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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Borrowers exit troubled Obama mortgage program

The Obama administration’s flagship effort to help people in danger of losing their homes is falling flat.

More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes.

Last month alone,155,000 borrowers left the program — bringing the total to 436,000 who have dropped out since it began in March 2009.

About 340,000 homeowners have received permanent loan modifications and are making payments on time.

Administration officials say the housing market is significantly better than when President Barack Obama entered office. They say those who were rejected from the program will get help in other ways.

But analysts expect the majority will still wind up in foreclosure and that could slow the broader economic recovery.

A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Many borrowers complained that the banks lost their documents. The industry said borrowers weren’t sending back the necessary paperwork.

Carlos Woods, a 48-year-old power plant worker in Queens, N.Y., made nine payments during a trial phase but was kicked out of the program after Bank of America said he missed a $1,600 payment afterward. His lawyer said they can prove he made the payment.

Such mistakes happen “more frequently than not, unfortunately,” said his lawyer, Sumani Lanka. “I think a lot of it is incompetence.”

A spokesman for Bank of America declined to comment on Woods’s case.

Treasury officials now require banks to collect two recent pay stubs at the start of the process. Borrowers have to give the Internal Revenue Service permission to provide their most recent tax returns to lenders.

Requiring homeowners to provide documentation of income has turned people away from enrolling in the program. Around 30,000 homeowners started the program in May. That’s a sharp turnaround from last summer when more than 100,000 borrowers signed up each month.

As more people leave the program, a new wave of foreclosures could occur. If that happens, it could weaken the housing market and hold back the broader economic recovery.

Even after their loans are modified, many borrowers are simply stuck with too much debt — from car loans to home equity loans to credit cards.

“The majority of these modifications aren’t going to be successful,” said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. “Even after the permanent modification, you’re still looking at a very high debt burden.”

So far nearly 6,400 borrowers have dropped out after the loan modification was made permanent. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes.

Credit ratings agency Fitch Ratings projects that about two-thirds of borrowers with permanent modifications under the Obama plan will default again within a year after getting their loans modified.

Obama administration officials contend that borrowers are still getting help — even if they fail to qualify. The administration published statistics showing that nearly half of borrowers who fell out of the program as of April received an alternative loan modification from their lender. About 7 percent fell into foreclosure.

Another option is a short sale — one in which banks agree to let borrowers sell their homes for less than they owe on their mortgage.

A short sale results in a less severe hit to a borrower’s credit score, and is better for communities because homes are less likely to be vandalized or fall into disrepair. To encourage more of those sales, the Obama administration is giving $3,000 for moving expenses to homeowners who complete such a sale or agree to turn over the deed of the property to the lender.

Administration officials said their work on several fronts has helped stabilize the housing market. Besides the foreclosure-prevention plan, they cited government efforts to provide money for home loans, push down mortgage rates and provide a federal tax credit for buyers.

“There’s no question that today’s housing market is in significantly better shape than anyone predicted 18 months ago,” said Shaun Donovan, President Barack Obama’s housing secretary.

The mortgage modification plan was announced with great fanfare a month after Obama took office.

It is designed to lower borrowers’ monthly payments — reducing their mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. Borrowers who complete the program are saving a median of $514 a month. Mortgage companies get taxpayer incentives to reduce borrowers’ monthly payments.

Consumer advocates had high hopes for Obama’s program when it began. But they have since grown disenchanted.

“The foreclosure-prevention program has had minimal impact,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group. “It’s sad that they didn’t put the same amount of resources into helping families avoid foreclosure as they did helping banks.”

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Foreclosures to be high for 18 more months

Foreclosure activity in America won’t stabilize until late 2011, an executive for Irvine-based Realty Trac told a group of real estate writers.

And with only three out of eight bank-owned homes on the market, and two-thirds of those under-valued homes yet to hit, the U.S. housing market still faces years of low prices.

“They will make it to market in a very slow, managed, measured way,” said Rick Sharga, senior vice president at Realty Trac, which monitors foreclosure filings. “The good news is that prices won’t double dip. The bad news is it will prolong the time it takes for market recovery.”

 

• Homeowners who owe more than their homes are worth account for just 25% of U.S. foreclosures. The rest of the foreclosures are caused by unemployment.
• Approximately one foreclosure occurs for every six to 10 jobs lost. Unemployment will drive high levels of foreclosure activity through the fourth quarter of 2010.
• A second wave of toxic loans is about to hit. Option ARMs — loans that gave borrowers the option to make low payments in the first months or years of the loan — will begin resetting to higher payments in high numbers this spring spring and summer, resulting in more defaults.
• A massive “shadow inventory” will slow down the housing market recovery. Of 800,000 homes that lenders seized and now own, nearly 500,000 are not yet listed for sale.
• Monthly foreclosure levels will not return to “normal” until 2012, and the “inventory” of bank-owned homes will stay at high levels through 2013.
• Sixty percent of all U.S. foreclosure activity is occurring in just six states. (Sharga’s map above shows foreclosure filingings by county.)
• 1.2 million U.S. homes currently are in foreclosure. 5.5 million loans are delinquent

If you are facing foreclosure and don’t want to damage your credit contact www.california-shortsale.com for more informaiton. We Can Help!!

 

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Sidelined Sellers’ Ready to Get Back In

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Certainly you’ve heard the term “shadow inventory,” which refers to the millions of foreclosed or soon-to-be foreclosed houses that lenders have yet to put back on the market for resale.

Well, get ready for a new yet another form of inventory, this one labeled “sidelined sellers” by the folks at Zillow to describe the untold millions of homeowners who would like to sell for one reason or another but haven’t even bothered to place their houses on the market because nothing is moving in their neighborhoods.

“Sidelined sellers” is one reason Zillow economist Stan Humphries believes housing prices will remain relatively flat over the next three to five years.

Indeed, once the market finds a bottom, appreciation will be “very anemic” to nonexistent, Humphries said of the sidelined sellers at the National Association of Real Estate Editors’ annual conference in Austin, Texas, last week.

Based on the Seattle firm’s surveys, the online real estate and mortgage service estimates there are some 5.3 million “highly motivated” owners who are just itching to sell once they sense a rebound. But Humphries also believes there are “a bunch more millions” of “wannabe” sellers sitting out the downturn.

Besides the 7% of all owners who are “very likely” to stick a for-sale sign in their front yards or apartment windows in the next 12 months if they see signs of a turnaround, Zillow’s latest survey found an additional 8% who are “likely” to try to move, and 14% more who said they would be “somewhat likely” to see it as a good time to pick up stakes.

Perhaps these are young families who have outgrown their current residences and want to move up. Maybe they are older couples whose kids have flown the coop and want to move down into something more fitting their needs. Or perhaps they just want to move sideways, to a better school district, perhaps, or closer to the old folks.

There’s no way to quantify exactly how many homeowners fit the definition of a “sidelined” seller. But whatever the reason they are sitting on their hands, Humphries says they are “likely to try to sell once they notice any sort of improvement” in the sales momentum where they live. And as a result, the extra inventory will serve to dampen prices because there will be too much product on the market for too few buyers.

“Whenever the excess is worked off,” the economist warns, “a bunch more eager sellers” will put their homes on the market. And he says the up and down could last until 2015. “It will make the bottom look like a saw-tooth,” he says.

Remember, this is on top of a housing market the economist says is already “flush with empty houses.” And the phenomenon is already at work. In April, nearly twice as many houses were added to the market as were sold as anxious sellers tried to piggyback on the federal tax credits for new and move-up homebuyers.

Even without sidelined sellers, Zillow says there is “lots” of shadow inventory waiting in the wings. How does 7.3 million houses strike you?

That’s 2.4 million in foreclosure, 2.3 million in which their owners are 30 to 90 days late on their mortgage payments, and 2.6 million owners who are more than 90 days behind but have yet to receive their walking papers.

Add that up, says Humphries, and the supply of houses in the pipeline is nearly half-again as large as the inventory numbers put forth by the National Association of Realtors suggest.

The Zillow economist also told the assembled housing reporters that the composition of foreclosures has changed, with harder-to-move expensive houses now accounting for twice the share they did three years ago.

In 2006, the top third of home values made up 16% of the foreclosures. But as of last July, they accounted for 30%.

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Negative Equity, Foreclosures Will Likely Delay Broader Recovery

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Various reports are cuing in support for what is expected by many: negative equity and foreclosures will likely delay broader recovery despite budding improvements.

Seattle-based Zillow Real Estate Market Reports showed mixed market results in the first quarter as home values in 106 of the 135 markets tracked by Zillow continued to decline on a year-over-year basis, also several metro areas in California that started reaching bottom in 2009 showed signs of improvement.

“It’s a very positive sign that several large markets have hit what appears to be a tentative bottom in home values,” said Zillow chief economist Stan Humphries, who nonetheless warned it is “no guarantee that home values there will not fall again” but probably remain at last year’s lowest point.

For example, home values in Los Angeles, San Diego, San Francisco, Santa Barbara and Ventura stabilized significantly in April or May 2009 and “have risen significantly for at least the past 10 months,” after values in all five markets reached a low point in 2009.

Now the general concern is about other factors playing out in markets across the country.

The Zillow Home Value Index fell 3.8% year-over-year, and 1% quarter-over-quarter, to $183,700. At the same time, negative equity across the country increased to 23.3% of single-family homes with mortgages underwater, up from 21.4% in the fourth quarter of 2009, while foreclosures reached a new peak in March, with more than one out of every 1,000, or 0.11%, of U.S. homes going into foreclosure during the month.

Even with the tax credits in place during the first quarter, inventory levels were rising, and home values continued to decline rather than steady, Zillow said, so national home values are more likely to reach bottom in the third quarter of 2010, rather than in the second quarter, as previously hoped.

“When we do get there,” Humphries says, high rates of negative equity and foreclosures are expected to keep national home value appreciation near zero for some time, “possibly as long as five years.”

Zillow data also show that one-third, or 32.4%, of home sales nationwide sold for less than what the seller had paid originally. While in March foreclosure resales nationally made up over one-fifth, or 22.2%, of all U.S. home sales. Foreclosure resales also made up the majority of sales in several MSAs especially in California where they represented over 60% of total sales.

According to Fitch, what makes California stand out and worth observing is the fact that it represents approximately 40% of the overall nonconforming mortgages originated in the country. Therefore, Fitch analysts say trends in the state are “important for both new and existing securities.”

And recent findings in California indicate there is a close correlation between the state’s negative equity levels and delinquency rates.

A Fitch Ratings study of all securitized nonagency mortgage loans in California shows the “dramatic differences” in local-level loan performance that result in high delinquency rates are triggered by the level of negative equity.

Along with unemployment Fitch managing director Roelof Slump says property declines in California are having “a dramatic effect on a borrower’s willingness to pay.” Meanwhile, 39% of underwater borrowers and 58% of the borrowers that are over 50% underwater are 60 days or more delinquent, compared to 18% for mortgages that are not underwater.

What seems unusual is that some areas in California have seen the lowest level of home appreciation from 2000-2006 as well as the lowest level of delinquency rates. Fitch reports that a “closer look” shows that while mortgage performance in the state “is not substantially different” from the rest of the country, regions with the largest home price increases have also seen “the most precipitous declines.”

In other words there still is some consistency in equity performance.

For example, according to CoreLogic the ranking of the top five states with the highest concentration of underwater homes has not changed. Nevada leads with 70%, followed by Arizona with 51%, Florida with 48%, Michigan with 39% and California with 34%. Similarly, Las Vegas continues to top the chart of metro areas with 75% of properties underwater.

A “slight improvement” compared to the fourth quarter of 2009 is that in the first quarter of 2010 11.2 million or up to 24% of all residential properties with mortgages remained in negative equity status at the end of the first quarter 2010, down from 11.3 million. By the end of the first quarter an additional 2.3 million properties have less than 5% equity, negative and near-negative equity mortgages, or 28% of all residential mortgages nationwide.

CoreLogic chief economist Mark Fleming expects “the typical underwater borrower” to likely regain their lost equity over the next five to seven years.

“The two most important triggers of default, negative equity and unemployment, have stabilized over the last six months. As house prices grow again and borrowers pay down their mortgage debt negative equity levels will begin to diminish.”

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Falling home prices stir fears of new bottom

Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices fell 0.5 percent in March from February, according to the Standard & Poor’s/Case-Shiller 20-city index released Tuesday.

That marks six straight months of declines — a sign that the housing market is going in reverse.

“It looks a little like a double-dip already,” economist Robert Shiller said in an interview. “There is a very real possibility of some more decline.”

The co-creator of the Case-Shiller index, who predicted in 2005 that the housing bubble would burst, says he worries that home prices rose last year only because of the federal tax credits. That fear is shared by other economists. They note that weak job growth, tight credit and millions more foreclosures ahead will weigh on the home market.

All that is discouraging for homeowners who have seen the value of their largest asset deteriorate sharply over the past three years. Falling home prices tend to curtail consumer spending. And they make it harder for struggling borrowers to refinance into an affordable home loan.

Prices in 13 of the 20 cities tracked by the index fell. Only six metro areas recorded price gains. One, Boston, came in flat.

In the first quarter of 2010, U.S. home prices fell 3.2 percent compared with the fourth quarter.

The numbers are especially disturbing because they show that improved sales due to the tax credits didn’t translate into higher prices, said David M. Blitzer, Chairman of the S&P index committee.

Still, falling home prices haven’t kept many consumers from maintaining their optimism about the economy.

A separate report Tuesday showed consumer confidence rose in May for the third straight month as hopes for job growth improved. The increase in the Conference Board’s Consumer Confidence Index was boosted by consumers’ brighter outlook for the next six months.

In a healthier economy, extraordinarily low mortgage rates would pump up demand for homes. But employers aren’t creating new jobs fast enough and loans are harder to come by for small businesses and individuals.

On Monday, the National Association of Realtors said sales of previously occupied homes rose 7.6 percent in April. But the sales were aided by the government incentives that have now expired. Economists don’t expect the improvements to last.

New buyers were offered a credit worth up to $8,000. Current owners who bought and moved into another home could get a credit for up to $6,500. To receive them, buyers had to have a signed offer by April 30 and must close by the end of June.

Shiller and other economists worry that prices could fall below the levels of April 2009. That was the lowest point since the peak in July 2006.

IHS Global Insight economist Patrick Newport forecasts prices will fall an additional 6 percent to 8 percent and bottom out in the third quarter of next year. Newport said the glut of homes on the market is the main reason. But he’s also worried about the rate of foreclosures.

“When banks foreclose, they sell the properties at deep discounts,” Newport said. “Foreclosures have either peaked in the first quarter or are going to peak soon, but they will remain very high for several years.”

Mortgage delinquencies reached a record high in the first quarter. More than 10 percent of homeowners with a mortgage missed at least one payment from January through March, the Mortgage Bankers Association said last week.

Since 2006, nearly 5 million homes have been lost to foreclosures or other distressed sales, according to Mark Zandi, chief economist at Moody’s Analytics. Zandi expects 3 million more to hit the market over the next two years.

Zandi noted that 15 million homeowners still owe more than their homes are worth. And 26 million Americans are either unemployed or underemployed. The underemployed include people who have given up looking for work and part-timers who would prefer to be working full time.

 

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If you’re of the opinion you can wait this out and your house will be worth more than you owe in the next couple years, think again.  Contact us today @ www.california-shortsale.com and we can discuss a strategic default with you.

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Why 1-In-10 Current Borrowers Will Lose Their Home To The Bank

New Observations is forecasting that a minimum of one in ten homes with a mortgage today will be lost to foreclosure in the next two years and that this loss represents a staggering five-million-unit addition to inventory-for-sale.

A record high 4.63% of mortgages were in foreclosure at the end of March The Mortgage Bankers Association reported Wednesday. Much worse, a mammoth 9.54% of mortgages are 90-days or more past due. Given cure rates are slim-to-nothing-at-all beyond a 60-day delinquency, in practical terms, all of these seriously-delinquent homes will be lost through a sheriff’s auction, a short sale, a deed-in-lieu passing title from borrower to bank, or some other variant of distressed sale. Amherst Securities Group in a Sept. 2009 report said of the cure rate: “The cure rate on 60+ loans has decreased from 66% in early 2005 to 5% in Q2 2009.” What is obvious and apparent from the cure-rate chart is that borrowers who miss a payment are giving up quickly. After two payments are missed, the mortgage is a goner. It’s a new phenomena and adds a serious risk of falling prices for those who currently own homes. If 50 million homes carry a mortgage, and with 10 percent lost to the bank in the next two years, five million units will be added to the current for-sale inventory. The five million bank-repo homes works out to about 10 months of sales at an average rate. Amherst estimated 7 million liquidations to the bank, but it was unclear over what period of time. The numbers will have even a more exaggerated impact if mortgage-payment performance continues to fall. Current inventory is at eight months. The recent inventory high was 11 months in April 2008. Our figures already show current supply for-sale at 3.6 million units – which we have estimated is excessive by over 900,000 units. In an average month 500,000 existing homes sell. In another derogatory sign, purchase applications fell 27 percent to their lowest point since May 1997. A government-paid down-payment program ended April 30th. The guesstimate that one-in-ten mortgage borrowers will lose their home is not a wild proclamation. It’s basic math based on the cure rate. What is wild is considering what will happen to real estate prices should mortgage failure gain greater momentum. Serious delinquencies are 30% greater today than a year ago. A crash has the same irrational exuberance as a mania, except that greed is liberating and fear is terrifying. We have already lost 30 percent of house prices nationwide. There is simply no question that a radical loss in value may still lie ahead. Mortgage performance has gone down hill, and only a strong employment recovery can change the math.

Need help with short selling your property and taking advantage of the current tax laws while they last contact www.california-shortsale.com.

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Mortgage delinquencies, foreclosures break records

The number of homeowners who missed at least one mortgage payment surged to a record in the first quarter of the year, a sign that the foreclosure crisis is far from over.

More than 10 percent of homeowners had missed at least one mortgage payment in the January-March period, the Mortgage Bankers Association said Wednesday. That number was up from 9.5 percent in the fourth quarter of last year and 9.1 percent a year earlier.

Those figures are adjusted for seasonal factors. For example, heating bills and holiday expenses tend to push up mortgage delinquencies near the end of the year. Many of those borrowers become current on their loans again by spring.

Without adjusting for seasonal factors, the delinquency numbers dropped, as they normally do from the winter to spring.

More than 4.6 percent of homeowners were in foreclosure, also a record. But that number, which is not adjusted for seasonal factors, was up only slightly from the end of last year.

Stocks slid Wednesday as investors remain concerned with the European debt crisis. The rising number of mortgages also drew some attention. The Dow Jones industrial average fell more than 160 points in early trading.

Jay Brinkmann, the trade group’s chief economist, said the foreclosure crisis appears to have stabilized. Seasonal adjustments may be exaggerating the change from the previous quarter, he added.

“I don’t see signs now that it’s getting worse, but it’s going to take a while,” he said. “A bad situation that’s not getting worse is still bad.”

The number of American homeowners who have missed at least three months of payments or are in foreclosure has surged to around 4.3 million, Brinkmann estimated.

The Obama administration’s $75 billion foreclosure prevention program has barely dented the problem. More than 299,000 homeowners had received permanent loan modifications as of last month. That’s about 25 percent of the 1.2 million who started the program since its March 2009 launch.

About 277,000 homeowners, or 23 percent of those enrolled, have dropped out during a trial phase that lasts at least three months.

Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. But homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures.

Those borrowers made up nearly 37 percent of new foreclosures in the first quarter of the year, up from 29 percent a year earlier.

The risky subprime adjustable-rate loans that kicked off the foreclosure crisis are making up a smaller share of new foreclosures. They made up 14 percent of new foreclosures in the January-March period, down from 27 percent a year earlier.

Don’t Foreclose and damage your credit contact www.california-shortsale.com for the best morgage advice.

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