Short Sales: Demand High, but Supply Low? Banks Making It More Difficult to Close Short Sales?
According to this Business Week article, Short Sales: A Fraying Lifeline for Homeowners, banks are making it more difficult for financially troubled homeowners to close short sales. According to the article, one year ago banks were responding to short sales in an average time period of 4.5 weeks and frequently forgiving the unpaid mortgage balances (i.e. the portion of the mortgage not paid off by the short sale), but now the banks are taking an average of 9.5 weeks to respond to short sale requests and frequently demanding that the seller sign a promissory for part of the shortage, or the seller (or someone else) pay additional cash funds to close the short sale. In short, one year ago banks were eager to close short sales due to their capital being depleted, but now, due to government bailout funds and record fee income (another way banks stick it to consumers), banks are being more difficult.
According to the article, "The situation could be a setback for the already wobbly housing recovery. A record one-third of borrowers owe more on their mortgage than their properties are worth, notes research firm First American CoreLogic. The number of underwater homeowners will only continue to rise since values are still falling. And if distressed borrowers can't negotiate short sales, more may be forced into foreclosure, further depressing prices. Since the housing bust, short sales have been a key part of the market. They accounted for 12% to 18% of national home sales over the course of this year. In such hard-hit areas as Miami and Phoenix, roughly a third of listings involve underwater mortgages, according to real estate brokerage ZipRealty."
The article quotes a Bank of America spokesperson as saying "A selling homeowner may be expected to reasonably participate in the shortfall on a sale, unless a financial hardship is demonstrated." According to the article, OneWest Bank has a policy which "requires borrowers who sell their homes for less than the mortgage to pay part of the difference. One West, formerly IndyMac Bancorp, was taken over last year by the Federal Deposit Insurance Corp. and purchased in March by a group of investors that includes billionaires George Soros and Michael S. Dell. As part of that deal, the FDIC agreed to eat most losses after the first $2.5 billion. Given the government's broad support of One West, some real estate agents and sellers are frustrated that the lender wants a promissory note—especially in cases where the government is picking up some losses." Again, this distortion of the market is due to government intervention. If the government had not provided any backstop for the losses incurred by this investor group they would be forced to deal with market realities instead of a government created profit opportunity. On another note, it is interesting to see that George Soros is making money by sticking it to sellers in financial distress. I find this particularly hypocritical since Mr. Soros is a major campaign contributor to the Democrats who supposedly "care about people". Anyone who thinks the Democrats are not using this financial crisis to financially benefit their largest campaign contributors on Wall Street, etc. needs to rethink their position (just look at all the money Barack Obama, Chris Dodd and Barney Frank received from AIG, Freddie Mac, Fannie Mae and George Soros).
According to the article short sales are further complicated when there are 2 different lenders involved, which usually happens when there are 2 or more mortgages on the property. The 2nd lenders, in particular, are demanding 5% of the sale proceeds in order to satisfy their 2nd mortgages. Thus far, I have not personally experienced this demand, but we will see. The article does mention that new government rules to encourage short sale transactions are imminent, but I personally do not have any hope that this government knows what they are doing so I don't think the rules will help much.
Based on the proven fact that lenders lose less with short sales versus foreclosures (due to less legal fees, property holding costs, maintenance costs, etc.), the banks should be favoring short sales, and, therefore, actively encouraging them. The question then is why are the banks making short sales more difficult? My guess is that the banks get more government bailout funds when they foreclose rather than approve short sales since with short sales the banks are voluntarily accepting their losses. I haven't seen any actual documented proof of why the banks are being difficult with respect to short sales, but there has to be a reason. Therefore, I think it has to do with the government bailout funds. Unfortunately, the indisputable conclusion of all of this is that more foreclosures will occur as a result of the actions taken by the banks.
If you are homeowner in financial distress the most important information to take from this article is that short sales are difficult to close so you should hire a knowledgeable short sale REALTOR to sell your home. This is different from the normal recommendation that a seller hire a neighborhood expert. Closing short sales requires a different skill set so you will need a different type of REALTOR to close your short sale.
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. 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 you can request help on my website JimTheRealEstateExpert.com and my Active Rain profile Jim McCormack's Active Rain Profile - Short Sale REALTOR and Real Estate Expert.
Monday, October 5, 2009
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.
Unemployment Rate Increases to 9.8% as Jobless Claims Come In Higher Than Expected
According to this New York Times article, Jobless Report Is Worse Than Expected; Rate Rises to 9.8%, the "American economy lost 263,000 jobs in September 2009, which was a lot more than was expected. As a result, the unemployment rate rose to 9.8%. This reduces the chances of the job market recovering by the end of 2009.
The US Labor Department raised concerns over huge government deficits coupled with high unemployment. The article stated "The numbers could intensify pressure on Congress to provide additional unemployment benefits and extend some programs that are set to expire toward the end of the year, such as tax credit for first-time homebuyers and health-insurance subsidies for people who lose their jobs."
According to the article, the government's stimulus efforts are not working to provide lasting employment. As an example, the article noted that state and local governments cut 47,000 jobs and auto dealerships (in the post "Cash for Clunkers" world) cut 7,100 jobs in September 2009. Also, the number of hours worked flattened and overtime hours declined in many industries. The article stated "while many businesses are making money again and seeing new orders trickle in, most are not ready to hire back the workers, even part-time. To economists, that suggests that unemployment could remain at historically high levels through next year, if not longer."
According to ean Baker, co-director of the Center for Economic and Policy Research, "People have been celebrating that we’re through the financial crisis, but the underlying issues are all still there. We’ve lost trillions of dollars in housing wealth, and consumption’s going to be weak. It’s not the ’30s, but there’s really nothing to boost the economy."
According to Andrew Stettner, deputy director of the National Employment Law Project, "This is still severe. It's not going to be turning around as fast as people want."
According to the article, there is a good chance that "other economic measures are beginning to waver, signaling that the initial phase of the recovery — a sharp rebound from a deep bottom — may be giving way to a long grind higher, marked by uncertainty and pain for many."
As I have been saying for quite some time now, this is only going to get worse. The problem was caused by too much debt. Now the economy needs to recede back down to a sustainable level not based on the high level of debt. The same goes for real estate - prices need to come down. All of this is going to result in more mortgage delinquencies, short sales and foreclosures.
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.
The US Labor Department raised concerns over huge government deficits coupled with high unemployment. The article stated "The numbers could intensify pressure on Congress to provide additional unemployment benefits and extend some programs that are set to expire toward the end of the year, such as tax credit for first-time homebuyers and health-insurance subsidies for people who lose their jobs."
According to the article, the government's stimulus efforts are not working to provide lasting employment. As an example, the article noted that state and local governments cut 47,000 jobs and auto dealerships (in the post "Cash for Clunkers" world) cut 7,100 jobs in September 2009. Also, the number of hours worked flattened and overtime hours declined in many industries. The article stated "while many businesses are making money again and seeing new orders trickle in, most are not ready to hire back the workers, even part-time. To economists, that suggests that unemployment could remain at historically high levels through next year, if not longer."
According to ean Baker, co-director of the Center for Economic and Policy Research, "People have been celebrating that we’re through the financial crisis, but the underlying issues are all still there. We’ve lost trillions of dollars in housing wealth, and consumption’s going to be weak. It’s not the ’30s, but there’s really nothing to boost the economy."
According to Andrew Stettner, deputy director of the National Employment Law Project, "This is still severe. It's not going to be turning around as fast as people want."
According to the article, there is a good chance that "other economic measures are beginning to waver, signaling that the initial phase of the recovery — a sharp rebound from a deep bottom — may be giving way to a long grind higher, marked by uncertainty and pain for many."
As I have been saying for quite some time now, this is only going to get worse. The problem was caused by too much debt. Now the economy needs to recede back down to a sustainable level not based on the high level of debt. The same goes for real estate - prices need to come down. All of this is going to result in more mortgage delinquencies, short sales and foreclosures.
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
Thursday, October 1, 2009
Over 15% of Option ARM Mortgages Seriously Delinquent
According to this Office of the Comptroller of the Currency Office of Thrift Supervision news release, OCC and OTS Release Mortgage Metrics Report for Second Quarter 2009, in the 2nd quarter of 2009 15.2% of the 900,000+ Payment Option Adjustable Rate Mortgages (Option ARM's) were seriously delinquent and 10% were in the process of foreclosure. Both of these figures are approximately triple the rates for all mortgages. The release defined Option ARM Mortgages as mortgages which "allow borrowers to choose from a variety of payment options each month, including payments that reduce principal, cover interest only, or result in unpaid interest being added to the balance of the loan, resulting in an increased amount owed."
Other important points covered in the release regarding default rates and foreclosures are:
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.
Other important points covered in the release regarding default rates and foreclosures are:
- The percentage of current and performing mortgages fell by 1.4 percent to 88.6 percent of the 34 million loans in the portfolios of reporting servicers.
- Economic factors continued to adversely affect credit quality, with delinquencies up across all risk categories—prime, Alt-A, and subprime. The percentage of serious delinquencies increased to 5.3 percent of all loans in the portfolio.
- Although delinquencies rose, the number of new foreclosure actions remained about the same as in the previous quarter. Total foreclosures in process continued to grow and reached 993,000 mortgages, or about 2.9 percent of the portfolio.
All I have to say is "wow". This is really bad. There is no way the real estate market is in any stage of recovery at this point in time. There will continue to be high levels of foreclosures and short sales for the next few years.
If you are a homeowner in Middle Tennessee who has one of these Option ARM Mortgages 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 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
Over 50% of Modified Loans in Default
According to this Office of the Comptroller of the Currency Office of Thrift Supervision news release, OCC and OTS Release Mortgage Metrics Report for Second Quarter 2009, when evaluated after 9 months over 50% of modified loans are 60 or more days past due. The news release doesn't actually say this. You need to read the supporting documentation, OCC and OTS Mortgage Metrics Report, to see the grim statistics.
Modified Loan Performance (from the OCC and OTS Mortgage Metrics Report)
As shown in Table 3 below, the percentage of loans that were 60 or more days delinquent or in the process of foreclosure rose steadily in the months subsequent to modification for all vintages for which data were available. Modifications made in third quarter 2008 showed the highest percentage of modifications that were 60 or more days past due following the modification. Modifications made during fourth quarter 2008 and first quarter 2009 performed better in the first three to six months after the modification than those made in the third quarter 2008.
As shown in Table 4 below, Loan Modifications on loans held in the servicers’ own portfolios continued to perform better than on loans serviced for others. This difference may be attributable to differences in modification programs and the servicers’ flexibility to modify loan terms to achieve greater affordability and sustainability.
As you can see as more time passes the percentage of homeowners who stop paying their modified loans increases across the board. The reasons are that loan modifications cannot help you if you lose your job, or have a home that is worth far less than the mortgage balance(s).
Modified Loan Performance (from the OCC and OTS Mortgage Metrics Report)
As shown in Table 3 below, the percentage of loans that were 60 or more days delinquent or in the process of foreclosure rose steadily in the months subsequent to modification for all vintages for which data were available. Modifications made in third quarter 2008 showed the highest percentage of modifications that were 60 or more days past due following the modification. Modifications made during fourth quarter 2008 and first quarter 2009 performed better in the first three to six months after the modification than those made in the third quarter 2008.
As shown in Table 4 below, Loan Modifications on loans held in the servicers’ own portfolios continued to perform better than on loans serviced for others. This difference may be attributable to differences in modification programs and the servicers’ flexibility to modify loan terms to achieve greater affordability and sustainability.
As you can see as more time passes the percentage of homeowners who stop paying their modified loans increases across the board. The reasons are that loan modifications cannot help you if you lose your job, or have a home that is worth far less than the mortgage balance(s).
If you are a homeowner who is having a hard time paying your mortgage you should try a loan modification first even though it is a low probability proposition and over 50% fail. At least a loan modification will buy you some time and help you in the short term if you can get approved. I would be glad to provide you with some FREE help so that you can increase your chances of obtaining a loan modification. If you live in the following areas, please contact me as I can help you solve your real estate problems since I am a Middle Tennessee 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
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