1,000,000 Foreclosures Ahead: NAR
USA Today
has some pointers on foreclosure purchases. "You're a would-be buyer who's been sitting stubbornly on the sidelines, having seen home prices soar to nonsensical levels, waiting for their inevitable fall back to Earth. Lately, you've seen prices slipping. And you've heard about foreclosed homes being thrown on the market at bargain prices."
"After all, there will be more than 1 million foreclosures over the next two years, according to the National Association of Realtors. A house in foreclosure might well offer a great deal."
"Michelle Mangione knows. She and her husband, Jeff Haag, are living in a home in Fallbrook, Calif., that she bought from the owner about three years ago, just before it went into foreclosure. Having paid about $680,000, she estimates she saved about $200,000."
"Still, her savings came at a price: a lot of needed work on the house. 'You have to be willing to live in a mess for a while,' Mangione said recently, as painters were working in the home."
"'There are some good buying opportunities,' says David Lereah, the NAR's chief economist. 'But don't repeat the mistakes of the foreclosed borrowers.'"
"With the market sinking for 'subprime' borrowers, buyers short on cash are finding it harder to get a mortgage. Before you try to buy a home in foreclosure, be sure you have a good credit score and enough cash for a sizable down payment. Prime borrowers, Lereah notes, should still be able to qualify for traditional fixed-rate loans with rates remaining near historic lows."
"If you do shop for a home in foreclosure, don't reel in the first one you see. In particular, don't get sucked into an auction right away. Auctions aren't the only way to buy a home in foreclosure, and they can sometimes be the most hazardous."
"Here are your main options: Auction. The typical one is a state process. It's generally held on the courthouse steps, in the clerk's office or in front of the foreclosed house. 'The auction probably represents the highest potential return but also the highest risk,' says Rick Sharga of RealtyTrac."
"That's because buyers typically can't inspect the home in advance of the auction and must pay on the spot in cash or with a cashier's check. It's also possible that the current homeowners will refuse to move out, and then you must deal with an eviction, says Alexis McGee of Foreclosures.com."
"REO (real estate owned). If a foreclosed home isn't sold at auction, if, for example, the highest offer is less than the homeowner owes the lender, the bank would repossess it. Though the bank will want to unload the home, it won't necessarily do so cheaply. So you aren't guaranteed a fabulous price."
"'The bank can take their time in responding to an offer,' says Jim McEachern, a buyer's agent in Las Vegas. 'It's just a piece of paper on a banker's desk.'"
"Still, you'll be able to arrange an inspection and title insurance. In that way, it's safer than an auction."
"Jenny Nelson recently bought a home in Stone Mountain, Ga., from the lender that seized it. She had time to research the home, which had been empty for about a year and was in rough shape. 'It's nerve-racking to think what could have happened to this house,' she says. Once Nelson hired an inspector, she learned that a broken pipe in the basement had caused mold to grow. Nelson, who had the problem repaired and cleaned up, plans to move in in June."
"Pre-foreclosure. Because an auction is risky and an REO is more costly and time-consuming, some experts recommend buying a home in pre-foreclosure. You can find a house in pre-foreclosure by studying the public notices about homes in default. The information is available from such Internet firms. You'll pay a fee, though, for their services."
"Plus, there will be little if any competition because the home usually isn't up for sale. It's a private deal. You offer a price that's less than market value but more than the amount owed on the bank loan. 'The thing that makes it difficult for people,' McGee notes, 'is the idea of soliciting somebody who hasn't put a for-sale sign up front.'"
More Records In Massachusetts
The
Boston Herald reports from Massachusetts. "Bay State home foreclosures have hit a record high for the second straight month. ForeclosuresMass.com reported today that 2,227 Massachusetts homes last month fell into foreclosure."
"Over the past 12 months, 21,644 Bay State homes have entered foreclosure, also an apparent record."
From
South Coast Today. "Foreclosures in Massachusetts sky-rocketed over the past year, with SouthCoast seeing some of the biggest increases in the state, according to a report released today."
"Dartmouth and New Bedford were among highest increases in the entire state, according to ForeclosuresMass.com. Bristol County experienced one of the largest increases, with a 92.33 percent increase."
"In communities with 50 or more foreclosure filings over the past 12 months, the biggest increases were Dartmouth, with a 244 percent increase (86 foreclosures in the past 12 months versus 25 in the previous 12 months), and New Bedford, with a 142 percent increase (476 versus 197)."
Money, Labor And Risk In Colorado
The
Gazette reports from Colorado. "The recent epidemic of residential foreclosures along the Front Range has, as usual, generated interest in investing in foreclosed properties. But, while there might be money to be made in this enterprise, there is also labor involved, and risk."
"As with any other purchase of real estate, you will need to know what the property is worth, what condition it is in, and what liens will still be present after your purchase. You will also need to know the details of foreclosure law and how the public trustee’s office, where foreclosures are conducted, does business."
"You will need to have liquid funds available to make your purchase; cover repairs and updates; and pay taxes, insurance, assessments and utilities while you’re trying to resell, or rent, the property. Although determining market value might not be hard in a tract house neighborhood, finding out the condition of a property in foreclosure can be problematic."
"Unless you’re dealing directly with the owner in pursuit of a bailout transaction, you may not have a chance to see the crayon artwork on the walls, experience the essence of cat that permeates the house, or investigate why water is dripping onto the kitchen floor from the upstairs bathroom."
"As for liens against the property, you can find out about delinquent taxes from the county treasurer, and a title insurance company can tell you what shows up as recorded documents, but there can still be surprises."
"For example, if work was recently done on the property, a mechanics lien could be filed after your purchase but with a priority that dates back to before your purchase."
"And then there is a multitude of purchase strategies to consider, each with advantages and disadvantages. You can, for example, buy the foreclosing lender’s position and complete the foreclosure yourself. You can make a deal with the owner being foreclosed on to buy the property. You can bid at the foreclosure sale itself."
"You can make the foreclosing lender an offer immediately after the foreclosure process ends, knowing that the lender is now stuck with a property it doesn’t want and needs to sell. You can buy the position of someone having a small junior lien on the property and exercise a redemption right at the end of the foreclosure process."
"If you still think there’s a wealthwithout-work opportunity here, start by reading carefully article 38 of title 38 of the Colorado Revised Statutes. (The law is changing July 1, so be sure you have an up-to-date copy.)"
"Next, sit in on a few public trustee sales. And, before you take your first plunge, have a title insurance company and a lawyer standing by to help you try to avoid unpleasant surprises."
The REO Realtors
The
Voice of San Diego reports from California. "For most families, the thought of losing their home due to missed mortgage payments is their worst nightmare. But in a wood-paneled office on University Avenue in La Mesa, one family rallies around the real estate F-word: foreclosure. Indeed, for Donna Sanfilippo and two of her sons, Eric and Robert Weichelt, foreclosures are the family business."
"The brothers' wives also work in the office, as does Sanfilippo's husband, their step-dad. Sanfilippo opened the office in 1992. Robert got into the business in 1986, and Eric followed in 1996. Even Robert's 11-year-old son told his grade-school class a few years ago he wants to grow up to be a 'loaner' -- a mortgage broker, like his dad."
"They work for lenders, selling the homes for which borrowers have fallen months behind on their mortgage payments. They become the local eyes and ears of faceless nationwide mortgage lenders, the hands that tuck a moving notice in the doorframe of the homes inhabited by embattled homeowners. They are the liaison between whoever lives in the foreclosed home, even an unsuspecting tenant, and the lender. And at a time when every month bears a higher number of county homeowners missing payments and moving into the foreclosure process, business in this part of the market is exploding."
"When a new listing comes in from the lender, the agents write it on whiteboards with blue and orange markers. By the time the office gets the listing, the bank has already posted a notice of trustee's sale on the homeowner's door, warning them the home will be auctioned. The REO Realtors drive to the property to see if anyone is still living there. They deliver a letter to the home, alerting the inhabitants of any money the lender may be willing to send their way to help them move. They set a deadline with the inhabitants, and when the house is cleared, they recommend repairs and give a price estimate to the lender. Then the agents list the home for sale and sell it on behalf of the lender."
"Robert Weichelt is old school when it comes to his business mindseto. Unlike some people who got into extremely specialized facets of the real estate industry when homes were sizzling a few years ago and are now losing their jobs, Weichelt claims he wears enough real estate hats to weather any direction the market can go. He considers himself a jack-of-all-trades in the business, having worked in title insurance, mortgage brokering, refinancing and lending, escrow and listings. And, of course, foreclosures."
"Weichelt and his family are reminiscent of Dog, the as-seen-on-TV bounty hunter in Hawaii. That television show has its share of car chases and fugitive rough-handling, and at the end of the day, it's about catching the wanted person. But Dog and his sons and his wife also pepper the show with bursts of compassion that humanize both criminal and bounty hunter. Weichelt shows similar bursts of kindness as he hunts houses instead of people."
"People aren't often too happy to see him, he explains. He loathes entering a house he's thought to be vacant, only to find someone sleeping inside."
"'It scares the daylight out of me,' he says. 'I feel like a cop without a gun.'"
"The REO Realtors often have to go with marshals to what's called a 'marshal lockout,' where the inhabitants of a house refuse to leave until they're forced out by armed officers."
"Weichelt explains it's their job to get as much money for the lender as they can. The last time the foreclosures business boomed was in the mid-1990s, after the last real estate bust. Then, banks had to unload the properties at '50 cents on the dollar, fire sale' prices, Weichelt explains. Now, at least while foreclosures are still at relatively low rates, the lenders are hoping to get top dollar for the properties."
"'The last thing [the lenders] want to do is be the downturn in the market,' Sanfilippo explained earlier. 'They're just like Mr. and Mrs. Smith -- they have an appraised value and they want to sell as close to that as they can.'"
"But they'll still sometimes offer relocation assistance in return for a quick move-out. In the business, that's called 'cash for keys,' and Weichelt considers offering that to pinched families one of the most important parts of his job."
"'At the end of the day, I'm there to get them out,' he says. 'Banks don't mess around. But if I can do it with a smile, at least I'm getting them options.'"
"After a pause, he continues: 'It's not all about the Benjamins, you know what I mean? I do whatever I can to be sympathetic. I'm not going to say, 'That's OK, take your time.' But I am going to say, 'Beat it' -- with a heart.'"
"Most of the people he's talking to these days are still victims of the typical reasons for foreclosure -- the 'life happens' kind, such as illness or job loss or divorce, he says. But a growing number are defaulting on loans they shouldn't ever have taken out, he says."
"Recent tumult in the mortgage market has shed light on lax lending standards embraced by brokers and banks during the boom that allowed hundreds of thousands of people to get into loans they would have previously been barred from. The number of homes in foreclosure activity was at a record low for years during the latest real estate boom, because homeowners in trouble could either sell their homes for a profit or refinance their roller-coaster mortgages for a more predictable, traditional payment. Now, though, declining home values mean more and more homeowners find themselves stuck between payments they can't make and slow sales conditions that make it difficult, if not impossible, to sell their homes before the bank repossesses them."
"Under the housing market's current conditions, foreclosures represent a niche that is growing nearly as quickly as home values ascended a few years ago. The number of San Diego County homes in some level of foreclosure activity reached 1,150 in January, according to RealtyTrac, a nationwide tracker of foreclosure data. That was up 20 percent from January 2006 and up more than 240 percent from the first month of 2005. Sanfilippo has increased her staff by one-third to handle the jump in business. Tuesday, they had seven new properties come in, more than double their daily usual, even these days."
"'It certainly is an uptick in foreclosures,' Sanfilippo says after two decades in the business. 'In 2003, 2004, there were very, very few in San Diego County, because of that quick appreciation.'"
"And some buyers who used mortgages to cover the entire cost of their homes near the end of the price-appreciation boom are now upside-down, owing more than their now-declining home is worth, with no equity cushion to protect against sudden illness, job loss, divorce, or the payments on adjustable-rate mortgages ramping up. The loans to consumers with poor credit, termed subprime mortgages, have proved especially troublesome in recent weeks."
Bidders Cautious In Michigan
Reuters
reports from Michigan. "With bidding stalled on some of the least desirable residences in Detroit's collapsing housing market, even the fast-talking auctioneer was feeling the stress. 'Folks, the ground underneath the house goes with it. You do know that, right?' he offered."
"After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: 'The lumber in the house is worth more than that!'"
"The rising cost of mortgage financing for Detroit borrowers with weak credit has added to the downdraft from a slumping local economy to send home values plunging faster than many investors anticipated a few months ago. At a weekend sale of about 300 Detroit-area houses by Texas-based auction firm Hudson & Marshall, the mood was marked more by fear than greed."
"'These people are investors and they know the difficulty of finding financing. They know the difficulty of finding good tenants. They're cautious,' said realtor Stanley Wegrzynowicz, who attended the auction."
"Steve Izairi, who re-financed his own house in suburban Dearborn and sold his restaurant to begin buying rental properties in Detroit two years, was concerned that houses he thought were bargains at $70,000 two years ago were now selling for just $35,000."
"At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less. A boarded-up bungalow on the city's west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000. 'You can't buy a used car for that,' said Izairi. 'It's a gamble, and you have to wonder how low it's going to get.'"
"In the most spirited bidding of the day, a sprawling, four-bedroom mansion from Detroit's boom days with an ornate stone entrance fetched just $135,000."
"Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince. 'I'm not sure it's congratulations,' said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. 'My wife is going to kill me.'"
"Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction. 'Once we've seen the last person leave Michigan, then I think we'll be able to say we've seen the bottom,' he said."
Firm Claims Defaults Are Understated
The
Central Valley Business Times has this press release from California. "Home foreclosures in the United States being reported by the media likely understate actual foreclosure sales activity, according to Foreclosure Radar. According to the company, February saw 4,171 foreclosures with a total loan value of $1.64 billion for distressed properties sold at auction in California."
"This dollar volume surpassed the prior record reached in the third quarter of 1996, and represents a 48 percent increase from December 2006, says the company which tracks actual foreclosure sales, not just initial listings."
"'The foreclosure sale numbers, sometimes referred to as REO's reported by similar listing services do not reflect current foreclosure sales activity. Instead, they are based on a document called a Trustee's Deed that gets recorded with the county weeks after the sale. With the rapid changes in the foreclosure market, the delay in waiting for these documents to be recorded has resulted in actual foreclosure sales to be under reported by more than 300 percent,' he says."
"'If you look at the data for Contra Costa County, for example, the number of foreclosures has increased by 865 percent in just one year and this is by no means the worst example in California,' says Mr. O’Toole."
"Such figures help explain the sudden surge in subprime lender failures, with nearly two dozen shuttered, Mr. O’Toole says."
A "Continuous Climb" For Dallas/Ft Worth
The
Dallas Morning News reports from Texas. "Homes posted for foreclosure auction in April rose 18 percent in the Dallas-Fort Worth area from the same month last year, the Foreclosure Listing Service said Thursday. That's up slightly from the 15 percent increase in the first three months of the year compared with the same period a year earlier."
"'We're not seeing the light at the end of the tunnel yet,' said George Roddy, who heads the Addison-based research firm. 'We have not seen year-on-year figures go down in the last few years. It's just a continuous climb from 2001 to this date.'"
"In the 10-county Dallas-Fort Worth area, 3,452 homes are posted for foreclosure auction in April."
"'There's really not a good reason for foreclosures to go down,' he said. 'The only reason they would is if lenders tighten up their lending practices, if they turn away people who don't have good credit.'"
"'We could be in for a little bit of a shakeout,' said Craig Jarrell, who oversees the Dallas-area operations of Pulaski Mortgage Co. 'I'm afraid that we've just begun to see the effects of all the negative factors: the subprime, the delinquencies, the rate adjustments on the ARMs.'"
"Home prices could fall in neighborhoods with lots of foreclosures, Mr. Jarrell said. 'There's going to be a little bit of pain,' he said. 'But we can handle it, and I think the economy is mudding through it.'"
"In North Texas, Collin County had the largest increase in foreclosure postings for April, up 40 percent from the same month a year ago, according to Foreclosure Listing Service. Over the same period, foreclosure postings rose 11 percent in Dallas County, 20 percent in Tarrant County, 20 percent in Denton County and 29 percent in Rockwall County."
"Total residential foreclosure postings since the start of 2007 numbered 14,307, up 15 percent from the comparable period a year ago."
"Texas has been one of the nation's top foreclosure markets in recent years. 'What it tells us is that we're in the midst of some sad economic times for a lot of people,' Mr. Roddy said."
"The Trend Is Accelerating": Massachusetts
The
Republican reports from Massachusetts. "Indicators of delinquent mortgage payments that could lead to foreclosure rose dramatically in Massachusetts in February, according to a report issued yesterday. The first step taken by a lender against a delinquent borrower, petitions to foreclose filed in state Land Court, rose 92.1 percent to 2,242 across the state compared to the number of petitions filed in February last year, according to The Warren Group."
"Advertisements for foreclosure auctions, the last step before a property is actually sold at auction, rose an alarming 199 percent to 1,005 statewide compared to the year before, according to the report."
"Terence F. Egan, editor at The Warren Group, said the 'trend is accelerating.' Month-over-month comparisons throughout 2006 and into 2007 have shown steady increases, he said. 'It's likely to get worse before it gets better,' he said."
"Petitions to foreclose in Hampshire County rose 177.8 percent, from 9 to 25; in Franklin County, petitions were up 122.2 percent, from 9 to 20; and in Hampden County, petitions were up 101 percent, from 99 to 199."
"Egan said 'what's really interesting' is that foreclosure petitions in the Pioneer Valley are tracking the increases across the state, but the increase in auction announcements is 'dramatically lower' than the rest of the state. That may be because housing prices are lower in Western Massachusetts and did not spike as high as eastern Massachusetts housing prices during the boom years."
"Also, he said, homeowners may find it easier to sell their homes than eastern Massachusetts homeowners, who have watched housing values slide. 'There's not a lot of wiggle room when you owe more on your home than you can sell it for,' Egan said."
From
News Center 5. "NewsCenter 5's Amalia Barreda reported that the numbers mean that in just about any neighborhood in any Massachusetts town, homeowners could be on the brink of losing their most important financial investment. Mortgage broker Don Larsen had to break the bad news to his client on Wednesday. New Century Mortgage, a wholesale lender, did not have the cash for a promised $417,000 loan."
"'They've always said everything was fine. Keep sending loans in, everything will fund. Unfortunately, this one didn't fund, and it makes me look bad and makes my borrower unhappy,' Larsen said."
"Foreclosure loomed for Barbara Gosselin and her husband recently. A risky zero percent down payment loan helped them become first time buyers of a property in New Hampshire. But tight finances got tighter when her husband had unexpected business problems."
"'The stress has been unbelievable. I've had days where I've cried. At work I've cried trying to do my job and just worrying about the stress of losing the home,' Gosselin said."
From
CNN Money. "Jemima and Ricardo Sanon saw the possibility of trouble before they ever signed their mortgage documents in 2004. The Sanons had diligently saved $5,000 in preparation to buy their first home, but the sum was just enough to cover the closing costs. So to finance the $290,000 purchase price of a Waltham, Mass home, they took one loan for $232,000 and also a piggyback loan for $58,000, both from New Century Financial, a subprime lender."
"'I worried about how we would make payments when they increased,' said Jemima. 'The mortgage broker [at New Century] told us we could refinance.'"
"Fast forward a couple of years, and the Sanons, like so many other subprime borrowers today, are struggling to keep their heads above water. As the housing market boomed, refinancing or selling your home was a simple solution for borrowers who had trouble making the mortgage payment. Now that the housing market has stalled, subprime borrowers are stuck with loans they really couldn't afford in the first place."
"Defaults and foreclosures are rising, and the industry is roiling as lenders face the consequences after years of handing out money irresponsibly. Says Bruce Marks, CEO of a non-profit that is trying to help the Sanons and other subprime borrowers refinance into sensible mortgages: 'Lenders knew these loans were structured to fail.'"
"For the Sanons, the initial monthly payment on the larger loan was some $1,300. Two years later, that payment jumped to over $1,800. As a result of the sticker shock, the couple fell behind on their credit cards and student loans."
"In November, Jemima had to leave her job for several months because of a difficult pregnancy, which put them even further behind on the bills. She recently returned to work. But not in time to stay current with the mortgage; in February, the Sanons paid late. Now the March payments are due, and the latest adjustment has pushed the sum on the larger loan to over $2,000."
"After the first adjustment, Ricardo called Litton Loan Servicing (the company currently servicing the mortgage) to try to work something out. 'They threatened us,' he says. 'They said, 'If you don't make your payment, we'll foreclose.'"
"Ricardo's working with Marks' organization to try to get into a loan that makes sense. In the meantime, he has been logging seven days a week at the drug store where he is employed as an assistant manager to keep up with the house payment. With their newly blemished credit record, the couple hasn't yet been able to refinance out."
"'We want to keep our house,' says Jemima. 'But we can't do it with the mortgage we have right now.'"
US Foreclosures Set Records
A
housing report from MarketWatch. "Many more U.S. homeowners were unable to keep up with their mortgage payments in the fourth quarter, the Mortgage Bankers Association said Tuesday, with the rate of homes entering the foreclosure process hitting a record 0.54% and the delinquency rate on U.S. home loans leaping to 4.95% from 4.67% three months earlier."
"The rise was led by subprime mortgages, where delinquencies increased to a seasonally adjusted 13.33% from 12.56%, and FHA loans, which saw a record-high delinquency rate of 13.46%."
"Delinquency rates for prime adjustable-rate mortgages rose to a seasonally adjusted 3.39% from 3.06%, while subprime ARMs increased to 14.44% from 13.22% over the quarter. The rate of delinquent prime fixed-rate loans rose to 2.27% from 2.10%, while subprime fixed-rate loans increased to 10.09% from 9.59%."
"The foreclosure inventory rate increased to a seasonally adjusted 0.5% from 0.44% for prime loans and to 4.53% from 3.86% for subprime loans. At 0.54%, the rate of homes entering the foreclosure process hasn't been this high since the second quarter of 2002, after the recession, said Doug Duncan, MBA's chief economist."
"'One of the impacts of (home-price) declines, of which some local markets clearly are registering declines today, is that it's an evaporation of equity or potential equity. And to the extent that a borrower gets in trouble in making their payments, it reduces their options for recovering from that,' Duncan said."
It Does Not Appear Things Have Hit Bottom
The
Capital Times reports from Wisconsin. "There were 69 property foreclosure filings in Dane County in January and 66 in February, the firm reported. The total of 135 is 17.3 percent more than in February last year and double 2005. Foreclosures totaled 752 in Dane County in 2006 and 477 in 2005."
"Statewide, foreclosures are up 27 percent this year, to 3,240 in January and February of this year from 2,549 in January and February of 2006. Sixty-three percent of state counties are seeing more foreclosure filings this year, 11 percent the same amount, and 26 percent fewer."
The
Ann Arbor News from Michigan. "In 2006, 1,944 homes were sold in the county compared with 2,707 the previous year, according to information from the Livingston County Association of Realtors. Listings are up 3.6 percent from the previous year, the average sales price has dropped by about 3.3 percent and sales volume is down by nearly one third from 2005."
"Michelle Brant, executive director of the Livingston County Association of Realtors, said the county faces many of the same pressures that other counties are seeing around the state. 'We're all in the same boat,' she said."
"The average sale price for Livingston County in 2006 was $242,043, compared with Oakland County's $226,879 and Wayne County's $126,904, according to Brant."
"Livingston County Register of Deeds Sally Reynolds personally handles foreclosures that arrive at her office. 'I'm definitely seeing an increase,' she said. 'It's been steadily growing each year, but 2006 is when it really jumped.'"
"Total foreclosures, which include mostly residential homes, have increased substantially since 2000 when there were 85 total for the year. In 2005 there were 280 and in 2006 the number jumped to 614."
"She speculates that the increase is due not only to a down economy, but that so many people have little home equity and thus no cushion when tough times hit. Tougher federal bankruptcy laws also have contributed, she said."
"It does not appear that things have hit bottom yet. January saw 72 foreclosures compared with 38 in the same month in 2006 and 22 in 2005. 'I'd like to say that we have (seen an improvement), but we haven't,' she added."
"But where some people are losing their properties, Reynolds added, another market is opening up for those looking to buy."
Music Stops In Massachusetts
The
Boston Herald reports from Massachusetts. "The number of foreclosures in Boston is escalating dramatically in the new year as scores of the high-interest-rate subprime mortgages go bust. As of the end of February, lenders had filed 301 notices to foreclose against homes and condos in Boston, reports Dorchester housing researcher John Anderson."
"That’s up from 86 during the same period last year, according to Anderson. If the current pace continues, Boston could wind up with 2,500 to 3,000 foreclosure filings by the end of the year, Anderson estimates. That’s compared to the 1,100 foreclosure filings in Boston last year, the worst in the 10 years he has been tracking these numbers."
The trend, though, is not a new one, with foreclosures in the city having begun to rise as far back as 2005, Anderson says. 'It’s overwhelming,' Anderson said. 'Everybody who is all of a sudden concerned; they are two years behind.'"
"The nation’s
subprime lending industry is now in full 'meltdown' and its woes are far from over, experts warned yesterday. 'It’s a total meltdown,' said Ernest Napier, an analyst with Standard & Poor’s. 'Everyone had anticipated that the music would stop (on these type of high-risk mortgages). Well, it has.'"
"'I think we’re just seeing the tip of the iceberg,' said Lee Forker, president of Boston’s New England Research and Management. 'This is serious stuff. . . . It’s not time to be putting your head in the sand.'"
"Gerard Cassidy, an analyst at RBC Capital Markets, agreed the situation is serious, especially since subprime lending accounted for about 22 percent, or more than $550 billion, of the entire $2.5 trillion mortgage industry in 2006."
Ohio Pros Offer Advice
The
Toledo Blade reports from Ohio. "With foreclosures soaring across northwest Ohio and southeast Michigan, Toledo real estate investor Matt Dewood has plenty of prospects, and not just ramshackle places in older areas of Toledo. 'There's a ton of opportunities out there,' said Mr. Dewood."
"He and other pros offer advice to prospective buyers on how to find and snag foreclosed homes, known as REOs, or real estate owned by the lender."
"But first, the experts dispelled a myth. Sheriff's auctions of foreclosed properties aren't the happy hunting grounds many would-be buyers believe. Odds are good that the successful bidder in the Toledo area will be the bank or other lender holding the mortgage on the property."
"To protect their interest, lenders typically submit opening bids for the loan balance. Home values didn't rise in this region as much as they did in some other areas of the nation during the long housing boom. So, unless the homeowner has built up significant equity, these properties seldom represent the kind of deals auction participants are seeking."
"Mortgage-holders get subsequent sales proceeds before other creditors. Although there are exceptions to this rule (such as abandoned properties sold for delinquent taxes), the greatest opportunity for prospective individual buyers begins after the lender has taken deed to the property and put it up for sale."
"Lucas County records show buyers are landing deals. A newer McMansion - four bedrooms, five baths, nearly 5,000 square feet - in the upscale Country Walk development in Sylvania Township was appraised at $575,000 for a sheriff's sale a year ago."
"It was acquired by the lender and was resold seven months later for $315,000, or $260,000 below the appraisal, according to the Lucas County auditor's office."
"A three-bedroom bungalow in Toledo's Point Place section was appraised at $86,000 for a foreclosure sale a year ago, bought by the bank, and resold in January to a couple for $38,000, county records show."
"A 1948 brick two-story near Toledo's Ottawa Park sold for $50,000 in a foreclosure sale. Lucas County lists the home's value for tax purposes at $114,200."
"One in 60 houses in the Toledo area was in foreclosure last year, ranking the city 30th worst among the nation's largest cities, said RealtyTrac Inc., of Irvine, Calif. In Lucas County alone in 2006, 2,573 properties were sold at involuntary auctions for $95.3 million, according to the sheriff's office."
"Fifth Third bank, like other lenders, tries to work with borrowers who miss house payments to prevent an involuntary sale. Homeowners unable to right their financial ships used to be able to turn the keys over to the bank and walk away. But now, policies at Fifth Third and most other lending institutions require the house be taken formally through foreclosure."
"In such situations, the lender files suit against the homeowner in state court, known in Ohio as Common Pleas court. If a judge rules in favor of the bank, the house is to be sold at a regularly scheduled auction overseen by the county sheriff's staff."
"Banks try to avoid foreclosures. In Lucas County, the process takes at least nine months and is costly, not only legal expenses before the sale, but also costs afterward including heating and lawn-mowing. Once Fifth Third takes possession of a house, it lists it with an outside agent. These lists typically are the most valuable sources for bargain-hunters, industry experts said."
"Fifth Third doesn't post a list of properties in branches or on the Internet. But it maintains a list internally and provides information to interested customers."
"National City Bank, which is a top mortgage lender in the region, delivers most deeds to Fannie Mae and other secondary lenders after successful foreclosures. Its mortgage unit operates a Web site, ncmcreo.com, listing remaining properties for sale."
"Each lending institution handles REO properties differently. Some sell houses on which mortgages are in default en masse at steep discounts to firms that specialize in the resale of these properties, experts said."
"A number of Internet sites, some of which charge a fee, provide listings of REO houses. The site reotrans.com listed 33 Toledo properties last week. Ocwen.com, operated by Ocwen Financial Corp., West Palm Beach, Fla., lists hundreds of homes recovered by the Veterans' Administration and other lenders."
"Unlike at sheriffs' auctions, however, prospective buyers don't bid against lenders. Sixteen northwest Ohio homes will be on the block at a sale scheduled for 7 p.m. Wednesday at the Holiday Inn French Quarter in Perrysburg. The properties are listed on the firm's Internet site, hudsonandmarshall.com."
"As a rule of thumb, agents who specialize in these properties say the longer an REO property is for sale, the better the potential deal for a buyer. 'Lenders aren't in the property ownership business; they're in the money business,' said Rod Culler. He is a specialist in foreclosed homes, and nearly all of the 80 to 100 homes he handles at any given time are REO properties."
"Unlike conventional sellers who can accept whatever their pocketbooks permit, banks must follow guidelines. Those guidelines loosen as the listing becomes 'seasoned,' Mr. Culler said."
"Because homes are sold 'as is,' he urges buyers to pay for professional inspections. Bank sellers are typically unwilling to lend to the new buyer, sales agents said."
"Agents who specialize in these properties warn prospective buyers that transactions sometimes get delayed because of a backlog of foreclosed homes awaiting final processing at the sheriff's office."
"Foreclosure specialist Linda Drews, of Loss Realty, Toledo, encourages prospective buyers not to get their hopes up too high. 'So many people have taken these classes that teach them they can buy for pennies on the dollar,' she said. 'From where I stand, that doesn't work. We'll have a home listed at $90,000 and someone will write an offer for $45,000. The seller isn't going to take it.'"
"She quickly added, however: 'There are deals to be had mainly because there are so many properties.'"
"Many REO homes are purchased by investors, noted agent Ray Doster, a foreclosure specialist at ReMax Preferred Associates, Toledo. Often, these are cash sales. Bank sellers usually adjust the price of a home every 30 days. On a property that hasn't sold after six months, 'somebody is probably looking at a pretty good price,' Mr. Doster said."
Memphis Sales Almost Equal To Defaults
The
Memphis Business Journal from Tennessee. "The old adage that if you give someone enough rope, he'll hang himself seems to be behind the high rate of foreclosures in the Memphis area, according to the results of an online survey."
"A recent story published in Memphis Business Journal found that there was one foreclosure for every 1.06 homes sold in 2006 in the Memphis MSA. Specifically, there were 19,738 homes sold in 2006, and there were 18,155 residential foreclosures last year."
"MBJ asked its online readers to pick a reason for the high rate of foreclosures. The survey, which provides an unscientific snapshot of reader opinion, received 202 votes. Most respondents, 59 percent, blamed the foreclosures on creative home financing that is aimed at marginal homebuyers, while 39 voters (19 percent) put the blame squarely on the shoulders of uneducated homebuyers."
"A smaller number of respondents, 8 percent, blamed unethical mortgage brokers. Another 5 percent of voters said the economy is to blame for the number of foreclosures. And 6 percent of voters said something else was to blame."
"Comments left by voters included the following: 'Creative financing is bad, but these people need to be able to 'live within their means.' Too often they are allowed to purchase more than they can afford.'"
"'Too many financially uneducated people have been caught up in these creative financing schemes then been talked into refinancing and taking out what meager equity they had built up.'"
"Too Much Credit" In Minnesota
The Winona
Daily News reports from Minnesota. "Last year, Winona County had 42 home foreclosures. The county is on track to have that many by spring this year. There have been 10 already this year with another 20 pending, putting the county on pace for a record increase, said County Recorder Bob Bambenek."
"The county is poised to see 'drastic changes,' Bambenek told the county Board of Commissioners in a real estate market update Tuesday night."
"The trend, largely a result of too much credit, isn’t unique to the area, or even the state, which saw a 46 percent increase in foreclosures between 2005 and 2006 and recorded 738 new ones in January, according to RealtyTrac."
"In Fillmore County, foreclosures jumped 33 percent over that same period. In Houston County, they doubled. 'It’s really scary,' said Houston County Recorder Beverly Bauer. 'A lot of people in the last few years have extended themselves very deeply.'"
"Bambenek said that of the foreclosures his office has handled this year, both completed and pending, several are associated with Internet lending companies. Some of those companies, which often deal in giving subprime loans to people with poor credit, have high interest rates and use overly complicated formulas to mask fees and other charges."
"Bauer also said she’s seen an increase in recent years of mortgages from outside lenders, which she said she’s 'leery about.' 'People have done online mortgages and all of a sudden had problems,' she said. 'They try to contact those people, huge corporations, and don’t get to talk to a real person. They come here and say, 'What can we do?' There isn’t much we can do besides giving them a copy of their foreclosure.'"
"Minnesota Attorney General Lori Swanson has suggested a series of bills to reform lending practices, some of which will be introduced in the Legislature in the coming weeks. Her agenda includes criminal penalties for those who consciously provide 'grossly unsuitable' loans, banning prepayment penalties, and requiring lenders to verify that borrowers can repay a loan."
