Wednesday, February 28, 2007

Interview With An Auctioneer

The Houston Chronicle interviews an auction veteran. "Ron Laird is not a fast talker and doesn't use a gavel much during his work. But he's auctioned off thousands of properties in Houston and across Texas since he got into the business nearly 25 years ago."

"Q: What types of properties are best suited for selling at auction? A: Properties that have high demand are going to get your best competitive bidding. Fully leased up, income-producing properties do extremely well at auction and will maximize the sales price."

"That's just the opposite of what brokers say. They say it has to be someplace way out in the middle of nowhere where there's no market at all. We've auctioned those properties. The more isolated they are, the more they need the auction method because we market on such a big basis."

"Properties that make sense in the traditional market of real estate make better sense at an auction. I've been trying to tell people that for years, but I don't think I've made many converts among the real estate brokers."

"Q: What types of preparations need to be done before an auction from both the buying and selling ends of a transaction? A: From a seller's end, properties sold at auction are sold on an 'as is, where is' basis.'

"There's no due diligence after you arrive at the sales price. We make full disclosure of all due diligence prior to the sale. Whether it be environmental reports, title reports, surveys, all that's provided to the buyer upfront in order to give that buyer a better comfort level bidding at auction because there's no contingencies."

"From a buyer's standpoint, he needs to thoroughly investigate all aspects of a property and review the due diligence that's provided. Maybe do some of his own. In an auction contract, there's only two blanks: the name of the buyer and the sales price. Therefore, we have a 100 percent closing ratio. We don't have deals fall through."

"Q: Can you identify any trends or changes you've seen in the business of property auctions? A: One of the things that is changing is handling more and more higher-end properties. Most of our residential properties are priced at $600,000 up to the millions of dollars. That's a new trend for Texas and for Houston. It's done all the time on the East Coast and West Coast."

"Q: How many people usually attend an auction? A: I've had 80 or 90 people show up for one property. I don't want 80 or 90 people."

"You send out 10,000 brochures. You advertise this property to a million people. What you're looking for is three or four bidders. You will arrive at market value, maybe more. It's not unusual to have 20 to 30 people show up. Shortly after the bidding starts, you're down to three or four serious people."

"We usually publish a minimum reserve price right in our brochure. That eliminated all the people who thought they were going to come out and buy a $1 million house for $50,000."

"In a real estate auction, you don't use that bid calling like those cow sellers. Everybody can understand where the bid is, what we're asking for, because the majority of people never have been to an auction. Am I going to scratch my nose and end up with a property? No, it's not going to happen."

Monday, February 26, 2007

"It's Easy To Walk Away"

The Dayton Daily News reports from Ohio. "More than 20 residential properties in the region are slated for the auction block in the coming weeks, as the nation's largest auction firm of foreclosed properties makes it's way to Dayton. Dallas-headquartered Hudson & Marshall's is planning an Ohio tour in early March, in which the company is slated to auction off 186 properties on behalf of several national lenders."

"The firm will be in Fairborn on March 6 to auction off local properties valued between $5,000 and $250,0000 located in Middletown, Dayton, Springboro and Fairborn."

"Benefits in the auction process exist for both prospective buyers and lenders, said Erica Brown of the National Auctioneers Association. Unlike trustee's and sheriff's sales, real estate auctions typically allow potential buyers to inspect properties beforehand."

"For the lenders, she added, the chances of landing a truer market value for the property is increased because of the competitive bidding process. Additionally, sellers can decline the final bid, if they choose."

"'With auctions, you also have a specific time and date in which the home is going to be sold, unlike the traditional selling of real estate where the home can be on the market for seven or eight months,' Brown said."

The Saginaw News from Michigan. "On Bewick, where the average state equalized value, SEV, of a home is $33,000, it's easy to assume anyone who can afford a house on Five Oaks can keep up with his or her mortgage. On Five Oaks, where the average SEV is $180,000, it's easy to assume a home on Bewick is a comparative cakewalk to pay off."

"Real estate listings tell a different story. Bewick and Five Oaks are small streets each with fewer than 35 homes. On both streets, three of those homes have gone into foreclosure, listings from RealtyTrac, indicate."

"The number of foreclosures in Saginaw County more than doubled last year, to 1,326 from 530 in 2005, RealtyTrac statistics indicate. Bewick and Five Oaks demonstrate that the high rate of foreclosures is a distinction not unique to the two contrasting residential neighborhoods."

"The consequences are more clear: blight, widespread displacement of families and a drag on a housing market that can't afford any more hits."

"Residents at risk of losing their homes for failing to pay property taxes crowded into the Saginaw County treasurer's office this month to try to negotiate a deadline extension. 'The room was completely full,' Treasurer Marvin Hare said."

"Carl E. Young still has his one-story on Bewick, barely. He rounded up payments on his 2004 taxes in the last few weeks, banking on a big income tax refund to cover part of a debt that quickly accumulates late fees."

"'By the time you get to pay it off, you're in trouble. If you owe $700, that's up to $1,000, and then every month it's another $20, $20, $20,' said Young. 'Then you're at $1,300. If you couldn't pay $700, how are you going to pay $1,300?'"

"Young's mother, Lonnie, wasn't so lucky. Her landlords lost the house where she lived next door to her son while she was in the hospital recovering from a stroke last month, Young said. When the family brought her home last week, they found a note from the bank giving her 10 days to move"

"The only good news was that she had plenty of empty houses to choose from, Young said. His sister found a 'miracle' rental on Nebraska with an option to buy, and the bank gave Lonnie Young a few extra weeks to move. 'Isn't that cool?' Young said. 'They were so nice.'"

"Young's worry now is the new liability next door. 'It's not gonna sell,' he said. He pointed to a home a few doors down, empty for the past two or three years. The original asking price of $42,000 was a laugh, he said. County property records show no house on Bewick selling for more than $28,000."

"'Any time a foreclosure exists within any given street, it's a negative influence on the remaining property owners,' said appraiser Ronald C. Reimers of Saginaw. 'The houses are normally already trashed. I have yet to see a foreclosure you could turn around and sell without doing more work on it. As that property remains vacant, generally it isn't maintained. The longer it sits, the more negative an impact it's going to have on surrounding houses and lower their value.'"

"The foreclosure spike likely comes out of a perfect storm of financial factors, said Rich Bernthal, mortgage loan originator with Citizens Bank in Saginaw. 'Some of these people went into these adjustable-type-rate loans that are now coming up for adjustment, and the adjusted rate is higher than original,' Bernthal said. 'The combination of two, if they have a job loss and an adjustable rate doubling their mortgage, that's just too much.'"

"The sudden increase might have to do with interest trends about five years ago that made adjustable-rate mortgages more attractive next to a standard, 30-year fixed-rate mortgage. 'Right now there's very little spread, but five to six years ago, there was a big spread,' Bernthal said."

"'It relates back to if a person doesn't have any bank account and is able to move into a house that has zero down payment, or where the seller will give the money to buy that house so it qualifies as a down payment,' Reimers said. 'If they have a problem, if they're suffering bad economic times, it's easy for them to walk away. If a person has no equity in a house, they can just get up and move to an area where they get a job and let the house go back to the bank.'"

Thursday, February 22, 2007

"Massive Backlog" In Denver

The Rocky Mountain News reports from Colorado. "Hundreds of foreclosures in Denver are on hold because of a massive backlog in the Clerk and Recorder's Office, putting lenders in a 'precarious position' and forcing the city to hire more help. On Wednesday, 661 foreclosure packets, which are supposed to be recorded within 10 days, were more than two weeks past due, according to an internal report obtained by the Rocky Mountain News."

"The problem is so bad that employees are working weekends to catch up and fielding urgent pleas from law firms handling foreclosures. 'I'm desperate!' starts off one e-mail to the clerk and recorder. 'I have a (Department of Housing and Urban Development) title package that has to be sent out tomorrow.'"

"Interim Clerk and Recorder Stephanie O'Malley said she inherited the problem when she was appointed to the post Jan. 9 by Mayor John Hickenlooper. 'The only thing I could do was say, 'I need to get more people in here to help move this process along,' and that is what I've done,' she said."

"O'Malley, who is running for the seat in May, said there are two factors contributing to the backlog. First, foreclosures in Denver have tripled since 2002."

"The other factor delaying Denver foreclosures points to former Clerk and Recorder Wayne Vaden, who resigned in the wake of the disastrous Nov. 7 election. While in office, Vaden approved the purchase of a $143,500 software program that requires employees to manually transfer data from about 2,500 older but active foreclosures into the new system."

"'My staff has been held captive in having to migrate data physically from that old system to the new system and be attentive to new packets,' O'Malley said. 'It is a lot of work.'"

"Rhonda Stewart, a deputy public trustee, said it used to take 10 minutes to process a foreclosure. With the new software, it now takes about 30 minutes, she said."

"Metro-area law firms that handle foreclosures and do business with the city either declined to comment or did not return calls. But in e-mails obtained by the Rocky, it is clear the backlog has put them under pressure. 'I know HUD could refuse title if we don't get it to them,' states another e-mail."

"HUD requires that all documentation, including the original or certified copy of a deed, be submitted within 45 days of the request for deed recording."

"O'Malley said the backlog 'doesn't bode well for the community.' 'When you just have these properties sitting there dormant, from a community standpoint, that's not a good thing,' she said."

"The delay also hurts business. 'If you have a piece of property out there that's (on hold), the lender is put in precarious position because now they're sitting on a piece of property of which they're not getting any revenues,' O'Malley said. 'There's no payment on the mortgage,' she said. And so their goal, of course, is to move the property so that they can get a return on their investment."

Wednesday, February 21, 2007

Credit Union In Danger Of Insolvency

The Ann Arbor News reports from Michigan. "A federal agency announced Monday it has assumed control of operations at Ann Arbor-based Huron River Area Credit Union. Regulators from the National Credit Union Administration), the independent federal agency that charters and supervises federal credit unions has taken over the credit union's management, placing it in conservatorship."

"'We found it's been operating in an unsafe and unsound manner and is in imminent danger of insolvency,' said Kathy Fagan, spokesperson for the Michigan Office of Financial and Insurance Services. 'This was something that came up suddenly.'"

"A credit union is typically placed into conservatorship when its loan or investment portfolios are judged by regulators as too risky, putting the institution's viability in danger, said David Adams, chief executive officer of a trade association that represents credit unions, including Huron River."

"'Most often regulators are identifying problems well in advance of it being a crisis and I suspect that's what's happened here,' said Adams."

"According to its Web site, the credit union serves people working primarily in engineering or scientific fields in southeast Michigan and has branches in Howell, Brighton, Center Line, Auburn Hills, Chelsea and Ann Arbor."

"Sreedhar Bharath, a professor of finance at University of Michigan's Ross School of Business, speculated the move may be due to the actual or anticipated future foreclosures due to the area's recent job losses. He also suggested the move may be an attempt keep customers, including other financial institutions, from panicking and withdrawing their money."

"'Home lending in Michigan in this climate is a risky bet. They may be being cautious and taking action even before bad things are happening,' he said. 'My guess is you might see more of this happening in the future. Foreclosure rates are up in Michigan.'"

Saturday, February 17, 2007

Defaults Grow In Northeast Denver

The Rocky Mountain News reports from Colorado. "Foreclosures in Denver since 2003 will log a fivefold increase by the end of the year, a trend that is tearing apart neighborhoods throughout the city. A new city-funded report that tracked the swelling number of foreclosed homes found that once a neighborhood has several foreclosures, it quickly multiplies."

"Vacant and abandoned houses drive down surrounding property values, hurting schools that depend on property taxes and can attract transients and criminals. Neighborhood complaints about yards overgrown with weeds and filled with trash correlate exactly with areas plagued by foreclosures."

"Nowhere is the impact of foreclosures more evident than in northeast Denver. 'I would say on some blocks, but not every block, in Montbello, 25 percent of the homes are in foreclosure,' said -Realtor Phil Heter, who specializes in selling foreclosed homes. 'The same thing happened to Montbello in the '80s, with all of the HUD foreclosures."

"Heter has about 120 distressed properties to sell, double what he had a year ago. On one block in northeast Denver's Montbello, he has three homes he is selling for a lender, and other brokers are listing a few more across the street."

"In 2006, a record 19,425 real estate foreclosures were filed in the seven-county Denver area. That's up from about 9,000 in 2003."

"Realtors Carolin Sandberg and Sarah Hayes are in the process of selling a house in Green Valley Ranch in a short-sale. For this type of sale, the property doesn't go through the entire foreclosure process, even though the borrower is behind on mortgage payments. Instead, the lender accepts less than the amount of the loan."

"The loan is for about $170,000, but Sandberg and Hayes are listing it for about $165,000. The bank is paying the closing costs, legal fees and commissions, and the move to an apartment for the family."

"City Councilman Rick Garcia, who is co-chairman of the Foreclosure Task Force, said questionable loans are to blame. 'It does appear that the growing number of foreclosures, in part, are being driven by folks who got involved perhaps in riskier mortgage products than they understood,' Garcia said."

Thursday, February 15, 2007

"What's Changed Is That There Are No Buyers"

The Westborough News reports from Massachusetts. "The dramatic rise in foreclosures across Massachusetts in 2006 did not spare Westborough. Driven by plunging housing prices, petitions to foreclose on town properties nearly tripled from 2005, according to a report. The report said mortgage lenders filed 30 foreclosure petitions on Westborough homebuyers in Massachusetts Land Court last year, compared with 11 in 2005. The total number of foreclosures in Worcester County increased 75 percent to 2,987."

"The numbers for the town and county mirrored record-breaking foreclosure figures across the state. Last week Boston-based real estate publisher The Warren Group reported a 70 percent increase in Massachusetts’s foreclosures in 2006. The report attributed the increase in large part to a 6 percent drop in the median price of a single family home."

"Tim Warren, CEO of the Warren Group, said the housing slump had a direct impact on why so many homeowners defaulted on their mortgages. 'The rapidly rising market we’ve had for the last 12 years or so covers up a lot of sins,' Warren said. 'When people lost their jobs or couldn’t make payments, they could refinance and take out the extra equity they needed. Now with prices dropping they can’t do that.'"

"The Warren Group report said although the median price of homes in Westborough rose slightly in 2006, the number of homes sold dropped to its lowest level since 1991. Median sale prices for single family homes in December 2006 were down 14 percent from December 2005."

"Warren said many homeowners’ problems have been compounded by the recent rise in interest rates. The monthly payments for some mortgages signed with low introductory 'teaser rates' are now going up. 'These numbers give a sense of a bad experience for a lot of homebuyers,' Warren said. 'Some people have gotten in too deeply and don’t have enough of a cushion.'"

"Jay Cox, owner of Commonwealth Mortgage Lending in Westborough, said in recent weeks some lenders in the area had stopped giving loans to borrowers with mediocre credit scores. They had also started reducing the number of interest only and no money down mortgages."

"Judith Pfeffer, vice president of Westborough Bank, said while her bank’s lending practices are largely unchanged, the number of people buying houses has dropped noticeably. 'What’s changed is that there are no buyers. It is extremely slow,' Pfeffer said. 'It started in the latter part of last year and has gotten worse in the last month.'"

Tuesday, February 13, 2007

Defaults Jump In Lowell, Mass.

Lowell Deeds reports from Massachusetts. "From February 1st to the 12th, a period of just eight business days, we recorded 13 foreclosure deeds. For the same eight day period in 2006, there were only 2 foreclosure deeds and the same was true for 2005."

"For 2007 to date, there have been a total of 31 foreclosure deeds recorded. Of those, 20 have been for properties in Lowell, 7 in Billerica and one each in Chelmsford and Dracut. This number is considerably higher than that seen in 2006 (12) and 2005 (5)."

"Here are the number of foreclosure deeds recorded between January 1 and February 12 of the years indicated: 1991 - 57; 1992 - 70; 1993 - 97; 1994 - 74; 1995 - 45; 1996 - 47; 1997 - 43; 1998 - 27; 1999 - 15."

"What can we tell from these stats? First, it’s not as bad now as it could be. But also that once it gets bad, it tends to stay that way for a group of years - 5 or more if the 1990s are any guide."

Monday, February 12, 2007

Bulk Sales Planned In New York

The Democrat & Chronicle reports form New York. "Roughly one-third of the tax foreclosure properties recently listed for sale at a city auction were in the 14621 neighborhood in northeast Rochester. So Joan Roby-Davison was concerned when the city this month proposed a bulk sale pilot program, allowing investors to buy more than the current limit of three city-owned properties at one time."

"Many of the foreclosed properties are among the 165 properties to be included in the pilot. And most if not all those properties are in the crescent, a 7.5-square-mile swath of impoverished and problem-plagued neighborhoods that wraps around downtown's perimeter from the northeast to the southwest."

"'We already have a concentration of these poverty and rental units,' said Roby-Davison, executive director of Group 14621 Community Association Inc. Only 5 percent of houses sold at auction end up as owner-occupied homes, and she said the pilot program appears unlikely to improve that figure."

"Mayor Robert Duffy pitched the bulk sale idea as a way to maintain if not increase the inventory of properties on the tax rolls."

"And the pilot program gives the city more control over the potential buyers. Unlike participants in normal auctions, potential buyers must pre-qualify to bid on properties, demonstrating the financial and organizational ability and know-how to take on multiple properties. Winning bidders cannot own any tax-delinquent property in the city or any property with code violations. They must put down a sizable deposit and complete any needed repairs within 12 months of closing."

"'One of the concerns we do have is being able to control the out-of-town interest in our properties, especially those the city is selling directly,' said Robert Barrows, director of housing and project development for the city."

"Last year, one in every five bidders at the city's tax foreclosure auction was from out of town. That ratio increased to one in four this year, officials said. City officials said properties owned by out-of-town landlords are more likely to have problems than those with local owners."

"Rochester has one of the nation's most unbalanced housing stocks; rentals comprise 60 percent of occupied units."

Friday, February 09, 2007

Defaults 15 - 20% Of Memphis' For-Sale Inventory

WREG Memphis reports from Tennessee. "Lenders' greed and borrowers' mistakes are breeding an epidemic of home foreclosures in Shelby County and Tennessee. Mortgage sources tell 3 On Your Side lenders promising loans under the prime interest rate with 100 percent financing and no money down are luring folks with bad credit or no credit into homes they cannot afford."

"They suck borrowers in, only to hit them six months later with adjustable rates that send their notes into orbit, with high pre-payment penalties that prevent the homebuyers from refinancing. The result is a Memphis housing market where 15 to 20 percent of the homes for sale are foreclosures."

"'(Lenders) should be underwriting those loans based on the worst-case scenario in terms of having that adjustable rate go up,' says Corky Neale, research and innovation specialist for the RISE Foundation, a non-profit that helps people in debt become credit-worthy and own their own homes. 'If the lender didn't consider their ability to repay as a part of underwriting that loan, then they get into really hot water when that interest rate bumps up.'"

"Memphis Daily News, the publisher of Shelby County's property records and the county's preeminent tracker of home foreclosures, conducted a study of foreclosure trends in 12 Shelby County zip codes over the last two years. It determined that Frayser's 38127 set a record pace for foreclosure notices: 962 in 2006."

"The Daily News says that zipcode also leads the county in bankruptcies. Cordova's 38016 holds the most startling trend: a 128 percent increase in foreclosure sales from '04 to '06."

"'The strength of hot markets like Cordova's is made possible, to some degree, by spreading the net wider to accommodate people who may not be 100 percent financially ready to own their own homes,' says David Yawn, associate publisher of Memphis Daily News."

"Broker/listing agent Walter Dunn markets foreclosures for 65 banks. He has seven foreclosures for sale in Cordova's Riverwood subdivision alone. He says one of the homes is 4,600-square feet. The couple who 'bought' it got in under a 'cash for keys' program, where they put just $750 down to get into the house. But they lost the house when they couldn't hold the note."

"'That's like putting up a deposit, and the notes are like renting, and the least little thing that happens, you're gone,' says Dunn. '(They) get in under these teaser rates, then all of a sudden, the note goes up $500-$600 a month.'"

"3 On Your Side talked to 11 'sub-prime' lenders who offer loans like these in Shelby County. Every one of them refused our requests for on-camera interviews. One of them, Fieldstone Mortgage, accepted our request, set an appointment, then stood us up when we arrived. Another lender, on the condition that she would not be identified, told us, 'Everyone's being greedy. Some lenders are not disclosing (terms and conditions of the loans) or counseling borrowers. If everyone had perfect credit (in Shelby County), we would have a lot of renters.'"

"Memphis lender Lisa Reid is the president of the Tennessee Mortgage Bankers Association. She says the state's predatory lending law requires lenders to disclose loan terms/conditions and to counsel borrowers on their credit-worthiness. They must put both in writing and make them available to the borrower."

"'It's unfortunate, though, sometimes if they don't take our advice, they go down the street, and someone will get them into a home one way or the other,' Reid says."

"'They'll look at that and go, 'You set them up to begin with. They had no way they could have made this payment,' she says. 'There's criminal liability, and there are civil penalties that go along with it.'"

Wednesday, February 07, 2007

Opportunities At Three Stages

The Press Enterprise reports from California. "Mortgage defaults reported to have doubled in a year in Riverside and San Bernardino counties are enticing bargain hunters to the foreclosure market. Professional investors say they are spotting more novices at foreclosure auctions, and real estate agents are fielding calls from clients demanding foreclosure properties."

"But they warn families who believe an upswing in defaults and foreclosures is synonymous with affordable housing that, so far, deals are not easy to find. 'It's not that you can't get a good deal. But you have to be very, very cautious,' said Jennifer Harrison, a professional bidder from Moreno Valley who works for an investment firm."

"Here's why: In a softening housing market, owners of homes in default often owe as much or more than the house is worth. That means once the home is sold and the loan repaid, there is little profit left for investors."

"And those with experience from previous housing downturns say foreclosures as yet are not voluminous enough to prompt lenders to give large discounts on foreclosed properties. But with foreclosures expected to continue increasing, they add that in six months to a year that could change."

"Kurt De Meire, owner of a foreclosure tracking service, outlines buyer opportunities at three stages: the nearly four months following a notice of default when owners can sell to avoid foreclosure, the foreclosure auction on the courthouse steps, and after the auction when lenders market homes that received no bids."

"In the months after a default notice is filed, particularly as the foreclosure auction approaches, homeowners in financial distress who have some equity may cut a deal to sell their home rather than lose both the house and their credit rating."

"'There are potential deals because you have a motivated seller with a time-frame problem,' said Bruce Norris, owner of a Riverside investment firm. If a property is overencumbered with debt, he said, an alternative is a 'short sale,' which means obtaining the agreement of the mortgage lender to accept a sales price that is less than what is owed."

"Rick Stallworth, a Moreno Valley investor, said many homeowners facing foreclosure are in denial. They won't discuss a sale when he knocks on their doors. 'I sent 100 letters to people in default and got no response. I offered to bring them current (on their mortgages), take over their payments and give them a couple thousand dollars for moving expenses,' Stallworth added."

"Lenders will permit a homeowner to sell a house for less than the mortgage only for hardship, such as a loss of a job or death in the family, said Lee Medlin, an agent in Corona. It generally takes time for a lender to agree to a below-market sales price, he said. 'But for people willing to go through the hassle, that is how you get a good deal,' Medlin added."

"Buying a house at a foreclosure auction is widely considered the most risky approach for an amateur wanting to buy a family home. 'Avoid trustee sales at all costs. That is a pros' game,' said Norris."

"Unlike those who buy a home from an occupant or lender, those who buy homes at auction have no right to inspection nor insurance to guarantee a clear title. Also they must come to the auction with a cashier's check for the total price."

"De Meire cautions that before bidding on a home at trustee auctions, it is vital to know which lender is foreclosing. If a second or third mortgage holder is auctioning a home at a starting price that seems a steal, that's because the buyer will still have to pay off the senior lenders."

"Norris said investment companies have teams of employees who check the titles for the properties they are interested in. 'You need to make no mistakes' at a trustee auction, he said."

"Right now, there are so few good deals at trustee auctions that many days only a handful of bidders show up. Greg Norris, Bruce Norris's son who has been making the rounds of auctions, said today a bidder is lucky to buy a house at 20 percent below market. By contrast, Bruce Norris said during the economic downturn of the late 1990s, 'I bought hundreds of properties from lenders at less than 50 percent of value.'"

"With the rate of defaults rising, Greg Norris predicted lenders will be overwhelmed with foreclosures and start discounting significantly in six months to a year."

"De Meire said for lack of bidders, more than half of foreclosed homes are returning to lenders after the auctions. He said the best time to negotiate with a lender for a discount is the day a house is rejected at the foreclosure auction, and before it is assigned to a broker."

"Medlin said it is a myth that bank-owned houses are always the cheapest. Sometimes people with troubles like divorce or a job change are more motivated to cut prices to sell quickly, he said. 'I get offers every day that are ridiculous because they think the banks will give away the farm and they won't,' said Mike Novak-Smith, a broker-agent in Moreno Valley who specializes in selling homes for banks."

"He said, however, that banks, unlike some private owners who are emotionally attached to their homes, will lower their price to follow a declining market."

Monday, February 05, 2007

North Carolina Defaults Up "Three-Fold"

The Kinston Free Press reports from North Carolina. "Ten years ago, Carolyn Craig, a real estate broker in Kinston showed no foreclosed homes to prospective buyers. Last year, she had 19 on her for-sale list. Her experience mirrors the trend in Lenoir County, where foreclosures jumped from 80 in 1997 to 270 last year. In Lenoir County, the need for housing after the flood of 1999, and the willingness of some lenders to take advantage of an emergency, put people into newer, bigger and more costly homes than the ones they replaced.

"'Certain lenders will pay off your credit cards to help you reduce your debt and increase your credit score in order to get you in a home,' Craig said. 'It wouldn't be so bad, but because the credit card isn't closed, it provides people with a false sense of money they have, and they are more likely than not to go out and spend it.'"

"Attorney George Jenkins agreed. 'I can't give you specific numbers, but yes, we did have significantly more lenders here, especially after Hurricane Floyd, that are no longer here,' Jenkins said. 'Some of these lenders were responsible for placing people in homes they couldn't afford.'"

"The chief mechanism for getting at-risk buyers into a home, however, is the sub-prime loan. It is also the easiest way for homeowners to get into trouble with lenders, experts say. They blame such lending practices for the dramatic jump in foreclosures, up three-fold in the state in the past eight years."

"Margaret Wood, mortgage lender at First South Bank in Kinston, said interest rates on these loans typically range about 2 percent higher than traditional loans, but can go higher."

"'I often tell people that they really need to use the two or three years they have before their interest rates increase to pay down their credit cards and get their finances under control, to use this short period of time they have as an opportunity,' she said."

Thursday, February 01, 2007

County Defaults Already Exceed 2006: Kentucky

The State Journal reports from Kentucky. "Local housing foreclosures after only one month are on track to exceed the number of properties sold in foreclosure last year, says Charles Jones, master commissioner of Franklin Circuit Court. 'Franklin County had about 90 foreclosure auctions last year, and already we could end up exceeding that by 25 percent,' Jones said."

"'Even though Ive not held the position more than four months, my prior knowledge leads me to think the numbers are certainly increasing,' Jones said."

"However, Jones said large out-of-state mortgage companies and not local lenders like Farmers Bank or First Federal file most of the foreclosure cases. A local bank executive, who asked not to be identified because of the sensitive nature of the information, agreed and said its because local banks have strict lending guidelines."

"'If you look at the legal notices in the Friday night papers you wont see Whitaker or First Federal or Farmers,' he told The State Journal. 'Most of it is Chase-Manhattan or Wells Fargo.'"

"The national mortgage brokers will charge up to $9,000 in closing fees, but offer a lower interest rate, the executive said. They also will lend up to 120 percent of the appraised value of the home, he said. But local banks will rarely lend more than 85 percent for a mortgage."

"'We like to see our customers put money into the deal because they have equity as soon as they close on the loan,' the executive said. The trend is the same across the nation, said Mike Fratantoni, senior economist for the Mortgage Bankers Association. The association conducts a quarterly survey that indicates the number of loans in foreclosure grew slightly across the country, from 0.98 percent to 1.05 percent."

"'The most significant increase was in sub-prime and adjustable-rate loans,' Fratantoni said."

"At the end of 2006, only about 2 percent of all fixed-rate prime loans were in foreclosure nationwide according to the report, but almost 10 percent of all sub-prime fixed-rate loans were in foreclosure. About 3 percent of all prime adjustable-rate loans were in foreclosure according to the Mortgage Bankers Association. More than 13 percent of sub-prime adjustable-rate loans were in foreclosure as well, according to the report."

"Kentucky also experienced a slight increase and is significantly above the national average with a foreclosure rate of 1.78 percent for all types of loans."

"Jones said foreclosures dont always end in an auction. He said the process is costly because there a lot of fees and commissions to pay along the way, and sometimes, the house sells for less than the appraised value. 'In many instances, the mortgage company will not be made whole on what is owed,' Jones said."

"If it does come to an auction, Jones said 90 percent of the properties are bought back by the lending agency. Occasionally, real-estate speculators or developers will buy a property, but Jones said it is a big risk because they cant inspect the home. Two citizens are required to appraise it, but neither Jones nor the buyers can actually visit or inspect the property."

"'They are buying it essentially on a windshield inspection of the property,' Jones said."