructed houses and existing houses sold through real estate agents, distressed properties are also attracting more out-of-state investors, said Gregg Stanley."
Loans 'Creating Blight' In Some Communities
The
New York Times has this report on foreclosures. "The housing boom of the last decade helped push minority home ownership rates above 50 percent for the first time in 2004 and the overall foreclosure rate below 1 percent. Social scientists laud these accomplishments because ownership can foster greater neighborhood stability and economic progress."
"But hidden behind such success stories lies a disturbing trend: in the last several years, neighborhoods with large poor and minority populations in places like Cleveland, Chicago, Philadelphia and Atlanta have experienced a sharp rise in foreclosures, in some cases more than a doubling."
"The increase in foreclosures could be the first of a wave of financial distress for many minority homeowners, experts say, because they are twice as likely as whites to have taken out expensive subprime mortgages, most of which will jump to higher interest rates in the next two year."
"Advocates for the poor say that aggressive lenders and mortgage brokers have given loans to borrowers who are lured by dreams of home ownership but have few savings and little job security. Many families might be better off, and receive less expensive loans, if they saved for a down payment and paid down other debts before buying a home, said Kathleen E. Keest, a senior policy counsel at the Center for Responsible Lending."
"The Mortgage Bankers Association said lenders used a number of factors like credit scores and the size of down payments, in addition to income, to determine what kind of loan and interest rates are offered to borrowers. Douglas G. Duncan, the chief economist at the trade group added some increase in total foreclosures is to be expected simply because the number of mortgages has increased substantially over the last decade."
US Foreclosures Up 45%
Inman News has
the January foreclosure numbers. "About 103,540 properties nationwide entered some stage of foreclosure in January, a 27 percent increase from the previous month and a 45 percent increase from January 2005, according to RealtyTrac. 'This is the first time since we introduced the report in January of 2005 that we've seen back-to-back months with increases of more than 20 percent,' said James J. Saccacio."
"'While some of this might have to do with the seasonality of normal real estate cycles, it appears that rising interest rates and softening home prices are beginning to push foreclosure inventories closer to the historic average of 1 percent of all U.S. households,' he said."
"After dipping in December, Georgia foreclosures spiked higher in January. The state reported 7,342 properties entering some stage of foreclosure, more than twice the number reported in December. Georgia documented the highest foreclosure rate among the 50 states, one new foreclosure for every 422 households."
"With one new foreclosure for every 483 households, Nevada documented the second-highest foreclosure rate among the 50 states. The state reported 1,795 properties entering some stage of foreclosure, a 60 percent increase from December and more than 2.5 times the number reported in January 2005."
"With a total of 3,747 properties entering some stage of foreclosure, new foreclosures in Colorado tripled from December to January and increased 36 percent year over year. The state recorded one new foreclosure for every 488 households, the third-highest foreclosure rate among the 50 states."
Foreclosure rates in Texas and Indiana were among the nation's five highest for the second month in a row, and new foreclosures increased in both states in January. Texas reported 14,669 properties entering some stage of foreclosure, a 15 percent increase from the previous month and one new foreclosure for every 549 households. Indiana reported 4,419 properties entering some stage of foreclosure, a 30 percent increase from the previous month and one foreclosure for every 571 households.
Along with Texas and Georgia, the five states reporting the most new foreclosures in January included Florida, California and Ohio. Florida reported 10,334 properties entering some stage of foreclosure, a 28 percent increase from the previous month and the second most new foreclosures of any state. Florida's foreclosure rate of one new foreclosure for every 707 households was 1.6 times the national average."
"California registered a foreclosure rate below the national average despite documenting the third-most new foreclosures of any state. The state reported 9,354 properties entering some stage of foreclosure, a 22 percent increase from the previous month and a 62 percent year-over-year increase."
Subprime, ARM Loans Drive Defaults Higher: Ohio
The
Columbus Dispatch has the latest on Ohio foreclosures. "Risky high-interest mortgages have cost record numbers of people their homes, but not just in the big cities. In Ohio, the loans are more common across the state’s farmlands and Appalachian hills. In 2004, people in rural areas were much likelier to sign mortgages with high interest rates, generally above 8 percent, compared with the average of 5 percent for a conventional loan at the time."
"Franklin, Cuyahoga and Hamilton counties, and other urban centers, ranked behind dozens of rural counties in the percentage of borrowers receiving highinterest loans. The state’s biggest concentration of costly loans was in Hardin County, a patchwork of farms and crossroad towns halfway between Columbus and Toledo, where Amish buggies share two-lane roads with tractortrailers."
"Nearly one in three mortgages in Hardin County carried a high interest rate, loans known as 'subprime,' in 2004, the most recent year for which numbers are available. 'They tend to come from big national mortgage lenders,' said Col. Ken Hilty of the Hardin County sheriff’s office. 'Local banks are more cognizant of what’s going on in the community. They know the people; the people know them.'"
"Ohio leads the nation, by far, in the rate at which subprime borrowers fall behind and lose their houses. Nearly 10 percent were in foreclosure between July and September, triple the national figure. The consequences of foreclosures are most visible in compact city neighborhoods pocked by abandoned houses, attracting the attention of researchers, politicians and consumer advocates. But The Dispatch has found that subprime lending and foreclosures are even more pronounced in rural areas."
"'To me, that shows how widespread the problem is in the state,' said Jeffrey D. Dillman, executive director of the Housing Research and Advocacy Center. Dillman, Rice and others said rural residents, like their innercity counterparts, are generally poorer and served less consistently by traditional banks. That would make them a logical market for subprime lenders."
"Bob Niemi, president of the Columbus Mortgage Bankers Association, said they also might have fewer employment options when they lose a job. If deeply rooted in their rural communities, they also could be less willing or able to move elsewhere to find work. So borrowing against their home becomes one possibility. High-rate loans help a lot of people, he said. 'Whether that’s right for them is their personal choice. It’s important they understand what their options are.'"
"Thomas Bier added that the concentration of these loans in rural areas, while surprising, parallels other trends. Lenders, he said, have realized that if they write more loans, 'They can absorb more losses and still be ahead..The only way they could do that is by looking at the whole universe of buyers, not just central cities.'"
"Hardin County registered the eighth-highest jump in foreclosures in Ohio from 1999 to 2004, a spike of 181 percent. A similar acceleration occurred across much of rural and suburban Ohio, according to state Supreme Court statistics. Last year’s numbers haven’t been tallied, but the situation appears to be worsening in Hardin. In January, 24 foreclosures were filed, up from 11 last year. It was the busiest January for foreclosure filings in the seven years for which comparable records are available."
"All but two of the 24 Hardin foreclosures last month were high-interest subprime loans. All but five had adjustable interest rates, which typically offer lower starting rates but go up after two or three years."
"People in rural areas, like those in the city, tend to get into trouble through a combination of financial desperation and marketing bombardment from lenders, said Donald Eager, a fair-housing consultant. 'People are looking for a way out,' Eager said. 'They’re not thinking long term.'"
Thousands Of D/FW Homes Face 'Forced Sale'
The
Dallas Morning News has this report on north Texas. "Foreclosure postings in North Texas have fallen from February's near-record levels. But the number of homes scheduled for foreclosure sale in March is still 15 percent higher than a year ago. More than 3,000 Dallas-Fort Worth houses are threatened with forced sale next month to repay lenders."
"'It's down pretty good from last month but is still up from a year ago, which is discouraging,' said George Roddy. 'We are still in a cycle of foreclosure numbers going higher.'"
"Almost half of the foreclosure postings are in Dallas County, which had a 22 percent increase from a year ago. Pending foreclosures rose 31 percent in Denton County and are up 44 percent in Rockwall. For the first three months of 2006, 9,475 homes have been posted for foreclosure in the D-FW area, an increase of 17 percent from the same period last year."
"February's foreclosure postings were the highest this area has seen since 1989. Analysts have attributed the higher foreclosure levels in part to tougher bankruptcy laws and requirements for higher credit card payments. 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."
Beware Foreclosure Myth's
Money
magazine has some tips on buying foreclosures. "Buying foreclosures once appealed mainly to the small group of hard-core real estate investors who were willing to dig into untouchable rehab projects and wrestle with deadbeat tenants. But in recent years, scores of self-help books, Web sites, gurus and classes have sprung up, touting the notion that buying property from distressed homeowners is not only the surest path to real estate wealth but also within easy reach of anyone with spare time and gumption."
"Foreclosure investing has always been fraught with risks. But rather than creating more buys, the torrid market of the past five years has added a whole new level of risk by leaving fewer genuine deals available for thousands of eager new investors. 'It's a tough market today. The low-hanging fruit has already been picked,' says author Gary Eldred."
"If you've been waiting for the McMansions in your town to start going on the auction block, your wait isn't over just yet. Another brake on foreclosures is that banks are no longer playing hardball with strapped homeowners."
"'Compared with the late '80s and early '90s, lenders use velvet gloves,' says Eldred. 'They've realized that giving people a six-month moratorium on payments, stretching out the term on the loan, reducing the rate, it's still more profitable for them than going through a foreclosure.'"
"What would push more homeowners over the brink? Hard economic times have always been a catalyst, says Doug Duncan. For example, in states that have recently lost industrial jobs, such as Ohio and Michigan, foreclosures rose significantly in 2005. So if the national economy sours this year, expect a big jump in foreclosures in 2007."
"Another catalyst is overbuilding. Regions that have enjoyed a boom in new condominium development, South Florida, for example, could soon suffer a spike in foreclosures if investors are unable to rent or unload their condos for a profit."
"'Five years ago, there were the same five or seven people at every auction,' says veteran foreclosure investor Roy Cloughen of Long Island, N.Y. 'Now there are 75 to 80.' Auctions are by far the riskiest way to invest, says Rick Sharga. 'You are buying the property sight unseen, and you will be responsible for any taxes, liens or second mortgages still on the property.'"
"If you're willing to knock on doors and ask embarrassing questions, you may find deals among pre-foreclosures. You can get listings from Web sites that search court filings and other public documents for homeowners behind on their mortgage payments. You can then contact the homeowner and try to negotiate a deal. Trouble is, the listings on many of the Web sites are out of date, and a lot of people are reading the same lists. That's why Pamela Smith taps a network of realtor contacts she's developed and checks listings of borrowers in default in her county paper for leads. Notes Smith, 'You have to be aggressive.'"
Default Inventory 'Balloons' In January
Reuters reports the
inventory of foreclosed properties is growing. "According to data released today, 95,073 foreclosed residential properties were available for sale in the United States during January, an increase of 3.5 percent from December."
"The January foreclosure inventory represents a noticeable slowdown in the purchase of foreclosed homes. Since November 2005, the total inventory of foreclosures available for sale increased by 9,968 properties, while new foreclosure listings only increased by 2,585 during the same time period. 'The ballooning inventory of available foreclosure properties should be an area of concern among lending institutions. It puts pressure on REO departments to reduce this expanding inventory,' said Brad Geisen. 'This situation is good news, however, for those who track and invest in the foreclosure market.'"
"The number of new
foreclosed residential properties in Georgia jumped 17 percent to 2,049 in January. At the end of January, Georgia had a total of 6,457 foreclosed residential properties, compared with 5,930 at the end of December."
From
Inman News. "Defaults on ARMs could result in $110 billion in losses nationwide over the next five years, an enormous-sounding number that still comprises less than 1 percent of the home loans sold since 2004, according to Christopher Cagan."
"'It's unpleasant, but it will not break the economy or the real estate market,' said Cagan, who studied valuations and mortgage debt for more than 26 million residences in a valuation database across 558 counties in 36 states and the District of Columbia, representing more than 60 percent of the nation's population. This is because loan losses will be spread out over the next four to six years, as not all distressed borrowers will find themselves in trouble at the same time, Cagan, an analyst with First American, said."
"Cagan agrees that loan delinquencies will go up. 'There will be four times more foreclosures than now. That we know,' the analyst said. But, because the delinquencies will be a 'time release' over the next four to five years, the economy will be able to weather the problems, Cagan said."
"Cagan noted that the market is already starting to impose limits in this area, with some Wall Street investors tightening up standards and refusing to pay as much for bundles of loans that are risky. 'Throughout human history there has always been a war going on somewhere. It doesn't affect most people. But if, say, you're an individual who bought with one of those teaser loans, or a broker who specializes in those loans, or an investor who bought them, you're in the war zone,' Cagan said."
"'You don't want to be the person who gets hit with it, but it's not going to break the country,' Cagan said."
Defaults Up 30% In Tennessee
A
Knoxville TV station reports on foreclosures in Tennessee. "Huge housing sales coupled with low mortgage rates have been a trend across America the last several years. But there is a growing problem along with the market: Foreclosures. Eric Waddell tells us that the state of Tennessee ranks in an unenviable top ten list."
"Last year nearly 30 percent more homeowners from the Volunteer state had their homes forclosed and taken from them that the previous year."
"Mortgage expert Brad Boring advises before you buy a home work with your mortgage lender to figure out what you can actualy afford to spend on a house. Not nessasarily what kind of loan you can qualify for. 'Even though they may qualify for a lot more, I deal with comfort zones with people,' Boring said."
"He adds that he expects to see a lot of refinancing in the next two years as home owners try to get out of adjustable rate morgages, which have seen signifigant interest rate increases. (Realtor) Melissa Hill tells us that many times forclosures happen not because of the home price itself, but other consumer spending and credit card debts."
"'The problem results after they are into the home, and they are buyiung the new refrigerator, decorating the house and then they spend 10 or 20 thousand dollars on additional consumer debt,' Hill said."
"Natioanly over 845,000 properties across America entered forclosure procedures in 2005, 25 percent more than in 2004."
Government Agencies 'No Hype' Auction Site
Newsday
reports on the governments real estate sales. "Whether you're a first-time home buyer, an investor, vacation property buyer, historic preservation buff, you are not shopping the market to the max unless you check out the federal government's best real estate resources: the combined property disposition program inventories of 10 agencies, all rolled into one online access point."
"Want to buy a cabin in the woods near Lake Huron? Center-city rowhouses for rehab from Baltimore to Los Angeles? Raw land in Arizona, a lighthouse in the Atlantic, a condo in Puerto Rico, a development site in the U.S. Virgin Islands?"
"The offerings change daily, the realty sales hype is refreshingly restrained, and the caveats plentiful when you browse through the properties available from the Internal Revenue Service, Customs Service, Department of Housing and Urban Development, Veterans Administration, Small Business Administration, U.S. Marshals Service, U.S Army Corps of Engineers and the Federal Deposit Insurance Corp. Each of these agencies ends up with unwanted real estate through its own specialized activities."
"HUD, VA, SBA, along with the final two of the 10, the General Services Administration and the Agriculture Department, foreclose on some of the properties they insure or finance. Customs, the IRS, and U.S. Marshals Service seize properties for nonpayment of taxes or criminal violations and then sell them on the open market."
"Now there's an easy way to check out the bulging portfolios of these agencies. Go to HUD's
real estate site, and then link into any of the government agencies' separate offerings. The links also connect you to congressionally chartered Freddie Mac and Fannie Mae's property disposition sites."
"HUD's own portfolio tends to be the largest of the federal government, and it represents the most productive resource for anyone shopping for moderate-cost houses to live in or renovate as an investment. The other agencies' sites are lesser-known, less visited and contain fewer properties for sale or bid. But they offer far more diverse and intriguing possibilities."
"For example, the IRS' site offers houses for sale in some delightful getaway locations. How about a quaint six-bedroom, four-unit multifamily New England frame house in scenic Brattleboro, Vt.? In a visit to the Web site in early February, the property was heading for auction March 2 with a minimum bid of $41,589."
"Like all the government property disposition Web sites, there's virtually none of the typical real estate agent hype. No 'fabulous view' no 'huge backyards' no 'once-in-a-lifetime' opportunities."
"Looking for real estate opportunities in the Caribbean? How about a half-acre, $35,000 piece of land in 'good' condition in St. Croix, U.S. Virgin Islands? It's for sale from the Small Business Administration, which also offers a former 'restaurant/store/gas station turnaround opportunity near Fairbanks, Alaska, on two acres for $250,000.' The SBA's site hypes the property not at all. In fact, it admits that it's only in 'fair' condition and comes with a 'contaminated tank/cleanup needed.'"
2,000 Defaults Per Quarter In San Diego: Dataquick
The
Union Tribune reports on foreclosure expectations in San Diego. "San Diego County mortgage default notices rose more than 34 percent to 1,173 in the final quarter of 2005 compared to a year earlier, and are likely to double in the near future, according to DataQuick. Last year, only 212 homes were foreclosed on in the county – a fraction of the thousands lost annually in the mid-1990s. At that time, as many as 20 percent of defaults did lead to foreclosures, records show."
"In other areas, fourth quarter default notices rose by 43.1 percent in Riverside County; 34.2 percent in Orange County; and 10.7 percent in Los Angeles County. The San Francisco Bay area increase was 10.5 percent and Central Valley counties were up 26 percent. So far, default notifications and foreclosures have not occurred due to problems with risky loans that involved low down payments and interest-only payments."
"'Everybody thinks that will happen, but it hasn't happened yet,' Dataquick's John Karevoll said."
"But he said as the real estate market settles down to a more normal pace and prices do not rise enough to permit early refinancing, defaults and foreclosures will inevitably rise. He said default notices locally will likely number 2,000 per quarter this year or next."
More Colorado Towns See Defaults Jump
The Pueblo Chieftain reports
on defaults in that Colorado town. "Foreclosure rates remain high in Pueblo and the rest of Colorado. The Pueblo County Trustee's office reports completed 806 foreclosures last year, up from 663 the prior year and three to four times more than the 200 to 300 foreclosures a year of the late 1990s."
"Thus far this year the office reports getting 110 foreclosure filings."
"Pueblo County Public Trustee Peggy Foley, who has held her position since 1999, said more people appear to be buying houses too expensive for their budgets. She recalled seeing few deficiency bids when she first began in office. Deficiency bids are notices that lenders submit when people owe more on their foreclosed home than its appraised value. The bids give lenders the option of going after homeowners for personal judgments beyond their lost property."
"Foley said deficiency bids have become more prevalent in recent years when mortgage companies gave homeowners the option of refinancing their home for as much as 125 percent of its value. For example, a person might own a home appraised at $80,000 but refinance it for $100,000. If the house went into foreclosure, the lender could seek a deficiency bid of $20,000 from the homeowner through a legal process beyond the foreclosure proceedings."
"Another shift Foley noted: The public trustee's office now routinely handles many more Pueblo West home foreclosures. Foreclosure activity from the Colorado City-Rye area also has become more common."
"While there's no scientific way of knowing why foreclosures occur, Foley said her staff does hear stories from homeowners when they come into her office. The reasons most mentioned, she said, are divorce, death of a spouse, job loss or household income reduction, major illness, major car or home repairs, too much debt and/or poor money management and predatory lending."
"Financial experts say Pueblo is ripe for 'predatory lenders.' The companies offer to refinance mortgages, usually for people with credit problems, but in the end drain homeowners' equity with high fees and insurance premiums that often aren't necessary."
'Short Payoffs' Growing In Denver
The
Denver Post reports on the situation in that city. "The median price of an existing single-family home in Denver last month edged up 4.2 percent over January last year to $245,000 but was flat compared with December, continuing to signal a shift to a buyers' market. The median price for condos dipped 1.3 percent from January 2005 to $155,000, according to statistics released Thursday."
"(Broker) Dave Miley said he has noticed a number of home sales brochures advertising that contracts are subject to the acceptance of a 'short payoff' from the lender. That's a sale where a lender allows the property securing a mortgage to be sold for less than the existing loan balance, because of factors such as the borrower's financial circumstances, the property's physical condition and local real-estate market conditions."
"For example, if the mortgage on a $300,000 home is $290,000, the expense of selling it would surpass the home's value. 'The commission itself would be something like $15,000,' Miley said. 'Sometimes, the lenders will cooperate and accept less than their $290,000 balance. If they can do it for $285,000, it's easier than foreclosing.'"
"The flattening of prices indicates that the market is slowing, said Tucker Hart Adams, a regional economist with U.S. Bank in Denver. The market also indicates that consumers are stressed about debt and are curbing their use of credit, she said. And because housing prices aren't rising, there isn't more equity to tap into each month."
"'You can't spend more than you make forever,' Adams said. 'Consumers, whether they're buing a house, car, television or refrigerator, are going to be forced to be more careful.'"
New Homes 'Flood' Indiana Market
Some
reports from Indiana. "A standing-room-only crowd of approximately 250 people attended the 12th annual 'State of Real Estate.' 'It was a quite acceptable, although challenging 2005,' said F.C. Tucker owner/broker Lou Johnson. 'We saw more units sell and the average price experienced an increase. That's encouraging. And while our average home appreciation was conservative, we believe we'll be spared the housing bubble that other parts of the country are experiencing, and that's even more encouraging.'"
"Broker Denny Mitchell, who also serves as president of the Lafayette Regional Association of Realtors, said an increase in the number of vacated houses on the market, however, reflects more foreclosures than normal and recognition that appreciation rates are in many instances around 1 percent. 'It is apparent that many people are getting in over their heads and there is a less conservative attitude toward borrowing than there was 20 years ago,' Mitchell said."
And
Realty Times reports on Indianapolis. "New home construction has flooded the market making existing home sales challenging. Marion County listed 29,232 homes selling only 52%. This is a buyers market when there are more homes to sell than buyers to buy. That means sellers homes have to be properly prepared to sell from the first day on the market."
"If you are considering a move this year you will want to prepare your home properly so you are not among the average of 46% of homes that did not sell. Proper pricing, marketing and staging are necessary to put your home in position to sell."
"As of 1/31/06
you can see 7,613 Indianapolis homes for sale, 23,000+ central Indiana listings and the top 300+ forelosures priced from $100,000 to $1.5 million."
ARMs make Up 17% Of South Carolina Loans
The State has a report on
foreclosures in South Carolina. "Fewer Columbia-area residents lost their homes to foreclosure in 2005, but rising interest rates and higher living costs might increase pressure on homeowners this year, some industry watchers say. Thousands of homeowners with adjustable-rate mortgages could see their monthly payments increase because short-term interest rates have risen 3.5 percent over the past 18 months.'
"'That’s a perfect storm scenario for a homeowner about to be in trouble,' said Rick Sharga, vice president of marketing for RealtyTrac."
"In Richland County, 1,436 people lost a home to foreclosure in 2005, down 9 percent from 2004. In Lexington County, 673 homes were sold at foreclosure sales in 2005, down 4 percent from 2004."
"The Mortgage Bankers Association’s 2005 third-quarter report says about a fifth of the S.C. homeowners who got behind in their mortgage payments wound up in foreclosure. Statewide, 563,850 loans were serviced as of the third quarter, the latest data available, according to the association. About 5.7 percent of all loans were past due, but only 1.8 percent were actually in foreclosure."
"Still, those who work in and follow the mortgage business say the foreclosure rates might increase in 2006. 'I would imagine they’re going to rise,' said Mark Vitner, a Wachovia economist."
"This year, the warning of a possible increase in foreclosure rates comes as thousands of homeowners who bought into adjustable-rate mortgages reach the end of their low, introductory interest rates. The ARM loans have been around for years but increased in popularity when interest rates reached historic lows in 2004."
"During three quarters in 2005, 93,905 ARM loans were serviced in South Carolina, about 17 percent of all mortgages. Ralph C. Taylor, president of 1st Choice Mortgage in Columbia, said he has seen more customers who want to refinance their homes to get out of their ARM loans. 'Everybody that has an ARM is going to be in payment shock,' he said."
Foreclosure Scams A 'Cottage Industry'
State
lawmakers are waking up to the housing bubble. "Though they’ve whiffed on past attempts, an advocate for homeowners and the poor says majority Republicans this time are pushing for mortgage-industry oversight that would give Ohio consumers some real protection. A revised bill to be unveiled today is expected to place mortgage brokers and certain lenders under the Consumer Sales Practices Act, which would allow home buyers to sue the bad apples of the industry and give the state attorney general more power to go after them."
"The wide-ranging bill is expected to call for home appraisers to be licensed, and beef up anti-coercion measures to prevent lenders and brokers from influencing those who deter- mine a property’s value."
"Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio, said Senate Republicans finally have been persuaded that current law does not offer home buyers enough protection from misleading practices such as predatory lending. 'They tried those other approaches, listening largely to the industry. The reality is, it didn’t work,' Faith said, noting his group had far more input in the changes this time around. 'I think they realize that not enough was done.'"
"Colorado
Attorney General John Suthers is cracking down on real estate investors who prey on financially strapped Coloradans in danger of losing their homes through foreclosure. Suthers testified Monday on behalf of Senate Bill 71, a measure his office backs that would make it a crime to take a person's home through deceptive and fraudulent lending practices."
"'Over the last several years, foreclosure rescue scams have become a cottage industry,' Suthers said. 'With foreclosure at near-record levels..we're also seeing a record number of complaints of heavy handed and deceptive practices by individuals determined to take advantage of distressed homeowners and claim for themselves the hard-earned equity in their homes.'"
"But real estate investors and mortgage brokers argued that the bill will harm the real estate industry and could drive up the state's foreclosure rate."
"The push to crack down comes on the heels of several high-profile scams, one that led to the eviction of 100 families. Local attorney John Head testified he represented 20 homeowners who lost their homes in a scam. They quit-claim deeded their homes to an investor, who evicted them, sold the houses and stole the equity."
"'These foreclosure operations prey on people who are emotionally connected to their homes and have plenty of equity,' Head said. 'By the time they get to them, they're desperate to try to save their home.'"
"Four Mecklenburg County
legislators will sit on a special committee investigating foreclosures in North Carolina. The 19-member House committee is charged with determining how the state can reduce foreclosures."
"Its creation follows a three-day Observer series showing that rising numbers of foreclosures in Mecklenburg and around North Carolina are hurting homeowners and damaging neighborhoods."
One In Four Lousiana Mortgages 'Past Due'
Inman News has
the latest on the hurricane related foreclosures. "The latest 'Katrina Index,' a measure of economic conditions and reconstruction activity in storm-damaged Gulf Coast communities, notes that about 750,000 households remain displaced by Hurricane Katrina, and Louisiana has lost more than 100,000 people in its labor force."
"'The dramatic drop in the unemployment rate is almost entirely due to a decrease in the size of the labor force in New Orleans and Louisiana. In particular, the metro area lost 42,000 people in its labor force between November and December, while the state of Louisiana lost over 100,000 people,' the report notes."
"'Mortgage delinquency rates skyrocketed between the second and third quarter of the calendar year. In the state of Louisiana, for instance, nearly one out of every four loans is now 30 or more days past due,' according to the report."
"'The slow pace of recovery on fundamentals strongly suggests that the city and state will be unable to restore essential services on their own, and require direct federal assistance to do so. Meanwhile, the wellbeing of the nearly 750,000 households that remain displaced by Katrina is essentially not known. With New Orleans, Louisiana, and Mississippi still facing massive economic and infrastructural challenges, it is likely that many of these households will need federal assistance for many months to come,' the institute concludes."
Lenders 'Bending Over Backwards' On Defaults
Market Watch looks at
some reasons foreclosures are so low. "Many lenders these days are bending over backwards to keep borrowers in their homes. If you are eligible, that is, if there is any possibility that you can get back on track within a reasonable amount of time, they have several tools at their disposal to help people. What I'm talking about here is a relatively new cosmos in the lending arena called loss mitigation."
"If you have a legitimate reason for not being able to meet your obligation, they want to help. 'Where it is economically feasible, we do whatever we can to get 'nonperforming' loans re-performing,' says Bill Merrill, director of nonperforming loans at Freddie Mac, a secondary-market company which helps keep the mortgage money flowing from Wall Street to Main Street."
"Like most investors in mortgages, or conduits for investors, Freddie Mac works hard to keep borrowers in their homes. In fact, it demands it of the companies which collect monthly payments on its behalf, all in the name of what Merrill calls 'homeownership preservation.' 'We require, we measure and we incent,' says Merrill. And as a result, most companies which administer mortgages have what are variously known as workout departments or portfolio-retention sections."
"The size of these departments depend on the size of the servicer. Some have 'entire office buildings' devoted to the task; others just a few people. But no matter how big or small, the goal is the same: to keep those who want to remain in their homes in their homes."
"Your lender might even be able to help, even if you do not or cannot keep your home. For one thing, a qualified buyer could be allowed to take over your debt, even if the loan is considered nonassumable. For another, if you can sell but only for less than what you owe, the lender might agree to a 'short payoff' in which the company writes off the portion of your mortgage that exceeds the net proceeds from the sale."
"A third choice is to allow you to voluntarily transfer title of your home to the lender in exchange for canceling your entire debt."
"Here are some of the options lenders can make available to delinquent borrowers: Forbearance. An agreement that temporarily allows borrowers to pay less than a full payment, or no payment at all, for a set period. Forbearance is an option when you can show that funds from a bonus, tax refund or other source will let you bring the mortgage current at a specific time in the future."
"Reinstatement. Sometimes combined with forbearance, this allows the borrower to pay the total amount they are behind in one lump sum by a specific date."
"Repayment plan. An agreement that gives you a fixed amount of time, say six months, to repay what you owe by combining a portion of what is past due with your regular monthly payment. At the end of the repayment plan, you will have gradually paid back the amount that was delinquent."
"Loan modification. An agreement that permanently changes one or more terms of your original mortgage so your payment is more affordable. You and the lender may agree to add the missed payments to your loan balance, for example. You might turn an adjustable-rate loan into a fixed-rate mortgage. Or you could extend the number of years you have to repay."
Foreclosures Increase Across California
The
Inman News site has this report. "Foreclosure activity in California edged up in fourth-quarter 2005, according to DataQuick. Lending institutions sent 14,999 default notices to California homeowners from October to December, up 19 percent from 12,606 for the third quarter, and up 15.6 percent from 12,978 for fourth-quarter 2004."
"'Because of the rise in home values, much of that financial distress has been covered by the increasing amount of equity that people have had in their homes. That equity is now being created at a slower pace, and default activity is inevitably on the rise,' said Marshall Prentice."
"The median amount owed when the default notice was recorded was $6,862 in fourth-quarter 2005, up from $6,130 for the same period a year ago. All regions of the state saw an increase in foreclosure activity, ranging from 10.5 percent in the Bay Area to 19.6 percent in Southern California. In Southern California, the number of notices jumped from 1,123 to 1,607 (43.1 percent) in Riverside County; from 872 to 1,173 (34.5 percent) in San Diego; from 684 to 918 (34.2 percent) in Orange County."
"In Northern California, the number of notices increases from 636 to 849 (31.4 percent) in Sacramento County and from 73 to 106 (45.2 percent) in San Francisco. On a loan-by-loan basis, mortgages are least likely to go into default in Marin County. The likelihood is highest in the Central Valley and Inland Empire."
"'While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today's market is negligible,' DataQuick reported."
'Uncertainty' Hangs Over Coastal Mississippi
After the bizarre
speculative rush following the hurricanes, the gulf coast is getting back to reality. "For many property owners on the Mississippi Coast, these are desperate times. There are mortgages to pay; insurance issues are still unresolved; what building will be permitted and when is still up in the air. For some, selling seems the only alternative."
"It's not unusual to see signs along roadsides advertising companies offering to buy a house 'as is.' In some cases that could mean a slab."
"South Mississippi five months ago was slammed by Hurricane Katrina, and it threw the real estate market into uncertainty. Realtor Carlene Alfonso said that right after the hurricane there was the initial shock of seeing everything close to the water gone. 'Everybody's initial reaction was, I'm never going back again,' she said."
"Dan Triplett, president of Gulf Coast Home Buyers said they are doing more business now than before the hurricane, said 90 percent are people leaving the area. 'We started seeing that right after the storm,' said Triplett."
"Complicating today's real estate market is the uncertainty caused by the FEMA flood advisory maps. The maps increase recommended heights across the board. And although the governor's recovery office has recommended all cities and counties adopt the new maps, some have balked. Rebuilding is proceeding in some areas, on hold in others."
"That uncertainty hasn't stopped some investors from looking at opportunities to buy properties. 'We were deluged with investors that wanted to buy waterfront property cheap,' Alfonso said. Alfonso said many of those looking at property probably won't buy until there is more certainty about what will be permitted."
"'There are some deals to be made right now. Some people don't want to rebuild. And they don't want the headaches,' said (developer) Craig Brown of C.A. Brown of Gulfport. 'But it's not as valuable as it will be in the future.'"
"And he's not just talking as a professional. Brown, a custom home builder, lost everything down to the slab. 'I think the people that can hold on to their property probably should,' said Brown, who plans to wait it out. From an investor standpoint, buying at a lower price now makes sense. 'It's still close to the beach. It's always going to be valuable,' he said, and pointed to Florida as a great example."
'Taxpayers Guarantor For Risk': Senator
The political
tug-of-war over the hurricane disaster area is coming to a head. "The U.S. Senate Banking Committee's chairman on Wednesday said he does not want a Louisiana proposal for a federal agency to buy up hurricane-destroyed homes to become an unnecessary bailout for mortgage bankers. 'I think we should be very wise, or try to be wise, to making sure that this is a situation that would work,' said Shelby."
"'It would not just be a bailout for some mortgage bankers and banks that have a lot of capital and maybe could absorb some of those losses or foreclosures themselves,' he said. 'That's what capital's about.'"
"Shelby said his committee planned to hold a hearing on Feb. 15 on Louisiana Rep. Richard Baker's plan to create the Louisiana Recovery Corp. with sweeping powers to buy and redevelop tracts of land devastated by the hurricanes, helping property owners in Louisiana avoid defaults on home and business loans."
"'We have to look at what this money would be used for,' Shelby said. 'Despite our compassion for the people we want to help, would this aid and abet building in certain areas that are surely going to flood again?'"
"Shelby also said the federal government's cash-starved flood insurance program, slammed by billions of dollars in Hurricane Katrina claims, needed to be reformed and put onto a sound actuarial footing to better balance the premiums paid by homeowners and actual flood risks and claims."
"This would mean a redefinition of flood-prone coastal areas based on scientific research and data and difficult choices in terms of where to rebuild homes and businesses. Shelby said he did not want the program to continue subsidizing imprudent development in flood-prone areas, such as expensive coastal vacation homes."
"'We're using the taxpayer over and over as guarantor for risk that people should take themselves,' he said."
Bankrupt Subdivision 'Not Unique'
The
Dominion Homes saga continues to play out in Ohio. "Unhappy homeowners in a west Columbus neighborhood met face-to-face Tuesday night with representatives from Dominion Homes. People living in the Galloway Ridge development are questioning Dominion officials about dropping home values and more than 100 foreclosures and bankruptcies in the neighborhood."
"'Right now I'd have to sell this house at about $180,000 to compete within this neighborhood and the next neighborhood up, and I owe $197,000 on the house,' said homeowner Matt Romine."
"Neighbors blame Dominion for selling to people who couldn't afford to live there."
"'Our Galloway Ridge community is not unique,' said Tom Hart, vice president of Dominion Homes. 'There certainly is a challenge to the real estate market in several parts of our overall region.'"
