Record Lows Continue for Mortgage Rates

The 30-year fixed mortgage rate fell to a new low of 4.54 percent this week from 4.56 percent last week and an average of 5.25 percent a year ago.

The 15-year fixed loan rate also hit a record low of 4 percent, down from 4.03 percent a week ago and 4.69 percent last year. The five-year adjustable-rate mortgage averaged 3.76 percent, compared to 3.79 percent last week and 4.75 percent a year earlier; and one-year ARMs averaged 3.64 percent, down from 3.7 percent and 4.80 percent, respectively.

Need help with getting the lowest rate on a loan contact www.california-shortsale.com

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It’s a Great Time for Housing Deals

Paying off an underwater mortgage and buying a better home could be the best tactic in this troubled market.

“If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?” says Christopher J. Mayer, a Columbia Business School economist.

With 15-year fixed-rate mortgages at about 4.5 percent, it also makes sense to pay off the mortgage and keep the house. “At this point,” says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, D.C., “if they don’t have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to.”

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California Foreclosures Drop to 3-Year Low

The number of home owners in California entering foreclosure in the second quarter dropped to a three-year low, according to research firm MDA DataQuick.

Default notices, the first step in the foreclosure process, fell 43.8 percent in the second quarter compared to the same period last year.

Analysts say the decline is due to banks pushing loan-modification programs and short sales. Also, fewer homes are underwater thanks to a recovery in home prices, so a smaller number of home owners are walking away.

Ironically, regions of the state where homes are cheapest are most likely to see the highest number of default notices. According to DataQuick, neighborhoods with a median sales price of less than $300,000 experienced 10.6 default notices for every 1,000 homes, while neighborhoods with prices above $800,000 accounted for 2.9 notices for every 1,000 homes.

Need help with a shortsale of your property contact www.california-shortsale.com

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Foreclosure Sales Account for 31 Percent of All Residential Sales in First Quarter

RealtyTrac the leading online marketplace for foreclosure properties, today released its first U.S. Foreclosure Sales Report™, which shows that foreclosure homes accounted for 31 percent of all residential sales in the first quarter of 2010, and that the average sales price of properties that sold while in some stage of foreclosure was nearly 27 percent below the average sales price of properties not in the foreclosure process.

A total of 232,959 U.S. properties in some stage of foreclosure — default, scheduled for auction or bank-owned (REO) — sold to third parties in the first quarter, a decrease of 14 percent from the previous quarter and down 33 percent from the peak during the first quarter of 2009, when sales of foreclosure homes accounted for 37 percent of all residential sales.

“First time homebuyers and investors continue to buy foreclosure properties in large numbers, and at substantial discounts,” said James J. Saccacio, chief executive officer of RealtyTrac. “As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration.”

The average sales prices on properties in some stage of foreclosure decreased 23 percent from 2006 to 2009 while the average discounts on foreclosure purchases steadily increased from 21 percent in 2006 to 27 percent in the first quarter of 2010. Discounts on REOs are larger than discounts on pre-foreclosures, although discounts on pre-foreclosures appear to be trending higher as short sales become more common.

Foreclosure sales increase 2,500 percent from 2005 to 2009
More than 1.2 million U.S. properties in some stage of foreclosure sold to third parties in 2009, an increase of 25 percent from 2008 and an increase of nearly 327 percent from 2007. Total foreclosure sales in 2009 were up more than 1,100 percent from 2006 and up more than 2,500 percent from 2005. Foreclosure sales accounted for 29 percent of all sales in 2009, up from 23 percent in 2008 and up from 6 percent in 2007.

The average sales price of properties that sold while in some stage of foreclosure in 2009 was 25 percent below the average sales price of properties not in the foreclosure process. That was up from an average discount of 22 percent in 2008 but down from an average discount of 26 percent in 2007. The average foreclosure discount in 2005 was 35 percent, driven by a nearly 50 percent discount on REOs; however, the discount on pre-foreclosures trended up slightly over the same five-year period, from nearly 12 percent in 2005 to 15 percent in 2008 and 2009.

Foreclosure sales by type in first quarter
A total of 144,503 bank-owned (REO) properties sold to third parties in the first quarter, down 13 percent from the previous quarter and down 27 percent from the first quarter of 2009. REO sales accounted for 19 percent of all sales in the first quarter, up from nearly 16 percent in the previous quarter but down from 21 percent of all sales in the first quarter of 2009.  REOs sold for an average discount of 34 percent, up from an average discount of nearly 32 percent in both the previous quarter and the first quarter of 2009.

A total of 88,456 pre-foreclosure properties — in default or scheduled for auction — sold to third parties in the first quarter, down 15 percent from the previous quarter and down nearly 41 percent from the first quarter of 2009. Pre-foreclosure sales accounted for nearly 12 percent of all sales, up from nearly 10 percent in the previous quarter but down from 16 percent in the first quarter of 2009. Pre-foreclosures, which are often short sales, sold for an average discount of nearly 15 percent, up from nearly 14 percent in the previous quarter but down from 16 percent in the first quarter of 2009.

Nevada, California, Arizona post highest percentage of foreclosure sales in Q1
Foreclosure sales accounted for 64 percent of all sales in Nevada in the first quarter, the highest percentage of any state, although Nevada’s percentage was down from 65 percent of all sales in the previous quarter and 75 percent of all sales in the first quarter of 2009.

California posted the second highest percentage, with foreclosure sales accounting for 51 percent of all sales there in the first quarter — up slightly from 50 percent in the previous quarter but down from 70 percent of all sales in the first quarter of 2009.

Foreclosure sales as a percentage of all sales were also down in Arizona from the first quarter of 2009, but the state still posted the third highest percentage in the first quarter, with foreclosure sales accounting for 50 percent of all sales.

Other states where foreclosure sales accounted for at least one-third of all sales were Massachusetts, Rhode Island, Florida, Michigan, Georgia, Illinois, Idaho and Oregon.

Want to avoid foreclosure and shortsale your home contact www.california-shortsale.com

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Lenders’ focus turns to strategic defaults

With tougher mortgage underwriting rules a virtual certainty under Congress’ new financial reform legislation, lenders have begun confronting still another vexing issue: Can home buyers who have high credit scores really be trusted not to pull the plug — strategically default — when the economy hits a rough patch and home values tank?

New research based on data from 25 million active consumer credit files suggests that the answer might be no. Though people with the highest credit scores are less likely to default compared with people with lower scores, when they do default they are much more likely to do it strategically — that is, simply stop paying with little or no warning.

In a study released June 28, researchers from credit bureau Experian and the Oliver Wyman consulting firm found that borrowers with “super prime” credit scores accounted for 30% of all mortgages outstanding in mid-2009 and produced just 5% of all serious mortgage delinquencies.

However, 28% of those elite scorers’ defaults were calculated and strategic, compared with 18% for the overall population in the statistical sample. This pattern is forcing lenders and the credit industry to seek new ways to evaluate risk beyond traditional credit scores.

The June study, which follows up on earlier research involving credit files where consumers’ personal identifiers had been removed, tracked strategic defaulters in 2009. By examining payment patterns in individual credit files, Experian and Oliver Wyman estimate that about 19% of all mortgage defaults last year involved strategic walkaways.

Though there was some evidence that total defaults may have peaked at the end of 2008, the walkaway issue remains a costly and controversial one for the mortgage industry. Fannie Mae announced in late June that strategic defaults have become such a problem that it was toughening its policy and would pursue walkaways for unpaid balances and penalties where permitted by state law.

The Experian-Oliver Wyman study confirmed that geography played a significant role in the strategic default phenomenon. Homeowners in volatile boom-and-bust states such as California and Florida have been especially prone to walk away from deeply negative equity situations.

A separate study by three researchers at the Federal Reserve found that not only is geography crucial, but state law treatment of unpaid mortgage debt balances after a walkaway may play a major role as well. The Fed study examined 133,281 loan histories from Arizona, California, Florida and Nevada where borrowers were underwater on their loans.

According to the researchers, in California and Arizona, where state law limits lenders’ ability to collect post-foreclosure deficiencies on principal residence mortgages, borrowers were more likely to walk away from their houses at lower levels of negative equity compared with borrowers in states such as Florida and Nevada, where lenders face fewer restrictions.

“This result suggests,” the Fed study said, “that borrowers may factor into the costs of default the potential legal liabilities resulting from a foreclosure.”

The Fed researchers concluded that the depth of borrowers’ negative equity positions is an important tripwire to their decision to send back the keys. Borrowers whose negative equity is relatively modest appear to be much less willing to strategically default, probably because they hold out hope that market conditions will improve enough to restore them to positive equity one day.

But as negative equity approaches 50% — and borrowers see no prospects for higher real estate values — roughly half of all mortgage defaults are strategic.

The Fed researchers cited a hypothetical case from Palmdale to illustrate the economic logic of strategic defaulters: Purchasers there in 2006 paid $375,000 for a median-priced single-family home. By 2009, the same house was worth less than $200,000. Meanwhile, a three- to four-bedroom house in Palmdale rented for $1,300 a month at the end of 2009 — far less than what the deeply underwater borrowers were paying for their homes.

Why stay in a seemingly hopeless situation, bleeding money indefinitely? Both studies document that many borrowers asked themselves that very question — and decided to just stop paying. Need help getting out of your mortgage situation contact www.california-shortsale.com

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Home tax credit extension relieves tardy buyers

Homebuyers worried about closing their house purchases before the tax credit cutoff can relax after the government extended the deadline.

Congress sent President Barack Obama a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring. The House approved the measure on Tuesday and the Senate approved it Wednesday night. Obama is expected to sign it shortly.

The legislation gives buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000 for first-time buyers and $6,500 for existing owners who move. Under the original terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

The bill only allows people who already have signed contracts to finish at the later date. Nearly 3 million taxpayers claimed the tax credits through May 22 at a cost of more than $21 billion, according to the Treasury Department.

Congress also approved the National Flood Insurance Program, which buyers need to qualify for a mortgage for a home located in a flood zone.

“We’re elated,” said Ron Phipps of Phipps Realty in Warwick, R.I.

About 180,000 buyers needed the tax credit extension, the National Association of Realtors estimated.

A lot of the holdups came from the mortgage approval process. Lenders were inundated with buyers rushing to close their sale and qualify for the tax credit.

“It wasn’t issues with qualifications or bad appraisals,” Phipps said. “The overwhelming demand simply bogged down the system.”

Phipps also noted that without the extension, some buyers would have walked away from their sales. Some buyers put clauses in their contracts that let them out of the deal if they couldn’t close before the June 30 deadline.

Matthew Morneault, 24, could have been one of them. A member of the Maine Air Force National Guard, Morneault is counting on the tax credit money to make roof and patio repairs on the four-bedroom house he’s buying in a short sale, where the bank agrees to let a home sell for less than what is owed on it.

He has been ready to close on the $154,000 home in Bangor, Maine, for two months and was ready to write off the deal if he didn’t close in time for the tax credit. He is waiting for the seller’s bank to provide documents to the title company to show the property is free of liens.

“The extension is making me stick it out a little longer,” he said.

Need help with a shortsale contact the experts at www.california-shortsale.com

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