Apr
30
Foreclosure Filings in Record Jump
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Hope Now reports a 20% increase in initial foreclosure filings during March. But there was a steep drop in bank repossessions.
NEW YORK (CNNMoney.com) — Lenders continued to rewrite troubled mortgages at a fast clip during March, but the weakening economy still sent foreclosure starts soaring to a record high.
March mortgage workout results announced on Thursday by Hope Now – a coalition of mortgage lenders, servicers, investors and community groups put together to fight the foreclosure plague – were a decidedly mixed bag.
Approximately 134,000 mortgages were rewritten by Hope Now members, which is nearly 20,000 more than the average since September. Another 115,000 at-risk borrowers were granted repayment plans, for a total of nearly a quarter of million troubled mortgages addressed for the month.
Repayment plans merely postpone payments for delinquent borrowers without making them any more affordable. Mortgage modifications are changes in the terms of loans that reduce or freeze interest rates, extend the life of the loan, reduce loan balances or any combination of those three, to, ideally, lower the amount borrowers pay monthly. Modifications are considered more effective that repayment plans.
“The lending industry is steadily working out solutions for homeowners and keeping as many as possible in their homes,” said Faith Schwartz, director of Hope Now. “I expect that these numbers will continue to increase as servicers work with the Obama Administration to implement its Homeowner Affordability and Stability Plan.”
Steep Spike in Starts
Despite the efforts, however, more homeowners fell into default in March. Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February’s 243,000, and the highest monthly total since the coalition began tracking data in mid-2007. Starts have risen by more than a third since January.
On the other hand, completed foreclosure sales, transactions in which lenders have actually taken back homes from defaulting borrowers, dropped by 39% in March. Banks repossessed only 53,000 homes compared with 87,000 taken over during February.
Since the mortgage meltdown hit in July 2007, 1,447,866 homes have been lost to foreclosure.
Michael Bright, a chief statistician with Hope Now, attributed the sharp reduction in completed foreclosures to servicers suspending foreclosures as they geared up to implement the administration’s refinance and mortgage-modification program.
“It’s too early to say this is a trend,” he said in a press release. “But anecdotal reports from servicers do indicate that they are taking this extra step to help homeowners who qualify stay in their homes.”
Once the program is fully in place, servicers will have more tools to be able to make successful modifications to unaffordable mortgages. In the meantime, they’re allowing a kind of grace period for homeowners until the government program can be applied to individual cases.
“Our counselors have been getting hardly any answers for weeks,” said Mark Seifert, director of the East Side Organizing Project in Cleveland, which advocates mortgage workouts for hundreds of delinquent homeowners a month. “The servicers have been sitting on their hands.”
But the impact of the Homeowner Affordability and Stability Plan should begin to be felt soon, according to Schwartz, who thinks it going to change – and improve – the mortgage landscape.
“It’s one of the most comprehensive programs I’ve seen,” she said. “”Eleven major servicers have formally signed on, and we should start to see data from it over the next few months.”
Apr
23
Realtors say home resales fell 3% in March, but analysts point to signs of a stabilizing market.
NEW YORK (CNNMoney.com) — Sales of existing homes fell in March, according to an industry report released Thursday, but analysts say the housing market is showing signs of stabilization.
The National Association of Realtors said that existing home sales fell last month to a seasonally adjusted annual rate of 4.57 million units, 3% lower than the downwardly revised rate of 4.71 million in February.
March sales were down 7.1% year over year, and came in weaker than the 4.65 million rate forecast by analysts surveyed by Briefing.com.
Despite last month’s decline, existing home sales appear to be stabilizing, according to Ian Shepherdson, economist at High Frequency Economics.
“Sales are volatile month-to-month, but the trend appears to be flattening off,” Shepherdson said in a research note.
Single family home sales, which are considered the core of the market, fell at a 10% annualized rate in the first quarter of 2009, after a 17.4% drop in the last three months of 2008. At the current sales pace, existing-home sales will be down “only” 2% in the second quarter, according to Shepherdson.
First-time buyers made up 53% of existing home sales in March. Charles McMillan, NAR’s president, said first-time buyers are “crucial” to a recovery in the overall housing market.
“The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down,” McMillan said in a statement.
Meanwhile, sales of “distressed properties” accounted for over half of all transactions in March. Foreclosed homes typically sell for 20% less than traditional homes, according to NAR.
“Clearly foreclosure activity is driving the marketplace,” said Adam York, an economist at Wachovia Economics Group, in a research report. “Buyers are clearly looking for ‘bargains,’ if they are looking at all.”
Existing home sales in the West declined 4.2% in March. Sales in the South and the Northeast also fell, while sales in the Midwest were unchanged.
The national median existing-home price was $175,200 in March, up 4.2% from $168,200 in February. Still, the median existing-home price was down more than 12% since March 2008, when it was $200,100.
The total number of existing homes on the market at the end of March fell 1.6% to 3.74 million units. At the current sales pace, it would take an estimated 9.8 months to sell that inventory of properties. That’s up slightly from 9.7 months in February and January.
“The inventory overhang has stabilized too,” Shepherdson said. But the number of existing homes on the market remains historically high, and prices will continue to fall rapidly “for the foreseeable future,” he said.
Apr
23
The Memphis market ranked No. 43 in foreclosure rate among U.S. metro areas with a population of more than 200,000, according to a first quarter report by RealtyTrac Inc.
The area, which includes parts of Mississippi and Arkansas, had 0.85 percent of its housing inventory receive a foreclosure filing — including default notices, auction sale notices and bank repossessions — during the quarter.
In the Memphis metro area, there were 4,638 filings for the first quarter, or one per 118 households.
This was a 14.1 percent increase compared to fourth quarter 2008, but a 6 percent decrease compared to first quarter 2008, when the city’s metro area ranked No. 20 in U.S. metro foreclosure rate.
Las Vegas led the nation with 4.4 percent of its housing inventory receiving a foreclosure filing. Burlington, Vt., ranked last, No. 203, with 0.01 percent of its housing receiving filings.
The national average was 0.63 percent.
Apr
22
Las Vegas Tops Foreclosure List
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26 of the cities hardest hit are concentrated in Nevada, California, Florida and Arizona, according to a report from RealtyTrac.
NEW YORK (CNNMoney.com) — The 26 cities with the highest foreclosure rate in the nation are all located in four hard-hit states, with Las Vegas topping the list, according to a report released Wednesday.
Metro areas in California, Florida, Nevada and Arizona topped the foreclosure filing list for the first quarter of 2009 in a report from RealtyTrac, an online marketer of foreclosed properties. A foreclosure filing includes default papers, auction sale notices and repossessions.
Las Vegas had the highest rate of foreclosures of any city, with one in every 22 homes subject to a foreclosure filing in the first three months of the year. The rate of foreclosure filings was 4.5%, seven times the national average.
Merced, Calif., had the second highest rate, with Cape Coral-Fort Myers, Fla., Stockton, Calif., and Riverside-San Bernardino-Ontario, Calif., rounding out the top five.
“The metro areas with the highest levels of foreclosure activity in the first quarter of 2009 paint a picture of concentrated problems in a relatively small number of hard-hit areas,” said James J. Saccacio, chief executive officer of RealtyTrac, in a written statement.
Foreclosure rates have been very high in the 4 key states throughout the bursting of the housing bubble, and so it was to be expected that cities from those states would pepper the top of the list.
However, it was a surprise to see the list so top heavy, according to Rick Sharga, senior vice president at RealtyTrac.
“The concentration of troubled metro areas within the hardest-hit states, candidly, was even more severe than we expected it to be,” Sharga said. “The degree to which those four states dominated the rankings surprised even us.”
New problem cities: Meanwhile, some metropolitan areas had a surge in foreclosures. Boise City-Nampa, Idaho, in 27th place, Provo-Orem, Utah, in 37th, and Charleston-North Charleston, S.C., in 51st were examples Sharga gave of areas that had particular strong gains in filings.
Sharga said the rise of foreclosures in additional regions indicates new factors influencing the housing market as the recession drags on.
“What we believe we are seeing is some of the areas with unemployment problems,” said Sharga. “These are people living paycheck to paycheck and, when the paycheck is gone, suddenly they can’t afford to make their mortgage payments.”
The data for RealtyTrak’s metro area foreclosure report is collected from 2,200 counties across the nation, and those counties represent more than 90% of the U.S. population. Some 203 areas are covered by the report.
Across the nation, foreclosure activity in the first quarter hit a record high, according to another RealtyTrac report issued last week. Total foreclosure filings reached 803,489 in the first three months of the year, the highest monthly and quarterly totals since RealtyTrac began reporting in January 2005.
The national report also found that the worst of the foreclosures were centralized in a handful of worst-hit states. California, Florida, Arizona, Nevada and Illinois accounted for nearly 60% of the total foreclosure activity in the first quarter, with 479,516 properties received foreclosure filings in those states.
Apr
13
Report indicates unemployment is a major driver of missed mortgage payments, and raises concerns that Presidential plan to modify loans may miss the mark.
NEW YORK (Reuters) — Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Obama’s plan to stem foreclosures by modifying loans.
Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.
Loan modifications are not necessarily a better deal for investors either, wrote Boston Fed economists Christopher Foote and Paul Willen, Atlanta Fed economist Kristopher Gerardi and Lorenz Goette, a professor at the University of Geneva.
Their research found that policies that directly help homeowners overcome setbacks such as losing their jobs may be more effective in combating foreclosures.
“Foreclosure-prevention policy should focus on the most important source of defaults,” the economists wrote in a study released on the Boston Fed’s Web site late last week.
The findings challenge the thinking behind a White House plan announced in February that would give up to 9 million families the chance to refinance their mortgages. President Obama’s administration has made loan modifications a central plank of its efforts to tackle the housing crisis.
“One of the most influential strands of thought contends that the crisis can be attenuated by changing the terms of ‘unaffordable’ mortgages,” the economists wrote. But policies that focus on loan modification “face important hurdles in addressing the current foreclosure crisis,” they wrote.
The economists suggest that the government could instead replace part of an individual homeowner’s lost income from a job loss through loans and grants and help those whose predicament is more permanent become renters.
In addition, investors do not necessarily stand to gain if foreclosure is avoided, they said, and that could help explain the relatively small number of loan modifications to date. Estimates that total gains for investors from modifying rather than foreclosing can run to $180 billion may not take into account a number of key factors.
Investors can lose money when they modify mortgages for borrowers who would have repaid anyway. Borrowers with modified loans may default again later, especially if the reason they were driven to default remains, the economists said.
Apr
8
Govt. May Spend More than $4 Trillion but Economy Faces ‘Prolonged Weakness,’ Oversight Panel Reports
Though some economic measures are improving, the financial crisis “is far from over” and “appears to be taking root in the larger economy.”
This, despite the government’s commitment to spend trillions of taxpayer dollars on a massive bailout of the financial system.
These were the findings released in a report today by the Congressional Oversight Panel, the body charged with overseeing the government’s Troubled Asset Relief Program, the $700 billion plan aimed at bailing out the country’s financial sector.
“We still have a long way to go. A very long way,” Elizabeth Warren, the Harvard Law School professor who chairs the panel, said in an interview today with Bloomberg News.
The panel reported that the government has spent, lent or set aside more than $4 trillion through the Troubled Asset Relief Program, the Federal Reserve and the Federal Deposit Insurance Corporation.
Today, the “credit markets no longer face an acute systemic crisis in confidence that threatens the functioning of the economy,” the report said.
But, it said, the economy now faces an “apparently prolonged period of weakness” with regard to financial firms and lending.
It noted, for instance, that Citigroup and Bank of America received multiple injections of capital from the government while borrowing costs remain high for businesses and individuals. The panel also cited increasing numbers of home foreclosures and lower home prices as reasons for concern.
The panel criticized the Treasury Department for failing to identify what measurements it will use to determine whether its rescue programs are working.
“If you don’t articulate what the metrics are going out … you can’t know if anything succeeded or failed,” Warren said.
Not Enough Spending Transparency?
Warren also criticized the Treasury for its lack of openness on its rescue efforts as it first began the TARP program last year.
“As Treasury started this program,” she said, “they really had the notion that they would spend the money the way they wanted, and not only were they not going to tell the public, I don’t think they were going to tell the Congressional Oversight Panel.”
The Treasury Department recently unveiled a Web site dedicated to detailing the government’s financial stability efforts. On the site, the department promises that the government’s financial stability plan “will institute a new era of accountability, transparency and conditions on the financial institutions receiving funds.”
Apr
7
NEW YORK (Reuters) – More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.
Dann Adams, president of U.S. Information Systems for Equifax Inc, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.
He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year.
“I’m trying to find optimism in these numbers, but I’m pretty hard pressed to do that,” Adams said, despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner.
Late last month the Commerce Department reported that sales of newly built U.S. single-family homes rose to a 337,000 annual pace in February, the highest in 10 months.
Such news has boosted homebuilder shares, which are up about 45 percent since March 6, according to the Dow Jones U.S. Home Construction Index.
But Adams said the continued increase in mortgage delinquencies revealed in his data foreshadows more foreclosures, short sales and home price declines as homeowners default and banks then repossess the homes to sell them at deep discounts.
LIFELINE OF CREDIT
The Equifax data also reveals the impact of the rise in unemployment, which is at its highest rate since 1983. Employers cut 663,000 jobs in March, sending the national unemployment rate to 8.5 percent, the Labor Department said on Friday.
The rising jobless rate manifests itself in consumers’ increasing reliance on credit cards even as lenders try to restrict access to credit, Adams said.
Banks closed 8 million credit card accounts in February, reducing the number of open cards to 400 million from a July 2008 peak of 483 million, according to Equifax data.
Credit limits fell as well, to $3.27 trillion in February from a July 2008 peak of $3.59 trillion.
“Limits are falling because lenders are trying to minimize their losses,” Adams said.
The data shows that lenders have good reason to be wary. Bank card delinquency is at its highest level in the past five years. Some 4.5 percent of total balances on bank-issued credit cards were at 60 days past due in February, a 32.7 percent increase from a year earlier.
“Their credit card is their lifeline,” he said. (Additional reporting by Lucia Mutikani; Editing by Steve Orlofsky)
Apr
1
When Home Prices Hit Bottom
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The end may be in sight – and getting a better sense of when it’s coming can help you make the smartest buying and selling decisions.
(Money Magazine) — Call it the Great Housing Paralysis of 2009. If you’re hoping to buy your first home or invest in a second one, you’re probably sidelined, unsure when to jump in. If you want to sell, you’re thinking it may be better to wait. And even if you don’t plan to either buy or sell anytime soon, watching one of your biggest assets tank is about as much fun as being chased by hornets. When will the pain stop?
Nationwide, home prices will bottom out at the end of this year, according to the forecasters at Moody’s Economy.com. Median prices will probably fall another 10% on top of the 27% they’ve plummeted since their 2006 peak. That prediction assumes that President Obama’s various recovery efforts – including billions to slow foreclosures and goose bank lending, plus a tax credit to most 2009 buyers who haven’t owned in the past three years – will have some effect. If they don’t, says Economy.com’s Mark Zandi, the bottom could come as late as 2011.
And then? “The recovery will look more like a U than a V,” predicts Mike Larson, a real estate analyst at Weiss Research. Translation: After home prices hit their lows, they’ll probably stay there for a few years as the economy slowly struggles back to its feet. Prices aren’t expected to reach their 2006 levels again for another decade.
Before you reach for the Xanax, think about a few things. First, the nation was in a housing bubble, remember? What’s happening now is both inevitable and necessary. Second, if you haven’t yet bought your first home, you should be happier than Kate Winslet on Oscar night. Third – and most important – the outlook varies dramatically depending on where you live. If you’re in Memphis or Greenville, S.C., for example, the bleeding is almost over. Find projections for when the nation’s 100 largest metro areas will hit bottom – and how prices are likely to change in the next 12 months in our Real Estate 2009 list.
As you’ve heard countless times, you should think of your home primarily as a place to live, not as an investment. And it’s nearly impossible to time the bottom perfectly. That said, getting a sense of the price trends in your area can give you the confidence to make decisions that can save you a whole lot of money. For the latest advice on buying, investing, and selling – no matter where you live – read on.
Buyers
Factor in future drops. Buying in one of the areas that is expected to keep falling significantly for another year or more is – how shall we put it? – probably not the greatest idea. If you don’t currently own a home, keep renting until your market is closer to its trough (you can find that information on the Real Estate 2009 list).
But if you really want to buy now – for example, you’re moving to a city where the available rental housing isn’t appropriate for your family – aim to negotiate a deal that factors in this year’s expected price drop. For example, if your market is forecast to fall 10%, bid at least 10% less than the home’s current value. If the seller refuses, find another house (there are plenty).
Even if you can’t score a deal like that, you can console yourself that you’ll have a decent shot at making up future price declines (and the thousands you spent in closing costs) as long as you stay put for at least five to seven years.
Consider foreclosures and short sales. If getting a great deal is your main goal, look for foreclosures, which typically sell for at least 20% to 30% less than market value, according to foreclosure-listing website RealtyTrac. Because these homes are sometimes abandoned and stripped, get a contractor to make a free estimate of the time and cost of repairs, and make sure they won’t wipe out the amount you’d save.
Another economical option: short sales, in which bankers allow homeowners to sell for less than they owe. They can save you 10% or more. The seller typically still lives in the home, so it’s usually in decent shape. One big drawback: The process can take up to six months and can fall apart at the last minute. “If foreclosure is 30 to 40 days away, it’s very unlikely that the short sale will happen first,” says Glenn Kelman, CEO of Redfin, an online real estate broker. For more see “Snag a Great Deal on a Short Sale.”
Be smart about mortgages. Today’s rates – averaging 5.2% for a 30-year fixed loan – are steals. They’ll probably hover in the 4.75% to 5.5% range all year, says Larson, so there’s no need to rush to lock in. (Jumbo loans – those larger than $417,000, or up to $729,750 in certain high-cost areas – average 6.8% and are unlikely to close in on traditional rates this year.) However, because some lenders are requiring more information today, it’s taking longer (about 45 to 60 days) for banks to approve loans. To land the best rates with no extra costs, you’ll usually need at least 20% down and a credit score of 720 or better. And to qualify for any mortgage, your monthly payments toward debt should eat up no more than 43% of your pretax income; your monthly mortgage, insurance, and taxes should total 31% or less.
Investors
Think tortoise, not hare. Because prices have further to fall in most areas, forget about flipping. You’re better off investing in, say, a vacation home, a future retirement home, or a rental property that you’re planning to hold for a minimum of five to seven years. Otherwise you run a significant risk of losing money from future price declines, plus closing costs.
Focus on location, location, location. If you plan to rent out your purchase at some point, look beyond the deal. “Many investors are simply looking for where prices have fallen the most, but they also need to look for areas where the economy is still strong and people can find jobs,” says Amy Bohutinsky, a vice president at Zillow.com. Many cities with large price drops have high unemployment. Look for areas close to public transportation, a university, or shops and nightlife. “Those neighborhoods will appeal to people in their twenties and thirties who have been waiting and renting,” says Bohutinsky.
Get pre-approved. Many lenders still want nothing to do with investors, so you’ll face tougher loan requirements than you would have a few years ago. Banks may also limit you to perhaps four outstanding mortgages if you don’t have tons of cash on hand. Before you start scouting neighborhoods, get pre-approved for a loan so that you’re sure you will qualify.
Sellers
Stop deluding yourself. Ignore list prices and base your asking price on what similar homes in your area have actually sold for in the past three months. “Even six months ago the market was totally different,” says Ellen Klein, a realtor in Rockaway, N.J.
No nibbles after 30 days? Drop the price. An even better strategy, says Klein: Right out of the gate, price your home at 10% below what comparable ones have gone for. That may attract more than one bidder, pushing up the final price. If your area is on Real Estate 2009 list and is forecast to fall by double digits in the next 12 months, do whatever it takes to unload now. The longer you hold on, the more the value will erode. The alternative: Stay put.
Spiff up the joint. If your area has lots of foreclosures, it’ll be hard to compete on price. But it won’t be hard to compete on condition. So make repairs now, then heavily market the fact that your house is move-in ready. Throw in a bigger commission to buyer agents so that they’ll show it more often. Also advertise that you have a flexible closing date – even if it means you must rent until your next home is ready. That way buyers who must move in 30 days will know yours is an option.
Get creative. If you absolutely must move out soon and your home isn’t selling, consider offering a rent-to-own option, sugests Eric Mangan of ForSaleByOwner.com. A potential buyer pays you a monthly sum to live there. After a set number of months – say, six to 18 – he either has the option to buy or is required to buy. You’ll need to pay an attorney about $300 to draft the contract. But at least you’ll have money coming in each month to cover some or all of your mortgage payment.
No matter where you live, remember that a year can make a huge difference. If the forecasts prove true, by this time in 2010 about half the metro areas mapped on these pages will have stopped falling. The housing market – slowly, gingerly – will start reviving. At last!