Strategic Defaults UP – Loan Modifications Down

C-Span is a wonderful thing.  Just listen or watch - The House Oversight and Government Reform Committee hearings yesterday brought in some interesting statements from CEO's and Presidents of Bank of America, JP Morgan/Chase and others.

As I reported in my article WALK AWAY FROM THE PROPERTY - STRATEGIC MORTGAGE DEFAULTS GROW TO 26%, that figure is now updated by the University of Chicago and Northwestern University researchers for the previous figures - a year later the strategic default rate is up another 10%!

Why is this happening?  Industry leaders blame the government programs.  The HAMP program has 800 specific requirements for the borrower  - 800 !!!  No wonder it takes 4 to 6 months for a person to go from trial modification to permanent modification.  Numbers for successful conversions under HAMP is running about 10% of trial modifications.

What makes a borrower ineligible for HAMP or other (proprietary) modification programs of the lender?  Testimony today said that government regulations of easy credit made the banks make loans to people that could not afford the mortgages they got - and this is now the end result - these borrowers still do not qualify even for a modification!  A big reason for rejection - trial mod recipients don't pay the reduced payments or don't provide necessary documents.

Modification requirements always now require real, as opposed to "stated", income revelations.  Many borrowers don't give the required information on their "real" income to qualify for the modification.  Why?   Testimony suggested being afraid of the IRS, or being intimidated because of perhaps false documents in the beginning, are other reasons.

I loved the comments from  Rep Elijah Cummings - his staff sent documents on behalf of constituents to a lender and those documents got "lost" - several times!  And he had proof that payments were made to the lender and the lender failed to acknowledge the payment even when the Congressman's staff showed the lender the cancelled check.

When asked what is the solution - lenders said there needs to be a "dignified transition".  What is THAT?  A "dignified transition" is making homeowners into renters! " Not all homeowners should be owning a home".  Well, I cannot disagree with that, but it just does not sit well.  So they suggest that short sales be the "dignified solution".

Maybe Washington is listening and even feeling the pain.  Keep watching and tell your Washington representatives what you think needs to be done.

Copyright 2010 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make.  This article is for information purposes and is not specific advice to any one reader

 

Foreclosures in Lake Charleston

The following is a list of the 161 homes in some stage of foreclosure in Lake Charleston, sorted alphabetically, by street.

• Anadale - 3
• Ansley - 2
• Anson - 1
• Ashley Shores - 9
• Atwood - 1
• Audrey - 2
• Belmont - 2
• Briar Cliff - 5
• Bristol Bay - 2
• Brunson - 4
• Bryson - 1
• Burgess - 9
• Catalina Way - 3
• Catalina Club - 1
• Catalina Isle - 3
• Cedar Hurst - 5
• Charleston Point - 7
• Chicora - 1
• Davit - 5
• Duncrest - 1
• Edisto - 5
• Forestay - 1
• Geneva Lakes - 1
• Gilmore - 1
• Hatteras - 1
• Heathley - 2
• Heavener - 1
• Highsmith - 1
• Hoffy - 3
• Hollington - 2
• La Rose - 2
• Lake Placid - 1
• Lakewood Cove - 6
• Michigan Isle - 4
• Nolting - 2
• Oakboro - 9
• Pierpont - 3
• Prescott - 5
• Rockbridge - 4
• Santee - 5
• Shell Ridge - 3
• Springfield Lake - 11
• Taylorwood - 1
• Thornlee - 5
• Tillman - 2
• Trenton - 3
• Trescott - 2
• Wescott - 5
• Winder - 2

If you would like information regarding bank-owned homes for sale in Lake Charleston or details about a specific house, please give me a call at 561-602-1258 or send me an email

Animal House, Belushi and Housing?

Seems like John Belushi's classic quote from Animal House: "Over, did you say over, nothing is over until we decide it is!" is the mantra for a few high profile real estate, mortgage and financial industry execs. Below are some excerpts from very recent interviews and reports:

• Stan Humphries, chief economist of Zillow: “Most consumers tend to be overly optimistic about what the future holds,”..."the housing recession is not over, prices are continuing to fall"..."We think the bottom is going to be a long and flat affair"...“Foreclosures are increasing and we will reach a peak in foreclosures later this year. These foreclosure rates won’t recede quickly. They’ll stay high.” ...referencing the recently expired tax credits, he said “We will see payback in July and August,”..."as long as unemployment is extremely high (8 percent to 10 percent, or higher), and large numbers of homeowners (23.3 percent) are underwater (almost 49% of all mortgage holders in Florida), foreclosures will stay high. Also, there are as many as 7 to 8 million housing units in the “shadow inventory,” many of which will turn into foreclosures as well... there are also 5.3 million “sideline sellers” just waiting to jump into the market and list their properties..."If you really want to know when the housing market will return to normal, the real estate experts and economics at my conference are talking about 2013 – or longer".

• This from the 'always optimistic' National Association of Realtors: Twice as many homes were added to the market as were sold in April, according to the National Association of Realtors...the housing inventory is back to where it was in 2009, which is lousy news for home price appreciation.

• Michael Fratantoni, the Mortgage Bankers Association’s vice president of research and economics: "Overall mortgage application volume, which includes loans for purchases and refinancings, dropped by 12.2 percent during the week ending June 4, compared with the previous week...“Purchase applications are now 35 percent below their level of four weeks ago, as homebuyers have not returned to the market following the expiration of the homebuyer tax credit at the end of April".

• James J. Saccacio, CEO of RealtyTrac:  "The numbers in May continued and confirmed the trends we noticed in April: overall foreclosure activity leveling off while lenders work through the backlog of distressed properties that have built up over the past 20 months. Defaults and scheduled auctions combined increased by 28 percent from 2007 to 2008 and another 32 percent from 2008 to 2009 — creating a build-up of delayed bank repossessions. Lenders appear to be ramping up the pace of completing those forestalled foreclosures even while the inflow of delinquencies into the foreclosure process has slowed.” This is precisely the event that CNBC's Diana Olick was warning about a month ago. Housing is about to take fresh new turn lower.

• Michael Pento, Chief Economist for Delta Global Advisors: "We need to sell assets, and we need to allow the deleveraging process to consummate. We are going in a wrong direction and that's the double dip recession is virtually assured. 2008 taught us very clearly that decoupling is a dodo bird's philosophy. The US is headed down. You'll see home starts, permits, sales plummet in the next few months, that's going to add more supply to the housing market..."

Sorry for the gloom and doom. But my job here is to educate my readers and present the information that may not be getting to them in the newspapers or on cable. I try to help my clients and readers make the best housing-related decisions based upon ALL of the pertinent data...

As always...thanks for reading.

Steve Jackson

Lake Charleston Sales, the past 30 days...and some analysis

There was a good number of closed sales the past 30 days...14 in all. Here's a map of the reported sales:

Here are the details...low price to high

1. 7517 Edisto: Sold @ $130k...short sale
2. 7529 Edisto: Sold @ $135k...bank owned
3. 7481 Edisto: Sold @ $147...traditional sale
4. 7409 Shell Ridge: Sold @ $158k...bank owned
5. 6864 Torch Key: Sold @ $161k...short sale
6. 7980 Lakewood Cove: Sold @ $169k...short sale
7. 7630 Bristol Bay: Sold @ $184k...traditional sale
8. 7878 Springfield: Sold @ $186k...bank owned
9. 6801 Torch Key: Sold @ $198k...traditional sale
10. 7708 Oakboro: Sold @ $210k...short sale
11. 7071 Davit: Sold @ $215k...traditional sale
12. 7227 Davit: Sold @ $242k...traditional sale
13. 7366 Shell Ridge: Sold @ $252k...traditional sale
14. 7759 Cedarhurst: Sold @ $325k...traditional sale

14 sales in 30 days is a great rate of sales...but my outlook on continuing this pace is not that optimistic. This number (14 in 30 days) was clearly driven by the Homebuyer tax credits. If I annulize this rate of sales, that would translate to 168 sales/year. But, if we look back to the the trailing 12 months, there were a total of 75 sales, less than HALF of that rate.

IMPORTANT:  If you are having real estate agents in to give you their Market Analysis show, be certain that they fully understand, discuss, analyze and account for the tax credit impact.

As always, thanks for taking the time to read our blog.


Steve and Jackie Jackson

What is everyone searching for?

Recently there has been a ton of good news being reported in the real estate segment. Resale home sales were up huge...new home sales were up big too...every talking head is predicting the end of the housing slump. Not so fast. I have done some research regarding some little publicized web traffic statistics, and that tells us..The Rest Of The Story!

The company, Hitwise, a web-traffic analysis company, recently published the following trend chart:

What this chart reveals is that year-over-year visits to websites in the Real Estate category are down 22% for April 2010...that is 11 consecutive months of traffic decline for visits to Real Estate For Sale sites! It is painfuly obvious that buyer interest is declining. Now, lets look at another Hitwise chart:

The above chart from Hitwise reports that visits to “Home and Apt Rental” websites are up 45% in April 2010 year-over-year, and that represents the tenth consecutive month of increases!

Finally, Hitwise reports: “The most popular term ranked by the overall share of search clicks is ‘apartments for rent’, which has increased 162% for the 4 weeks ending May 8, 2010 when compared to the same time period 2 years ago.” For the Home and Apt Rental websites, visits have increased year-over-year for the past 10 months. 

Now, every real estate agent will tell you that 90% or more of all homebuyers use the Internet during the home purchase process... So, a 22% decline for traffic to real estate sites, combined with 45% increase for rentals suggests that the market demand for housing sales might be a whole lot softer, and headed in a different direction, than widely reported economic data indicates.

People will choose to rent for 2 main reasons...they can't buy a home or they don't want to buy a home.
A large number of people today who CAN'T buy fall into a two categories: 1) No job/job or income instability, 2) credit issues. Hopefully, the job situation will improve consistently going forward, but the number of people with credit issues will most likely continue to rise. Think about the statistic in this following chart: (look at the very left bar in the graph)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The state with the greatest percentage of people at least 30 days late on their mortgage is...FLORIDA! Over 1 out of every 4 people with a mortgage is 30 or more days behind.
 
It is common knowledge that missing mortgage payments will deliver a pretty significant hit to ones credit score. And with the abject failure of the Govt. HAMP (loan modification) program, it is a fairly safe bet that a large number of people currently behind on their mortgage will end up eventually either losing their home in a foreclosure action or successfully completing a short sale (the much better alternative). In either case, these folks will not be purchasing a homeduring the next 2 years, or more. These are ones who can't buy a home.
 
Then you have large segment who still believe that it is not a good time to buy..they are renters by choice, and their numbers are growing daily.
 
Now, I personally know that many investors are plowing money into the real estate market, although they are very selective and are making decisions that factor in NO appreciation for 5 or more years. And, there are still buyers out there. They are balancing the historically low interest rates, low home prices and reduced competition against the chance that home values will decline further. But most of my buyers today have a long enough time horizon to give them the confidence that the combo of interest rate and home prices makes it a good time to buy.
 
Any homeowners reading this who are considering moving in the next 24 months or so should seriously consider getting your home on the market sooner, rather than later. Sell, get you money in the bank now, and rent for a while if you need to. It may be a bit inconvenient, but it appears that this may be the smartest move.