Over 6,600 Home Foreclosure Filings Per Day

Over 6,600 Home Foreclosure Filings Per Day

According to this REUTERS article, Foreclosures mark pace of enduring U.S. housing crisis, in the US there is a foreclosure every 13 seconds which translates into "more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending, a nonpartisan watchdog group based in Durham, North Carolina. With nearly two million already this year, the flood of foreclosures shows no sign of abating any time soon."

According to the article, "the country's worst housing downturn since record-keeping began in the late 19th century may only get worse since foreclosures, which started with subprime borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment. In congressional testimony last month Michael Barr, the Treasury Department's assistant secretary for financial institutions, said more than 6 million families could face foreclosure over the next three years."

The article references a September 2009 report from a FL foreclosure task force as finding that people are now defaulting on their mortgages for different reasons. The report states "People are no longer defaulting simply because of a change in the payment structure of their loan. They are defaulting because of lost jobs or reduced hours or pay."

According to the article, "A recent pickup in sales and home prices in some regions has been heralded as a sign that the crisis in residential real estate may be close to bottoming out, after the steepest price decline since at least 1890. But nearly half of recent sales have been attributed to foreclosures or "short sales" at bargain-basement prices. Even as the U.S. economy seems to be recovering from its worst recession since the Great Depression, mortgage delinquencies continue to rise. And that adds risk to any relatively upbeat assessment, since foreclosures depress the value of nearby properties while eroding the net worth of homeowners and the tax base for communities nationwide. The Center for Responsible Lending says foreclosures are on track to wipe out $502 billion in property values this year. That spillover effect from foreclosures is one reason why Celia Chen of Moody's Economy.com says nationwide home prices won't regain the peak levels they reached in 2006 until 2020. In states hardest-hit by the housing bust, like Florida and California, the rebound will take until 2030, Chen predicted."

The article quotes Celia Chen of Moody's as saying "The default rates, the delinquency rates, are still rising. Rising joblessness combined with a large degree of negative equity are going to cause foreclosures to increase. Anyone doubting that the recovery in U.S. real estate prices will be long and hard should take a look at Japan, Chen said. Prices there are still off about 50 percent from the peak they hit 15 years ago."

According to the article, the chief economist for the Mortgage Bankers Association, Jay Brinkmann, thought that foreclosures would peak in the second half of 2010. The problem is that this somewhat rosy prediction is based on unemployment falling in 2010 after reaching a peak "barely in double digits by the middle of next year." As we already know, the US unemployment rate reached 9.8% in September 2009 and show no signs of going down anytime soon.

I think this article provides even more evidence that the US real estate/housing short sale and foreclosure crisis is not going to end anytime soon. As more people lose their jobs, short sales and foreclosures will increase for the next several years since it will take until at least 2011 before the unemployment starts to go back down and even then it will take until at least 2012 or 2013 before the US unemployment reaches a level where people can afford to pay their mortgages. The net effect of all this will be that US real estate and housing prices will continue to decline for the next several years leaving more homeowners underwater.

If you are a homeowner in Middle Tennessee who is unemployed, have seen your income decline, has been turned down for a loan forbearance or loan modification 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 TN Short Sale and Foreclosure Expert and REALTOR.

Forbearance: A New Plan for Temporary Mortgage Payment Relief

Forbearance: A New Plan for Temporary Mortgage Payment Relief

According to this New York Times article, A Plan for Forbearance, due to continuing high unemployment "federal regulators are intensifying efforts to curb the effects of job losses or underemployment before they fuel another wave of home foreclosures. The Federal Deposit Insurance Corporation (FDIC), which protects consumer deposits when banks fail, recently recommended that lenders provide certain borrowers with a temporary respite from mortgage payments, or a forbearance. That relief would last up to six months, and sometimes longer, as the lenders work on long-term loan modifications."  This new forbearance plan was announced in September 2009.

The article quotes Michael H. Krimminger, the special adviser on policy to the FDIC chairwoman Sheila C. Bair, as saying "We want to make sure lenders do this as a strategy to mitigate losses to the F.D.I.C., but also because it’s the right thing to do."

According to the article, the FDIC's plan recommends (i.e. does not require) that certain lenders (see below) reduce loan payments to "affordable levels" for borrowers who cannot pay their mortgages as a result of login their jobs, or having their incomes reduced.  The FDIC says that the new reduced mortgage payments would "be low enough to allow for reasonable living expenses in addition to the mortgage."  The plan "applies only to the 53 financial institutions that relied on the F.D.I.C.’s insurance fund while acquiring failed banks. It does not include the four major mortgage lenders: Citigroup, Wells Fargo, JPMorgan Chase and Bank of America. These banks already have unemployment forbearance programs, though they differ from the F.D.I.C. plan."

The article offers some information about about the proprietary plans offered by Wells Fargo, Bank of America, Citigroup and JPMorgan Chase.  A summary of those plans is below:

• Citigroup - The article states that in March 2009 "Citigroup introduced its Homeowner Unemployment Assist program, which lowers the monthly payment for many unemployed borrowers to $500 for three months. To qualify, a homeowner must have a loan owned and serviced by CitiMortgage, and be 60 days or more delinquent, among other things."
• Wells Fargo - The article states that Wells Fargo has had forbearance programs in place for years for years for "unemployed borrowers who cannot pay their mortgages".  According to Debora K. Blume, a Wells Fargo spokeswoman, the forbearance terms are "highly dependent on the customer’s full financial and personal circumstances."
• JPMorgan Chase - The article states that a spokesman for JPMorgan Chase said "if the borrower’s income is too low or not certain, but there are prospects for future employment, we may offer a loan forbearance program that allows a borrower to pay a reduced amount, or even zero, for a limited length of time, often three months."
• Bank of America - The article states that "Bank of America offers up to six months of forbearance, according to Jack Schakett, the bank’s credit loss mitigation strategies executive."  The article quotes Mr. Schakett as saying "borrowers generally receive better forbearance packages if they have "reasonable prospects for employment," though his bank also examines their financial management skills. Bank of America looks at mortgage-payment habits and overall debt payment success, among other things.  People who were already struggling with their mortgage payments would be less likely to end up with a job that would help them be successful in the future."

According to the article, the lenders insist that "they have been working together, and with the federal government, to create more consistent strategies for unemployed borrowers."  Personally, I laugh at this.  Lenders are completely botching this situation and causing significantly more short sales and foreclosures than they need to.

If you are a homeowner in Middle Tennessee who has lost their job, but have either been turned down for a loan forbearance or loan modification, or you still cannot pay your mortgage 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 short sale you can my request help on my website JimTheRealEstateExpert.com.

My Thoughts on the "Doomed" Housing Market: Listen When "Dr. Doom" Speaks

According to this CNBC article, US Economy Facing 'Death by a Thousand Cuts': Roubini, Nouriel Roubini says "more banks will fail and residential real estate prices have more room to decline."  According to Roubini, the economy faces a real threat of a "double dip" recession due to the severely damaged financial system and a lack of consumer spending.  Roubini says "the securitization market is all but dead, the credit markets are still frozen and consumers will continue to save more rather than spend and boost growth."  He predicts that by the time this financial and economic crisis is all over the following will happen:

• More than 1,000 financial institutions could fail.
• Housing prices will likely to fall another 12 percent in the next year making the total decline approximately 40 percent since the market began its steep decline. This will result in nearly one half of all homeowners owing more on their mortgages than their houses are worth.

Regarding housing construction, Roubini states "The gap between supply and demand is so huge we could stop producing new homes for a year to get rid of all the inventory  This price adjustment, in my opinion, is going to continue for another year."

Regarding commercial real estate, he warns that regulators are repeating some of the same mistakes made during the financial crisis. He states "Allowing forbearance in the deeply troubled sector will mask underlying problems that will come back and bite the economy".

While I do have a BA degree with a major in Economics from an Ivy League University, I am not a professor or professional economist.  However, I have been saying much of the same for months now.  That is that housing prices are still too high and there is still too much new construction.  We do not need new construction reduced to such and such levels - we need all new spec construction to come to a halt for at least a year.  Of course, that will not happen.  Instead new homes will be built, housing will continue to decline, more short sales and foreclosures will occur and more bailouts will be doled out to foolish banks and lenders.  It's an endless cycle of disaster.

With respect to the Middle Tennessee real estate market:

• 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

I have been saying since I moved here in September 2008 that the Middle Tennessee housing and commercial real estate market is significantly over built and that housing prices are still too high.  Since the peak of the real estate market in Middle Tennessee occurred in late 2007/early 2008 (i.e. 2 years later than most places) the market here will decline for a few more years.  Also, a large portion of the homes sold with 95-100% subprime and FHA financing which have high default rates so short sales and foreclosures will be high in Middle Tennessee.  Therefore, I predict that the Middle Tennessee real estate market will do worse than the US average over the next few years.

Prime Mortgages Make Up One Third of Foreclosure Actions

According to this Forbes.com article, Prime Mortgages Are Failing, between April and June of 2009 13% of all homeowners in the United States were either behind on their mortgage payments, or in foreclosure. If that is not bad enough news, the article goes on to state that while subprime (sub prime) ARM loan defaults decreased, the decrease was offset by large a large increase in the number of delinquent prime mortgages (that is mortgages to the most credit worthy borrowers who actually invested down payments, had verifiable jobs and excellent credit). The article quotes Jay Brinkmann, chief economist of the Mortgage Bankers Association (MBA), as stating "Prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five. While 41 states had increases in the foreclosure start rate for prime fixed-rate loans, 43 states had decreases in that rate for subprime (sub prime) adjustable-rate loans." According to the article, the MBA defines delinquencies as those between 30 and 90 days past due. Homeowners beyond 90 days past due, or in foreclosure, are identified as seriously delinquent. The article blames increasing unemployment and declining property values (think underwater homeowners) as the main causes of this huge increase in prime mortgage foreclosure starts. According to the article, California, Florida, Arizona and Nevada continue to make up the largest % of foreclosures, but that % has decreased from 46% in the 1st quarter of 2009 to 44% in the 2nd quarter of 2009. The article states that Florida is in particularly bad shape with 12% of mortgages in the process of foreclosure, and at least 22.8% are delinquent. Also, according to the article, there was a major jump in Federal Housing Authority (FHA) foreclosures.

Here is my synopsis of the real estate market based on the information above and other information.

• The most financially responsible borrowers (prime mortgagors) are hurting. Even large down payments are not enough to counter the huge price declines. More homeowners underwater = more foreclosures.
• Foreclosures are increasing in general. This will cause more price declines.
• While the "Fab 4" (California, Florida, Arizona and Nevada) are still the kingdoms of foreclosure and prices will surely continue to fall in those markets, the decrease in % of total foreclosures nationwide from 46% to 44% while overall foreclosures increased means that foreclosures in other states increased at a higher pace that the "Fab 4" states. This means prices will decline nearly everywhere.
• More distressed homeowners will cause more people to try to rent out their homes. Until prices decline to a point where monthly rents exceed total monthly housing payments prices will continue to decline. Rampant foreclosures will make sure prices actually head below this normal equilibrium.
• Government meddling (expanded FHA mortgages, tax credits, etc.) has not and will not work to save the real estate market. The market is correcting itself to sustainable levels. FHA mortgages are now failing at alarming rates. Tax payers will once again have to foot the bill for regulatory incompetence. It seems that very few people are stating the truth about the real estate market. That is that high housing prices are bad for people (especially lower income people) and high commercial real estate prices are bad for business, which is in turn bad for job growth. Also, real estate has never (until the last few years) been the driver of the economic bus. It has been the passenger, meaning that economic growth (and the resultant business, job and income growth) caused housing prices to increase and new construction to increase. Not the other way around. Any attempt to work in reverse logic = insanity.

Please be clear about my opinion. "The worst is yet to come." I have been saying this since early 2006 and I see no reason to change my outlook on the housing and commercial real estate markets.

Commercial Defaults Coming Fast and Furious

According to this Bloomberg.com article, Maguire to Surrender Buildings, No Bankruptcy Planned, Maguire Properties Inc., the largest office landlord in downtown Los Angeles, will give seven office buildings back to the lenders. The company has already given one of those buildings back to the lenders. They plan on giving the other six buildings back soon. According to the article the company told lenders "it will no longer continue to fund the cash shortfall" on the mortgages for the six buildings. Of the seven office buildings, two are already in default. The CEO of Maguire said that the company is not considering bankruptcy. According to the article, Maguire's decision is a sign that landlords in Southern California’s overleveraged office market can no longer make payments and may be forced to abandon properties.

In short, the real estate market is still in for a world of hurt in formerly fast growth areas such as CA, NV, AZ and FL. Rising commercial loan defaults will lead to large numbers of short sales and foreclosures. The coming ARM resets will cause even more problems. Together, they will wreak more havoc on the real estate markets across the US over the next 12-24 months. Only after these issues play out will we hit a true real estate bottom.

Great Blog Post: The Ridiculous Loan Modification Solution

According to this BrokerAgentSocial article, The Ridiculous Loan Modification Solution, Banks and Mortgage Lenders have no real incentive to offer struggling home owners a loan modification since a Barclay's study showed that "current loans receiving rate modifications will experience a 62% redefault rate and delinquent loans receiving rate modifications will experience an 83% redefault rate." The reasons that these loans will still go bad are simple:

1. The home owners were shaky from the beginning and so they are not the most financially responsible people to start with.
2. Their homes are worth far less than the their mortgage balances. Eventually these people realize that they will never "get even" and just give up by letting the go into foreclosure.

The result of all of this is that short sales are rely best solution for the lenders and the homeowners since it is statistically proven that loan modifications will not work. Regardless of what the all knowing Obama says, keeping people in their homes is not the answer to our real estate crisis. Letting the market hit bottom as soon as possible is.

Obama Administration Expands Housing "Rescue Plan"

According to this BusinessWeek article, Obama administration expands housing plan, the Obama Administration is expanding the coverage of its previous $50 billion housing rescue plan in order to cover more distressed homeowners. The previous plan has helped 55,000 homeowners avoid foreclosure via loan refinances and payment modifications. This new expansion will only aid homeowners by making it easier to give their homes back to the banks, or complete a short sale. While these add ons are certainly needed it still does not address the problem of the banks having too many REO's, or losing money and becoming insolvent. Of course, in my previous blog posts I beat up the initial plan since it omitted investors and homeowners whose homes were worth far less than the mortgage amount. These remain a source of a lot of foreclosures. In short, this new plan will do little to nothing to stop the decline of the housing market.

Government Meddling and Banks' Incompetence Will Cause More Home Price Declines

According to this RISMEDIA article, Are Banks Withholding Foreclosed Homes to Prop Sales?, banks are only marketing 30%-50% of the foreclosed homes they have on their books.  The article cites the possible reasons for this including government intervention in the form of foreclosure moratoria, banks' hopes that the government will offer them more than the foreclosed homes are worth and banks' unwillingness to take the losses now.  Unfortunately, I predict that the result of all of this is ultimately going to be a flood of these foreclosed homes coming on the market all at once whent eh pressure finally builds up to a peak, or a continued foreclosure problem for years to come as these homes keep coming onto the market even after the foreclosure problem has subsided.  The fact is you cannot escape reality forever.