Foolish Banks Foreclose Again
This article, The Abysmal State Of Mortgage Finance As Shown By One House, Two Foreclosures, absolutely hits the nail on the head and shows that bankers regularly hit their thumbs with hammers. This "lending into sink hole" needs to stop. "Saving" the housing market cannot be defined as artificially propping up housing prices with taxpayers paying up the huge losses on the long way down to the bottom that result from this foolish and reckless policy. I personally know of a very similar situation involving a home in Murfreesboro Tennessee, but this one is even worse. A builder defaulted on a construction loan secured by a vacant lot and the house next door that was 99% complete. On 10/20/2008, the bank (Pinnacle Financial Partners – The "Official bank of the Tennessee Titans"), foreclosed and took the properties back as REO's. On 5/29/2009 the bank resold the house and lot to a home buyer through an online auction company for $264,400 (including the 5% auction premium). At that time I was personally interested in buying the house (not the lot - it has little value in this market), but was only willing to pay in the $190K's including the auction premium. Obviously, I was grossly outbid by this foolish buyer (I wonder if they were a tax credit buyer?). Here is the really scary part. The bank, Pinnacle Financial Partners, loaned that buyer $236,696 (i.e. about 90% of the purchase price) on a "non-qualifying" basis. This means the buyer essentially got a no-doc/stated income type of mortgage loan from Pinnacle Bank. Of course the reason the bank did this was to artificially inflate the price that they would get for the property when they were selling it as an REO. Less than 6 months after this bogus sale closed I received a postcard in the mail from a REALTOR marketing this same house for sale. Apparently, the buyers of this home needed to sell rather quickly after buying it! Their attempt to sell the property failed (they were asking in the low $300K's), and, as a result, on 10/12/2010 the bank foreclosed on the house and lot for the 2nd time in less than 2 years. The really, really scary part is that I personally know that this very same bank did the same exact thing with other properties with the same bad, but, predictable, results. This bank was practicing what I call "incestuous lending", which is very similar to what Fannie Mae, Freddie Mac and the FHA are doing when they offer all types of incentives and special financing to entice buyers to buy their foreclosures so the banks can essentially take a dead asset off one side of their books and replace it with a questionable asset on the other side of their books. It's like saying someone who never repaid the personal loan they owe you and you just say OK and let their brother or sister guarantee the payments even though they are just as reliable. Meanwhile, you still haven't received any actual money, just a promissory note with another name on it. A person who works for a major bank recently told me that once a home is foreclosed on there is an 80% chance that it will be foreclosed on again within 10 years. Now I know why. The banks keep inflating the prices of their REO's by obtaining buyers who are lured into the purchase by the banks' artificially easy to get and artificially cheap financing. In other words, the banks are getting generally unqualified and ignorant buyers who are overpaying for the foreclosed properties. Therefore, it should be no surprise that these same home buyers end up in financial trouble in such a short period of time at such an alarming rate. In addition to the buyers who bought homes at the top of the market, those who bought homes with no-doc/stated/exotic mortgages, those who bought homes with subprime loans, prime borrowers who have lost their jobs or suffered a reduction in income, we now have to add the foolish foreclosure buyers who overpaid in a declining market to the list of homeowners who have a high risk of defaulting on their mortgage loans. This mess just keeps getting worse. Home prices are going to keep declining for quite a while (see: Home Prices Decline Again and The Truth About Home Prices). As a result of all of this, I know there is going to be a lot of short sales and foreclosures over the next several years.
Nashville and Middle Tennessee Short Sale and Foreclosure Help and Assistance for Homeowners and Property Owners in Financial Distress. If you are a Nashville Tennessee, Franklin Tennessee, Brentwood Tennessee, Nolensville Tennessee, Spring Hill Tennessee, Murfreesboro Tennessee, Smyrna Tennessee, La Vergne Tennessee, or Middle Tennessee homeowner, property owner, condo owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Nashville Tennessee and Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR, Expert and Real Estate Investor. I primarily help sellers (homeowners, property owners, condo owners, owners of high end homes and properties (estate homes, luxury homes and executive homes), real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Robertson County TN, Maury County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN, Belle Meade TN, Nolensville TN, Spring Hill TN, Gallatin TN, Springfield TN and Mt. Juliet TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Nashville Tennessee and Middle Tennessee Short Sale and Foreclosure REALTOR, Real Estate Expert and Real Estate Investor.
Showing posts with label REO's. Show all posts
Showing posts with label REO's. Show all posts
Thursday, December 2, 2010
Monday, February 8, 2010
7.2 Million Delinquent Mortgages As Of December 2009
7.2 Million Delinquent Mortgages
7.2 Million Mortgage Loans In Default With An Estimated 1.0 Million REO's
According to this LPS Mortgage Monitor (a mortgage industry performance report provided by LPS Applied Analytics), LPS Mortgage Monitor: January 2010 Mortgage Performance Observations: Data as of December 31, 2009 Month-end and the Executive Summary, in December 2009 mortgage loan delinquencies and defaults increased significantly and foreclosures (REO's or bank owned properties) reached the one million mark. The Executive Summary noted the following:
7.2 Million Mortgage Loans In Default With An Estimated 1.0 Million REO's
According to this LPS Mortgage Monitor (a mortgage industry performance report provided by LPS Applied Analytics), LPS Mortgage Monitor: January 2010 Mortgage Performance Observations: Data as of December 31, 2009 Month-end and the Executive Summary, in December 2009 mortgage loan delinquencies and defaults increased significantly and foreclosures (REO's or bank owned properties) reached the one million mark. The Executive Summary noted the following:
- Delinquency rates have surpassed the 10% level; factoring in foreclosures, the total non-current rate sits at 13.3%.
- Industry extrapolations indicate that over 7.2 million loans are currently behind on payments with an estimated nearly 1 million properties in REO status.
- Average number of days delinquent for loans in foreclosure has increased 63 percent from January 2008 to December 2009, rising from 249 to 406 days delinquent.
- Prime loans have experienced a worse pace of deterioration on a relative basis than subprime, FHA and all loans as a whole. Within prime loans, those with current unpaid principal balances between $417,000 and $600,000 have performed the worst.
- The percent of “new” serious delinquencies (from the population of loans that were current as of year-end 2008) sits at 4.64%, higher than any other year analyzed for the same period. Extrapolated counts result in approximately 2.3 million “new” 60-day delinquent loans from December 2008 to year-end 2009.
- Roll rates show the largest percentage increase in loans improving since the same period in 2008.
- 2009 marks the only time during the last five years that the six-month deterioration ratio has dropped from September to December.
- Foreclosure starts increased slightly in December – still the second lowest month in 2009 based on volume. Foreclosure sales were stable month over month and remain at relatively low levels.
- 2009 vintage loans are performing better than loans from any of the prior five years and have been steadily improving as more origination months are added to the loan pool. However, more restrictive underwriting is driving this behavior rather than actual improved consumer behavior. Liquidity is still not available where it is needed most.
- Most of the information above shows that mortgage loan delinquencies, and therefore, foreclosures, are getting much worse. For example, the total percentage of delinquencies at 13.3%, the average number of days per delinquent loan, the continued deterioration of prime loans and the new mortgage loans serious delinquent rate of 4.64% are reasons to believe that things are getting much worse.
- The information which shows a positive trend is, for the most part, artificially and temporarily skewed. For example, the improved roll rates, the 6 month deterioration ratio showing improvement and the 2009 vintage loans performing better are all skewed by the fact that most of these new loans are made to buyers/borrowers who perceive that their home or real estate purchase was a "good deal". Since most of these buyers/borrowers used FHA/VA/USDA Rural Housing loan programs (see my blog post Our Phony Real Estate Market) they have little to no initial equity. Due to the continued housing market decline, huge numbers of these buyers/borrowers will soon be in negative equity positions, which will result in increasing mortgage loan default rates among these buyers/borrowers in the near future. In addition to that the relatively low foreclosure starts in December 2009 were artificially held down by government mandated loan modification and foreclosure moratoria, which will go end soon with the result of foreclosures increasing again.
Tuesday, November 3, 2009
Buying a Foreclosure Is Harder Than It Should Be
Buying a Foreclosure Is Harder Than It Should Be
This video, How to Buy a Bank-Owned Home (see below), is both hilarious and infuriating because it is true. I really believe that banks choose the most incompetent and ignorant foreclosure and REO agents to market their bank owned foreclosures.
If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, bank foreclosure or REO, a short sale, or other distressed real estate in order to get a great home or investment property at an attractive price without dealing with the difficult REO/foreclosure listing agents and you want aggressive and professional buyer representation, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
This video, How to Buy a Bank-Owned Home (see below), is both hilarious and infuriating because it is true. I really believe that banks choose the most incompetent and ignorant foreclosure and REO agents to market their bank owned foreclosures.
If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, bank foreclosure or REO, a short sale, or other distressed real estate in order to get a great home or investment property at an attractive price without dealing with the difficult REO/foreclosure listing agents and you want aggressive and professional buyer representation, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
Friday, October 16, 2009
How to Buy a Freddie Mac Foreclosure
How to Buy a Freddie Mac Foreclosure
Freddie Mac, one of the 2 quasi governmental mortgage buying companies and sister company to Fannie Mae (the largest), published this document on how to purchase a HomeSteps Mac foreclosure/REO, 5 Easy Steps to Buying a HomeSteps Home.
According to the document, a potential buyer, or their agent should do the following 5 things in order to give them the best shot at buying a Freddie Mac foreclosure.
Freddie Mac, one of the 2 quasi governmental mortgage buying companies and sister company to Fannie Mae (the largest), published this document on how to purchase a HomeSteps Mac foreclosure/REO, 5 Easy Steps to Buying a HomeSteps Home.
According to the document, a potential buyer, or their agent should do the following 5 things in order to give them the best shot at buying a Freddie Mac foreclosure.
- Prepare your offer, signed by the buyer(s), in writing on your local or state contract. The seller should appear as "Freddie Mac."
- Include signed copies of the following HomeSteps addenda: (1) the Single-Family Real Estate Disposition, (2) the Lead-based Paint Disclosure addendum, (3) Property Condition addendum and release, (4) State Riders (if applicable) and (5) Manufactured Home addendum (if applicable). These addenda are available from the listing agent. Please reference them in the contract, and remember, no changes are allowed to the addenda printed text.
- Submit a buyer pre-qualification letter with the purchase contract and addenda to the listing broker. The listing broker must have all required documentation prior to presenting the offer to HomeSteps.
- Negotiate the written offer verbally until final agreement is reached.
- Submit final terms on a clean, typed contract with buyer’s original signatures and initials, along with all required addenda. Return the executed contract and any additional deposit monies to the listing broker no later than three (3) business days from the verbal acceptance by HomeSteps. If the contract is not returned timely, HomeSteps (Freddie Mac) may withdraw its verbal acceptance to sell the home at the agreed-upon terms.
- Offer contingent on the sale of buyer’s current residence.
- Buyer(s) to occupy or store personal items at the home prior to closing.
- Buyer(s) allowed access to the home to perform repairs prior to closing.
- Buyer(s) to receive credit at closing for repairs not completed.
- Repairs after the buyer(s) signs the closing documents.
- Seller’s funds to be escrowed
- HomeSteps suppliers (including listing agent, agents within listing broker’s offices, all independent subcontractors, etc.), their employees and/or their immediate family members.
- HomeSteps or Freddie Mac employee or member of his/her immediate family or household.
Monday, October 12, 2009
Housing Market Problems Persist Despite Government Intervention
Housing Market Problems Persist Despite Government Intervention
According to this REUTERS article, Housing risks still lurk even as buyers return, the US housing market will likely decline further due to continued pressure from adverse economic forces. The article proposes that the most significant economic forces which will hurt the real estate market in the near and mid term future are:
The article states "California led the United States when housing prices soared early this decade, spurred by an array of public policy incentives to encourage home ownership. The boom fueled a frenzy of lending and spending that drove the U.S. economy. But California proved to be the epicenter of reckless lending that pushed housing throughout most of the United States over a cliff in 2007, triggering a credit crisis that plunged the world economy into recession. The sobering view now from ground zero of the U.S. property market underscores the problems faced by President Barack Obama as he tries to fix the U.S. economy. Washington is trying to stem rising numbers of homeowners who cannot afford their mortgages as job losses mount. Housing prices have fallen to levels not seen since 2003. But even investors pouring millions of dollars back into real estate say it may take up to four more years for California's housing market to settle. The reasons why -- rising foreclosures, joblessness and tight credit -- are not unique to the state and may have already slowed a recent recovery in places like Florida."
Tax Credit Threat
The article describes how the potential housing rebound will be challenged by the expiration of the $8,000 first time home buyer tax credit on November, 30, 2009. According to the article, the "(tax credit) plan has resulted in 357,000 home sales so far in 2009, out of a total 3.88 million, according to a survey of realtors by research firm Campbell Communications Inc." The article quotes John Burns Real Estate Consulting in Irvine, California as saying that ending the tax credit "will likely cause a drop-off in buyers, or a "false peak" of the budding housing recovery."
Recent rumblings in Washington indicate that the government is considering extending and/or expanding the home buyer tax credit due to their concern that the housing market is still not stable. I have to say that the housing market is definitely not stable.
According to article, "Helped by government measures and a sense that the worst of the price slump is over, U.S. home prices have risen nearly 4 percent from their low point in April. But the bounce was preceded by a 33 percent slide since the peak in July 2006. The nascent housing recovery has combined with stronger data in other sectors to suggest the U.S. recession is over. This has helped thaw credit markets that are the lifeblood of the economy. Bidding wars are breaking out in some areas. Sales are now routinely above asking prices in California, from wealthy Orange County towns like Irvine to harder-hit San Bernardino County in the high desert east of Los Angeles." Apparently foreclosed houses are selling for 25-30% less than their 2007 market peaks, but still about 40% more than their original new construction prices of 2002. To me, those prices are still too high. Ask yourself, did incomes of the buyers for these types of homes increase 40% from 2002 to 2009? The answer is "No". Therefore, those homes are still priced too high.
Job Loss Threat
According to the article, "Efforts by the government and by banks to help struggling homeowners cut payments and stay in their homes are outpaced by mortgages going bad. The mortgage-modification programs risk being swamped by rising unemployment." A recent mass loan modification event in Los Angeles "drew 50,000 people over five days, hoping for mortgage-reduction deals to help keep them in their homes." The article quotes JC Ferebee, manager of Wells Fargo's team at the mass loan modification event, as saying "When you look at the whole culture right now and the economy with the jobs situation, it's a domino effect." We already know that the September 2009 US unemployment rate hit a "26-year high of 9.8 percent and is likely to head into the double-digit levels already suffered in California. The jobless rate is usually considered to be a lagging economic indicator because employers are slow to hire after a recession as they wait to be sure a recovery is for real. Economists fear that a protracted and high unemployment rate this time will deter Americans from spending more again on houses and goods, raising the prospect of a slow recovery." In short, jobs drive consumer spending and home purchases. With the economy shedding over 500,000 jobs each month there can be no real and meaningful housing market recovery. What we are seeing now is more mirage than substance.
Foreclosures Threat
In previous blog posts I have stated that the banks are holding back on offering their foreclosures for sale and not taking back homes even when the home owners haven't paid their mortgages for many months. My opinion is that the banks are trying to artificially inflate the market values of their foreclosed assets (i.e. homes). According to the article, "Economists fear a repeat of the flood of foreclosure listings that scared all but vulture buyers -- specialized in assets few others want -- and sped the 2008-09 price slump. More than half of house sales in southern California in late 2008 and early this year involved "distressed" properties, accelerating price drops, according to Thomas Lawler, founder of Lawler Economic & Housing Consulting in Leesburg, Virginia. In response to the slump, banks slowed foreclosure sales to seek other solutions for homeowners and help shore up prices. At the same time, the Federal Reserve's emergency slashing of interest rates to near zero has helped encourage buyers to take advantage of the lowest prices in decades and a rush by the Federal Housing Administration, a U.S. agency, to guarantee more loans is also helping would-be home owners find credit. But the emergency steps by the government and the Fed will be overrun by economic forces, according to many analysts. "We are far from persuaded by a little summer upturn in a sector that the government had endeavored so mightily to support," Deutsche Bank said in a report last month. In California's Inland Empire -- a 27,000 square mile (69,900 square kilometers) region made up of Riverside and San Bernardino counties, prices will likely fall 15 percent from June for a peak-to-trough drop of 66 percent, the most for the biggest 10 U.S. metropolitan areas, Deutsche Bank predicted. Local buyers rely not only the scheduled-to-expire tax credit but almost entirely on funding from the FHA, which in response to rising taxpayer losses may soon tighten access to its credit. One bill would require bigger down-payments." I discussed this FHA insolvency issue in a previous blog post. In short, lending irresponsibly is not a solution for a problem that was caused by lending irresponsibly.
Regarding the failure of loan modifications, the article states "Nearly 43 percent of homeowners whose mortgages were modified in the first quarter fell behind on payments within three months, data from the U.S. Office of the Comptroller of Currency shows. For older modifications, the re-default rate is above 50 percent. Postponed foreclosures have created a backlog that banks may have little alternative but to dump onto the market. Foreclosures being processed surged nearly 80 percent in the second quarter from a year earlier to nearly 1 million. But completed foreclosures fell nearly 10 percent to 106,007, the OCC says. Brokers in California bemoan what they say is just a delay in the inevitable pain of people losing their homes and the follow-on boom in sales of cheap properties, something for which there is no shortage of demand today. Bruce Norris, president of property investment firm The Norris Group, said inventory levels are "completely artificial, completely baloney ... The delinquency rate (in California) has exploded, but inventory levels have gone down. In many of these cases the banks have simply avoided foreclosure." I have been saying this for months.
According to the article, "Amherst Securities, a broker-dealer specializing in residential mortgage-backed securities, calculated a mountain of 7 million U.S. housing units is likely to end up on the market -- equivalent to 135 percent of a normal year's supply." Fred Arnold, a broker in Stevenson Ranch, California said "It's going to drip on the market. We don't have the state and federal government that will let the natural supply and demand market occur which is pushing the real estate problem into 2012." Amen, that is what I have been saying for months now. The best way to get the housing market to stabilize is to allow the housing market to hit the real bottom, which will be at prices that buyers can actually afford without government subsidies. Per my previous post, it will take until about 2020 (or longer) for home prices to return to their 2006 peaks. For homeowners who owe more than their homes are worth and who have lost their jobs or suffered a reduction in their incomes 2020 will probably not come quickly enough. Many of these homeowners will need to get loan modifications, sell their homes via short sales, or suffer through a foreclosure.
If you are a homeowner in Middle Tennessee who is unemployed or have seen your income decline and your home is worth less than your mortgage balance, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.
According to this REUTERS article, Housing risks still lurk even as buyers return, the US housing market will likely decline further due to continued pressure from adverse economic forces. The article proposes that the most significant economic forces which will hurt the real estate market in the near and mid term future are:
- Expiration of the first time home buyer tax credit on Novermber 30, 2009.
- Continued job losses.
- High rates of foreclosures.
The article states "California led the United States when housing prices soared early this decade, spurred by an array of public policy incentives to encourage home ownership. The boom fueled a frenzy of lending and spending that drove the U.S. economy. But California proved to be the epicenter of reckless lending that pushed housing throughout most of the United States over a cliff in 2007, triggering a credit crisis that plunged the world economy into recession. The sobering view now from ground zero of the U.S. property market underscores the problems faced by President Barack Obama as he tries to fix the U.S. economy. Washington is trying to stem rising numbers of homeowners who cannot afford their mortgages as job losses mount. Housing prices have fallen to levels not seen since 2003. But even investors pouring millions of dollars back into real estate say it may take up to four more years for California's housing market to settle. The reasons why -- rising foreclosures, joblessness and tight credit -- are not unique to the state and may have already slowed a recent recovery in places like Florida."
Tax Credit Threat
The article describes how the potential housing rebound will be challenged by the expiration of the $8,000 first time home buyer tax credit on November, 30, 2009. According to the article, the "(tax credit) plan has resulted in 357,000 home sales so far in 2009, out of a total 3.88 million, according to a survey of realtors by research firm Campbell Communications Inc." The article quotes John Burns Real Estate Consulting in Irvine, California as saying that ending the tax credit "will likely cause a drop-off in buyers, or a "false peak" of the budding housing recovery."
Recent rumblings in Washington indicate that the government is considering extending and/or expanding the home buyer tax credit due to their concern that the housing market is still not stable. I have to say that the housing market is definitely not stable.
According to article, "Helped by government measures and a sense that the worst of the price slump is over, U.S. home prices have risen nearly 4 percent from their low point in April. But the bounce was preceded by a 33 percent slide since the peak in July 2006. The nascent housing recovery has combined with stronger data in other sectors to suggest the U.S. recession is over. This has helped thaw credit markets that are the lifeblood of the economy. Bidding wars are breaking out in some areas. Sales are now routinely above asking prices in California, from wealthy Orange County towns like Irvine to harder-hit San Bernardino County in the high desert east of Los Angeles." Apparently foreclosed houses are selling for 25-30% less than their 2007 market peaks, but still about 40% more than their original new construction prices of 2002. To me, those prices are still too high. Ask yourself, did incomes of the buyers for these types of homes increase 40% from 2002 to 2009? The answer is "No". Therefore, those homes are still priced too high.
Job Loss Threat
According to the article, "Efforts by the government and by banks to help struggling homeowners cut payments and stay in their homes are outpaced by mortgages going bad. The mortgage-modification programs risk being swamped by rising unemployment." A recent mass loan modification event in Los Angeles "drew 50,000 people over five days, hoping for mortgage-reduction deals to help keep them in their homes." The article quotes JC Ferebee, manager of Wells Fargo's team at the mass loan modification event, as saying "When you look at the whole culture right now and the economy with the jobs situation, it's a domino effect." We already know that the September 2009 US unemployment rate hit a "26-year high of 9.8 percent and is likely to head into the double-digit levels already suffered in California. The jobless rate is usually considered to be a lagging economic indicator because employers are slow to hire after a recession as they wait to be sure a recovery is for real. Economists fear that a protracted and high unemployment rate this time will deter Americans from spending more again on houses and goods, raising the prospect of a slow recovery." In short, jobs drive consumer spending and home purchases. With the economy shedding over 500,000 jobs each month there can be no real and meaningful housing market recovery. What we are seeing now is more mirage than substance.
Foreclosures Threat
In previous blog posts I have stated that the banks are holding back on offering their foreclosures for sale and not taking back homes even when the home owners haven't paid their mortgages for many months. My opinion is that the banks are trying to artificially inflate the market values of their foreclosed assets (i.e. homes). According to the article, "Economists fear a repeat of the flood of foreclosure listings that scared all but vulture buyers -- specialized in assets few others want -- and sped the 2008-09 price slump. More than half of house sales in southern California in late 2008 and early this year involved "distressed" properties, accelerating price drops, according to Thomas Lawler, founder of Lawler Economic & Housing Consulting in Leesburg, Virginia. In response to the slump, banks slowed foreclosure sales to seek other solutions for homeowners and help shore up prices. At the same time, the Federal Reserve's emergency slashing of interest rates to near zero has helped encourage buyers to take advantage of the lowest prices in decades and a rush by the Federal Housing Administration, a U.S. agency, to guarantee more loans is also helping would-be home owners find credit. But the emergency steps by the government and the Fed will be overrun by economic forces, according to many analysts. "We are far from persuaded by a little summer upturn in a sector that the government had endeavored so mightily to support," Deutsche Bank said in a report last month. In California's Inland Empire -- a 27,000 square mile (69,900 square kilometers) region made up of Riverside and San Bernardino counties, prices will likely fall 15 percent from June for a peak-to-trough drop of 66 percent, the most for the biggest 10 U.S. metropolitan areas, Deutsche Bank predicted. Local buyers rely not only the scheduled-to-expire tax credit but almost entirely on funding from the FHA, which in response to rising taxpayer losses may soon tighten access to its credit. One bill would require bigger down-payments." I discussed this FHA insolvency issue in a previous blog post. In short, lending irresponsibly is not a solution for a problem that was caused by lending irresponsibly.
Regarding the failure of loan modifications, the article states "Nearly 43 percent of homeowners whose mortgages were modified in the first quarter fell behind on payments within three months, data from the U.S. Office of the Comptroller of Currency shows. For older modifications, the re-default rate is above 50 percent. Postponed foreclosures have created a backlog that banks may have little alternative but to dump onto the market. Foreclosures being processed surged nearly 80 percent in the second quarter from a year earlier to nearly 1 million. But completed foreclosures fell nearly 10 percent to 106,007, the OCC says. Brokers in California bemoan what they say is just a delay in the inevitable pain of people losing their homes and the follow-on boom in sales of cheap properties, something for which there is no shortage of demand today. Bruce Norris, president of property investment firm The Norris Group, said inventory levels are "completely artificial, completely baloney ... The delinquency rate (in California) has exploded, but inventory levels have gone down. In many of these cases the banks have simply avoided foreclosure." I have been saying this for months.
According to the article, "Amherst Securities, a broker-dealer specializing in residential mortgage-backed securities, calculated a mountain of 7 million U.S. housing units is likely to end up on the market -- equivalent to 135 percent of a normal year's supply." Fred Arnold, a broker in Stevenson Ranch, California said "It's going to drip on the market. We don't have the state and federal government that will let the natural supply and demand market occur which is pushing the real estate problem into 2012." Amen, that is what I have been saying for months now. The best way to get the housing market to stabilize is to allow the housing market to hit the real bottom, which will be at prices that buyers can actually afford without government subsidies. Per my previous post, it will take until about 2020 (or longer) for home prices to return to their 2006 peaks. For homeowners who owe more than their homes are worth and who have lost their jobs or suffered a reduction in their incomes 2020 will probably not come quickly enough. Many of these homeowners will need to get loan modifications, sell their homes via short sales, or suffer through a foreclosure.
If you are a homeowner in Middle Tennessee who is unemployed or have seen your income decline and your home is worth less than your mortgage balance, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.
Friday, October 2, 2009
Fannie Mae and Freddie Mac Have Nearly 100,000 Foreclosures (REO's)
Fannie Mae and Freddie Mac Have Nearly 100,000 Foreclosures (REO's)
According to this HousingWire.com article, GSE REO Portfolio Near 100,000, according to 10-Q filings with the Securities and Exchange Commission (SEC), the total REO foreclosure inventory now held by government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac is almost at a combined level of 100,000 single-family properties. That is staggering, especially considering that foreclosures continue to pile up and the rate of new foreclosure filings exceeds the rate at which those properties are being sold (per my previous blog post this is partially a result of the banks holding back REO inventory).
According to the article, "Freddie’s portfolio is nearly 35,000 properties, while Fannie’s is closing in on double that figure at nearly 64,000. While the rate of growth in the two portfolios has declined, Freddie acknowledges it expects to experience further losses from REO properties." The SEC filing stated “While temporary suspensions of foreclosure transfers and recent loan modification efforts reduced the rate of growth in our charge-offs and REO acquisitions during the second quarter of 2009, our provision for credit losses includes expected losses on those foreclosures currently suspended.” According to the article, "Fannie’s REO portfolio nearly doubled from the first half of 2008 compared to H109. Fannie held 33,729 properties during H108. The number of properties increased in all regions of the US except the Midwest, which experienced a decrease from 15,265 to 14,626 properties." The article stated that Freddie Mac indicated that their pool of Alt-A interest-only loans and loans made in 2006-2007 make up the biggest share of its portfolio. These types of loans are now major contributors to the declining quality of the Freddie Mac loans. It appears that the continuing decline in home values is the main culprit. As I have stated in previous blog posts, as home prices decline and homeowners become "upside down" or "underwater" the number of delinquencies, short sales and foreclosures increase.
According to this HousingWire.com article, GSE REO Portfolio Near 100,000, according to 10-Q filings with the Securities and Exchange Commission (SEC), the total REO foreclosure inventory now held by government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac is almost at a combined level of 100,000 single-family properties. That is staggering, especially considering that foreclosures continue to pile up and the rate of new foreclosure filings exceeds the rate at which those properties are being sold (per my previous blog post this is partially a result of the banks holding back REO inventory).
According to the article, "Freddie’s portfolio is nearly 35,000 properties, while Fannie’s is closing in on double that figure at nearly 64,000. While the rate of growth in the two portfolios has declined, Freddie acknowledges it expects to experience further losses from REO properties." The SEC filing stated “While temporary suspensions of foreclosure transfers and recent loan modification efforts reduced the rate of growth in our charge-offs and REO acquisitions during the second quarter of 2009, our provision for credit losses includes expected losses on those foreclosures currently suspended.” According to the article, "Fannie’s REO portfolio nearly doubled from the first half of 2008 compared to H109. Fannie held 33,729 properties during H108. The number of properties increased in all regions of the US except the Midwest, which experienced a decrease from 15,265 to 14,626 properties." The article stated that Freddie Mac indicated that their pool of Alt-A interest-only loans and loans made in 2006-2007 make up the biggest share of its portfolio. These types of loans are now major contributors to the declining quality of the Freddie Mac loans. It appears that the continuing decline in home values is the main culprit. As I have stated in previous blog posts, as home prices decline and homeowners become "upside down" or "underwater" the number of delinquencies, short sales and foreclosures increase.
If you are a homeowner in Middle Tennessee who cannot pay your mortgage and your home is worth less than the amount(s) you owe, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR.
- Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
- Williamson County Tennessee: Brentwood TN and Franklin TN
- Davidson County Tennessee: Nashville TN and Belle Meade TN
You can find out more information about me via my website JimTheRealEstateExpert.com and my Active Rain profile Jim McCormack's Active Rain Profile - Short Sale REALTOR and Real Estate Expert.
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