SCARY STUFF: About half of U.S. mortgages seen underwater by 2011

According to this Reuters article, About half of U.S. mortgages seen underwater by 2011, a Deutsche Bank report states that "the percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March (2009)." According to the Deutsche Bank report, home price declines will affect "conforming" or "prime" borrowers (i.e. those that put 20% down, had documentable income and good credit" the most. The report goes on to state that 41% of prime conforming loans will be underwater by the first quarter of 2011, up from 16% at the end of the first quarter 2009 and 46% percent of prime jumbo loans will be underwater, up from 29%. The report goes on to state that 69% of subprime loans, will be greater than the underlying property value in 2011 (up from 50%) and 89% of option adjustable-rate mortgages (option ARM's), which artificially reduced payments by allowing payments to be lower than the interest due resulting in increasing principal balances, will be underwater in 2011, up from 77%.
In June 2009 Deutsche Bank covered 100 U.S. metropolitan areas and forecast home prices would fall 14% through the 1st quarter of 2011 for a total drop of 41.7%.

The Deutsche Bank reports stated that the regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. The report added that Las Vegas and parts of Florida and California will see 90% or more of their loans underwater by 2011.
The Deutsche Bank analysts stated that "For many, the home has morphed from piggy bank to albatross."
The Reuters article states that "the drop in home prices is fueling a vicious cycle of foreclosures as it eliminates homeowner equity and gives borrowers an incentive to walk away from their mortgages. The more severe the negative equity, the more likely are defaults, since many borrowers believe prices will not recover enough." (Translation: homeowners will walk away from their homes and give the keys back to the banks once they realize their homes will never be worth enough to pay off the debt.)

The above is more evidence that this housing market mess is far from over despite the nonsense you hear from the National Association of REALTORS (NAR) and the Obama Administration. There will be high numbers of foreclosures and short sales for years to come.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including loan modifications or short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. 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 do need to short sell your home (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), 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 Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Fannie Mae Loses $14.8 Billion in 2nd Quarter of 2009

According to this Fannie Mae News Release, Fannie Mae Reports Second-Quarter 2009 Results, Fannie Mae lost $14.8 billion in the 2nd quarter of 2009. The news release states "Second-quarter results were driven primarily by $18.8 billion of credit-related expenses, reflecting the ongoing impact of adverse conditions in the housing market, as well as the economic recession and rising unemployment." Translation: loan defaults and foreclosures are killing them. Mark my words, this is only going to get worse.

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.

98 of the Top 100 Metropolitan Areas Lost Jobs Over the Period of June 2008 to June 2009

According to this Nashville Business Journal article, 98 of top 100 metros suffer job losses, almost all major metropolitan areas lost jobs over the period of June 2008 to June 2009. New York City, Los Angeles and Chicago where the hardest hit with over 200,000 jobs lost. Atlanta, Detroit and Phoenix each lost over 100,000 jobs. The Nashville Metropolitan area (generally Nashville, Davidson County, Williamson County (Franklin and Brentwood) and Rutherford County (Murfreesboro and Smyrna) was in the middle of the pack with 32,800 jobs lost. All of this means more unemployed people with a result of more delinquencies, foreclosures (REO's) and short sales. the effect of this will be continued dampening of the real estate market.