Real Estate Information Archive

The banks foreclosure holdings increased 12.5% in the first quarter of 2010 in a recent analysis by SNL Financial. In addition, properties in the foreclosure process but not yet taken back by the bank climbed 9.1 percent.

Properties, which are called assets by the bank, are increasing in numbers on the banks books. This shows that we are still a ways from climbing out of this type of housing market and all the government programs to curb foreclosures are failing.

Unfortunately, all government sponsored programs have very strict criteria to be eligible and are all voluntary by the banks to participate. This does not make for a winning combination to help main street America.

Moody's Investor Service has found that only 50% of temporary loan modifcations have been made permanent loan modifications. The report also showed that some permanent loan modifications had been cancelled.

According to Moody, the biggest factors in the low conversion rate is failure to provide documentation to the lender and negative equity in the home. The payments offered to homeowners are not motivating enough for most homeowners to remain in their home while it is severely upside down.

Most critics have called HAMP a failure. There is a high percentage of default on the permanent loan modifications within the first six months. With high unemployment, severe negative equity, and less to be desired loan modifications, most critics don't expect it to get any better. As a matter of fact, most think the loan modification craze is running its course now that the Administration has focused on short sales as an alternative to foreclosure.

On April 5th, 2010 the HAFA program was rolled out but is voluntary by banks to participate. HAFA is a streamlined short sale process. Due to restrictions and qualification standards most homeowners will find they don't qualify for this program either.

With all the turmoil of the European markets, investors are putting their money in U.S. Treasuries which is what the home loan market is tied to. We have been expecting an increase in mortgage rates as the government has indicated it will no longer articifically keep rates low to spur housing purchases. However, in recent weeks, the Euro is under attack and many investors are nervous about an all out collapse.

"The angst of investors around the globe about European debt, slower growth in China, and saber-rattling on the Korean Peninsula all feed into what is known as the ‘fear trade,’” Bankrate said in its report. “That fear trade has helped bring yields on U.S. Treasury securities considerably lower and mortgage shoppers have been direct beneficiaries.”

This could be a extraordinary time to purchase a home and get an interest rate of five percent or lower! Rule of thumb, each time interest rates rise or fall one percent, then payment adjusts one 19 percent! Interest rates are expected to reach six percent this year or by end of year. So jump in now or pay 19 percent higher payment when you do decide to buy.

Wow! I have read a lot of articles touting some great improvement in the housing market based on April 2010 trends. It is unfortunate because each time I read these articles it doesn't give the whole story. Yesterday, on the radio some economist was remarking that April 2010 was the first time in months that buyers who intended to live in the home outpaced investor sales. Why? What was April 2010? You won't get that tidbit in the lazy journalism read.

April 30th, 2010 was the deadline for the TAX CREDIT folks! To receive the tax credit you have to LIVE in the home. You had to have a signed and official purchase contract on a home by midnight on 4/30/2010 to receive the tax credit. Do you think this would contribute to an uptick in primary home buyers for the month of April?

Now, I don't want to be a Debbie Downer on the housing market. There are some remarkable positives going on. Loan rates are so low that most will be kicking themselves for not buying now when they see rates 6% and higher. Guess what folks, that will happen. Why? Because it has to.....that is another blog subject though.

Another positive? Prices are LOW!!!! Housing is so undervalued right now, it is not even funny. Most people can own a home cheaper than what they pay in rent. Who doesn't want that?

Did I mention the tax breaks associated with owning a home? No, I didn't...but there are some! Just talk to your accountant!

I don't have a problem with positive housing articles, I'm a Realtor. I want positive news on housing! However, I also want you to have a clear and true picture of what is happening in the market. Don't let one month be your guide. All growth needs to be sustainable and not have government intervention. Give us a few quarters of pending home sales and all the great housing news. That will be something to tell all your friends about!

In another sign that the housing market is instable, homeowners late on their mortgage or in foreclosure is on the rise. Unfortunately, until the economy improves, employment returns, and prices stabalize, the housing market will continue to be under stress.

Banks cite high unemployment as a major factor in their inability to modify mortgages. That makes sense, if you don't have the income, how can you pay a mortgage?

Please remember that most economist project on a national level. Real estate is regional and local. Unfortunately, this news is not good news for us. Nationally the real estate numbers are better than what regionally and locally our real estate numbers are. For example, Arizona leads with Nevada, California and Florida for most foreclosures and price declines. So when researching your real estate news make sure your facts and figures are local and not based off national projections.

Click here to read full article: http://www.reuters.com/article/idUSN1923337220100519?type=marketsNews

CNNMoney reports that in the first quarter of 2010 foreclosures spiked 7%. That is a 16% increase over last year at the same time. Why? Simply, government intervention. Government got involved last year, putting moratoriums on foreclosures, pressuring banks to modify loans (but not mandating it), implementing new programs every three months for banks to learn and train on, etc.

Despite kicking the can down the road, not much has changed. Very little homeowners have permanent loan modifications, 2nd lien holders and PMI companies continue to hold the short sale process hostage, and our recovery has been delayed with all the stall tactics mentioned above.

Is is bad that all these foreclosures are happening? Yes and no. Itis unfortunate that people are losing their homes, neighorhoods are being blighted, prices are declining. However the bright side is, once they are worked through then the market can really recover. We HAVE to work through the foreclosures. Shutting our eyes and pretending they are not there does not make it so.

Banking executives are skeptical on reducing anyone's mortgage principle. They testified to lawmakers that only in limited cases would they lower principle on a mortgage. They say it is unfair to those paying on time and could have future negative consequences on consumers, investors and market conditions

A few weeks ago Bank of America was reported to start reducing principle on mortgages. However, read a little further. They reported only on a small number of loans, sub-prime loans, and they have already targeted those homeowners.

Unfortunately, many Americans still feel like some fairy godmother is going to swoop in and rescue them from this mortgage nightmare. However, you need the facts, the real facts to make a good financial decision.

If you want a REAL understanding of what is going on and if help is on it's way to you, contact me and let's discuss your situation.

Government watchdogs have released a report criticizing Obama's loan modification plan. Getting a permanent loan modification is akin to winning the lottery. Only 168,708 have received a permanent loan modification while 7 million people are behind on their mortgage.

It is estimated that one million homeowners will be aided by the loan modification program, however, the program had estimated four million when implemented. It is falling way short of that goal. In addition, lots of loan modifcations are only for five years and critics complain that the program is just kicking the foreclosure can down the road for most homeowners.

For every one homeowner saved, using $50 billion in TARP funds, 10 homeowners have gone into foreclosure. Strict guidelines that most people do not meet and lack of lender motivation is blamed for the failure.

Beginning April 5, the Obama administration will encourage delinquent borrowers to avoid foreclosure and instead give up their homes in short sales by streamlining the process.

The program will offer a cash payment to the home owner, as well as to the servicer and second-lien holder; and protect borrowers from future lender lawsuits for the unpaid mortgage balance. To curtail fraud, lenders will have to consult real estate practitioners to assess home value and minimum acceptable offer; they then must accept any offer that is equal to or higher than that.

As with all government intervention certain criteria applies. Please call me to discuss if you are seeking alternatives to foreclosure.

Realtor Magazine reports that an estimated 4.5 million homeowners owe more than their home is worth. That number is expected to rise to 5.1 million in June, affecting 10 percent of homeowners and increasing the chances of them walking away.

Consultant at Oliver Wyman calculated that in 2008 17 percent of owners were defaulting. Some chose to default despite that they could afford the mortgage. This trend is increasing as homeowners realize it will take ten to twenty years, sometimes more to break even on their homes. For those close to retirement, they are thinking walking away is their best option.

First American estimates that it would take $745 billion, the same amount as the first stimulus pacakge, to restore all underwater homeowners to the break even point.

A big complaint about "bailing" out homeowners are from the homeowners who are current on their mortgage and are not likely to walk away. They feel this is unfair to them. However, according to Michael Barr, Assistant Treasury Secretary for financial institutions, doing nothing would be another blow to the already fragile economy.

Source: The New York Times, David Streitfeld (02/022010)