Wednesday, March 7, 2012
Friday, March 2, 2012
WSJ:Number of ‘Under Water’ Borrowers Rises
March 1, 2012, 4:18 PM ET.Number of ‘Under Water’ Borrowers Rises.
The number of U.S. homeowners owing more on their home loans than their properties are worth increased at the end of last year, highlighting a continuing source of weakness for the economy.
CoreLogic, a real estate data provider, said Thursday that 11.1 million, or 22.8%, of American households with a mortgage were “under water” at the end of last year. That was up from 10.7 million, or 22.1%, of properties in the third quarter of 2011.
In addition, fourth-quarter data showed that about 2.5 million borrowers had less than 5% equity in their homes, CoreLogic said.
The figures were the highest level of negative equity since the third quarter of 2009, when CoreLogic started reporting negative equity statistics using its current methodology.
Negative equity is closely linked with foreclosures, since homeowners without equity in their properties have trouble refinancing or selling their homes in the event they lose their job or need to relocate. As the Federal Reserve noted in a January paper, negative equity “constrains a homeowner’s ability to remedy financial difficulties.”
Nevada had the highest level of negative equity at the end of last year at 61% of all properties with a home loan. It was followed by Arizona (48%), Florida (44%), Michigan (35%) and Georgia (33%).
“Negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures,” said Mark Fleming, chief economist with CoreLogic.
Of those “under water” borrowers, 6.7 million had no second mortgage. They owed 130% of their property’s value on average. The remaining 4.4 million had two loans. On average, they owed 138% of their property’s value.
The number of U.S. homeowners owing more on their home loans than their properties are worth increased at the end of last year, highlighting a continuing source of weakness for the economy.
CoreLogic, a real estate data provider, said Thursday that 11.1 million, or 22.8%, of American households with a mortgage were “under water” at the end of last year. That was up from 10.7 million, or 22.1%, of properties in the third quarter of 2011.
In addition, fourth-quarter data showed that about 2.5 million borrowers had less than 5% equity in their homes, CoreLogic said.
The figures were the highest level of negative equity since the third quarter of 2009, when CoreLogic started reporting negative equity statistics using its current methodology.
Negative equity is closely linked with foreclosures, since homeowners without equity in their properties have trouble refinancing or selling their homes in the event they lose their job or need to relocate. As the Federal Reserve noted in a January paper, negative equity “constrains a homeowner’s ability to remedy financial difficulties.”
Nevada had the highest level of negative equity at the end of last year at 61% of all properties with a home loan. It was followed by Arizona (48%), Florida (44%), Michigan (35%) and Georgia (33%).
“Negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures,” said Mark Fleming, chief economist with CoreLogic.
Of those “under water” borrowers, 6.7 million had no second mortgage. They owed 130% of their property’s value on average. The remaining 4.4 million had two loans. On average, they owed 138% of their property’s value.
Sunday, February 26, 2012
Short sales are better than Foreclosures even for banks
23
Feb
2012 McGeough Lamacchia Realty Study Shows Short Sales Are Better for Banks Than ForeclosuresPosted in Short Sale News | 2 Comments
McGeough Lamacchia Realty compiled data from MLS for short sale and lender owned (foreclosure) homes sold in 2010 and 2011 in five major markets: Boston, Phoenix, Tucson, Southern California (Orange, Los Angeles, Riverside, and San Bernardino Counties), and Southwest Florida (Lee, Charlotte, Collier, and Hendry Counties).
The data shows that for the past two years, selling prices for short sale homes were considerably higher than prices for lender owned homes:
As you can see, the average short sale home sold for 24% more than a lender owned home in 2011. This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale. And this does not include the cost of foreclosing and additional missed payments. There were more short sales and foreclosures in 2011 than in 2010, and we expect to see this increase in 2012.
Banks take in more revenue from short sales than from foreclosures so it’s not surprising many banks are offering cash incentives to distressed homeowners to move out of homes they can no longer afford. But more needs to be done to promote short sales. In 2009, the Obama Administration introduced the Making Homes Affordable Program for struggling homeowners, which included the HAFA Program that also provides homeowners with a cash incentive to do a short sale. The program has since been modified and has been a great success, however, Fannie Mae and Freddie Mac have not adopted the most recent updates.
Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure. An article in HousingWire last month reported that Fannie Mae and Freddie Mac actually charge servicers for taking too long to complete the foreclosure process. Bank of America, for instance, had to pay Fannie and Freddie $1.3 billion in foreclosure delay penalties in the first nine months of 2011. Instead of speeding up foreclosures, Fannie and Freddie should make doing a short sale easier.
* Orange, Los Angeles, Riverside and San Bernardino Counties, CA
** Lee, Charlotte, Collier, and Hendry Counties, FL. Total sales within + or -5% margin of error; however, the average selling prices are exact.
Feb
2012 McGeough Lamacchia Realty Study Shows Short Sales Are Better for Banks Than ForeclosuresPosted in Short Sale News | 2 Comments
McGeough Lamacchia Realty compiled data from MLS for short sale and lender owned (foreclosure) homes sold in 2010 and 2011 in five major markets: Boston, Phoenix, Tucson, Southern California (Orange, Los Angeles, Riverside, and San Bernardino Counties), and Southwest Florida (Lee, Charlotte, Collier, and Hendry Counties).
The data shows that for the past two years, selling prices for short sale homes were considerably higher than prices for lender owned homes:
As you can see, the average short sale home sold for 24% more than a lender owned home in 2011. This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale. And this does not include the cost of foreclosing and additional missed payments. There were more short sales and foreclosures in 2011 than in 2010, and we expect to see this increase in 2012.
Banks take in more revenue from short sales than from foreclosures so it’s not surprising many banks are offering cash incentives to distressed homeowners to move out of homes they can no longer afford. But more needs to be done to promote short sales. In 2009, the Obama Administration introduced the Making Homes Affordable Program for struggling homeowners, which included the HAFA Program that also provides homeowners with a cash incentive to do a short sale. The program has since been modified and has been a great success, however, Fannie Mae and Freddie Mac have not adopted the most recent updates.
Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure. An article in HousingWire last month reported that Fannie Mae and Freddie Mac actually charge servicers for taking too long to complete the foreclosure process. Bank of America, for instance, had to pay Fannie and Freddie $1.3 billion in foreclosure delay penalties in the first nine months of 2011. Instead of speeding up foreclosures, Fannie and Freddie should make doing a short sale easier.
* Orange, Los Angeles, Riverside and San Bernardino Counties, CA
** Lee, Charlotte, Collier, and Hendry Counties, FL. Total sales within + or -5% margin of error; however, the average selling prices are exact.
Nearly 25 % of Households Use Over 1/2 of Income for Housing Costs
Nearly 1 in 4 Households Use Over 1/2 of Income for Housing Costs
By: Esther Cho 02/24/2012
Even with falling home prices, a study from the Center for Housing Policy found that affordability is still becoming increasingly out of reach for homeowners and renters. According to the 2012 Housing Landscape report released by the Center, the share of working households paying more than half their income for housing between 2008 and 2010 went up from 21.8 percent to 23.6 percent.Source: Center for Housing Policy
As home prices dropped between 2008 and 2010, working homeowners also dealt with shrinking paychecks. For working homeowners over the two-year period, incomes dropped twice as much as housing costs, according to the study.
Jeffrey Lubell, executive director of the Whington-based Center, said this was primarily due to a drop in average hours worked among moderate-income homeowners.
“The data show that homeowners have been hit hard by the housing crisis in more ways than just lost equity,” Lubell explained. “Many working homeowners have been laid off or had their hours cut.”
According to the study, the monthly median income for working homeowners’ fell from $43,570 in 2008 to $41,413 in 2010, which is about a 5 percent decrease. The median number of hours worked per week dropped from 50 to 48 between the two years, which partly explains the decrease in income.
For renters, the monthly median income fell 4 percent from $31,570 to $30,229 between the two years. Housing costs for renters also increased, up by 4 percent over the same period.
Laura Williams, author of the report, said rent rose because of increased demand for rental housing, which was partly encouraged by the housing market crises.
“More and more people are interested in renting,” Williams said. “Some prefer it because it allows them to be more mobile in a tough job market. Others are postponing purchasing a home or facing difficulties obtaining a mortgage. Given the long lead times involved in responding to increased demand with increased supply, the rental market has tightened somewhat and rents increased.”
The five states with highest share of working households with a severe housing cost burden in 2010 were California (34%), Florida (33%), New Jersey (32%), Hawaii (30%), and Nevada (29%).
The five metropolitan areas with the highest share of working households with a severe housing cost burden in 2010 were Miami-Fort Lauderdale-Pompano Beach, Florida (43%); Los Angeles-Long Beach-Santa Ana, California (38%); San Diego-Carlsbad-San Marcos, California (37%); Riverside-San Bernardino-Ontario, California (35%); and New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania (35%).
Moody Analytics Outlines 25Billion Settlement Impact
Moody's Analytics Outlines Settlement Impact for Banks and Borrowers
By: Esther Cho 02/24/2012
After more than a year of intense negotiations, 49 state attorneys general and the nation’s five largest mortgage servicers reached a $25 billion settlement on February 9. While the agreement allotted specific amounts to go towards certain areas of relief for borrowers, including $10 million to write down principal on underwater mortgages, many are wondering how the decision between federal and state officials and the nation’s top servicers will impact the housing market.
Moody’s Analytics released a report with an analysis of the settlement’s expected impact on banks and borrowers.
Impact on banks
As for the servicers included in the settlement – Bank of America, Wells Fargo, J.P. Morgan and Citigroup, and Ally Financial – the report stated, “the settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing.”
More specifically, the report stated, “Bank of America, Wells Fargo, J.P. Morgan, and Citigroup have each publicly disclosed that the settlement will have little to no additional financial effect on the banks, outside of a modest reduction in interest income over the life of any modified loans.”
This is in part due to the fact that “existing litigation and loan-loss reserves mostly cover the related costs” for the banks.
The banks are still vulnerable to other lawsuits outside of the settlement from individuals or through a class action suit.
The settlement also includes new standards for how banks service loans and practice foreclosure proceedings, including a ban on robo-signing.
Impact on borrowers
The report projects that foreclosure timelines will be lengthened due to the requirement for servicers to review loans for principal forgiveness, causing a delay for servicers when referring loans to foreclosure. According to the report, Florida and California should be more significantly affected since they were awarded the highest proportion of funds from the settlement.
Borrowers will have greater protection since servicers and insurance providers will not be able to charge high premiums when force placing insurance and must instead charge commercially reasonably prices. A third-party review process will also be set in place offering more protection to borrowers since it will hold servicers accountable for meeting certain goals and deadlines.
The Mood Analytics stated that “the reviews will likely assess whether or not servicers are making reasonable and timely modification decisions on behalf of both borrowers and investors and are implementing the key operation provisions of the settlement.”
Out of the $25 billion, the settlement allocates $10 billion for principal reduction; $7 billion in relief for other types of support including forbearance and short sales; $3 billion for refinancing underwater homes; $1.5 billion for those wrongfully foreclosed on between 2008 and 2011; and $3.5 billion for state housing programs.
While the settlement proved to be a disappointment to some since it does not include Fannie Mae and Freddie Mac loans, Moody’s Analytics stated that the settlement is still significant.
“The number of distressed homeowners helped is modest in the context of the estimated 14.6 million underwater homeowners, a sore point for many critics of the settlement. Nonetheless, the number is significant,” stated Moody’s Analytics in the written report. “Keeping even half a million households out of foreclosure or a short sale would be enough to curb the flow of foreclosed, vacant properties into the market, and thus relieve downward pressure on house prices nationwide and allowing prices to stabilize this year.”
The Moody’s Analytics also expects to see Nevada, Arizona, California, Florida, Ohio, and Michigan to benefit the most since those states experienced the worse price declines and have the highest share of homes underwater.
©2012 DS News. All Rights Reserved.
By: Esther Cho 02/24/2012
After more than a year of intense negotiations, 49 state attorneys general and the nation’s five largest mortgage servicers reached a $25 billion settlement on February 9. While the agreement allotted specific amounts to go towards certain areas of relief for borrowers, including $10 million to write down principal on underwater mortgages, many are wondering how the decision between federal and state officials and the nation’s top servicers will impact the housing market.
Moody’s Analytics released a report with an analysis of the settlement’s expected impact on banks and borrowers.
Impact on banks
As for the servicers included in the settlement – Bank of America, Wells Fargo, J.P. Morgan and Citigroup, and Ally Financial – the report stated, “the settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing.”
More specifically, the report stated, “Bank of America, Wells Fargo, J.P. Morgan, and Citigroup have each publicly disclosed that the settlement will have little to no additional financial effect on the banks, outside of a modest reduction in interest income over the life of any modified loans.”
This is in part due to the fact that “existing litigation and loan-loss reserves mostly cover the related costs” for the banks.
The banks are still vulnerable to other lawsuits outside of the settlement from individuals or through a class action suit.
The settlement also includes new standards for how banks service loans and practice foreclosure proceedings, including a ban on robo-signing.
Impact on borrowers
The report projects that foreclosure timelines will be lengthened due to the requirement for servicers to review loans for principal forgiveness, causing a delay for servicers when referring loans to foreclosure. According to the report, Florida and California should be more significantly affected since they were awarded the highest proportion of funds from the settlement.
Borrowers will have greater protection since servicers and insurance providers will not be able to charge high premiums when force placing insurance and must instead charge commercially reasonably prices. A third-party review process will also be set in place offering more protection to borrowers since it will hold servicers accountable for meeting certain goals and deadlines.
The Mood Analytics stated that “the reviews will likely assess whether or not servicers are making reasonable and timely modification decisions on behalf of both borrowers and investors and are implementing the key operation provisions of the settlement.”
Out of the $25 billion, the settlement allocates $10 billion for principal reduction; $7 billion in relief for other types of support including forbearance and short sales; $3 billion for refinancing underwater homes; $1.5 billion for those wrongfully foreclosed on between 2008 and 2011; and $3.5 billion for state housing programs.
While the settlement proved to be a disappointment to some since it does not include Fannie Mae and Freddie Mac loans, Moody’s Analytics stated that the settlement is still significant.
“The number of distressed homeowners helped is modest in the context of the estimated 14.6 million underwater homeowners, a sore point for many critics of the settlement. Nonetheless, the number is significant,” stated Moody’s Analytics in the written report. “Keeping even half a million households out of foreclosure or a short sale would be enough to curb the flow of foreclosed, vacant properties into the market, and thus relieve downward pressure on house prices nationwide and allowing prices to stabilize this year.”
The Moody’s Analytics also expects to see Nevada, Arizona, California, Florida, Ohio, and Michigan to benefit the most since those states experienced the worse price declines and have the highest share of homes underwater.
©2012 DS News. All Rights Reserved.
Tuesday, February 21, 2012
FHA waives 3 year Wait Time for Short Sellers
SUBJECT: FHA Waives 3-YR Wait Time For Short Sellers
This may help a few of your clients who have already "short sold" their home...or it can make a big difference to your future clients who are considering a "short sale" in the future.
FHA has financing for homeowners who are short selling their home and wants to repurchase another home after the short sale is approved and completed thru their current lender.
There are a number of home owners who will qualify for this program by meeting the "extenuating circumstances" criteria.
If marketed correctly.....this loan program will deposit commissions into your bank account; by persuading those homeowners to "list" with you because YOU have a lender that can provide financing for their next property.
In other words...there will be "life (home ownership) after foreclosure" following their short sale.
The CAVEATS are:
1) They must be current on their mortgage and all other credit obligations for the 12 months prior to the actual short sale completion date.
Editor Note: Contrary to popular belief .. a "short sale" in and by itself is a not a credit score killer! The damage to a borrower's credit score by the number of “lates” incurred during the "ramp up" to the short sale.
Also note...there is absolutely no discernible difference between a "short sale", a foreclosure or a loan mod in relationship to Fico scores.
FHA/Fannie/ Freddie see all 3 events listed below as equally negative to each other.
2) Home owners must document "hardship" defined as:
a) Job loss and subsequent job transfer/ relocation... (a new stream of income will be needed to qualify for the new loan).
b) Catastrophic medical bills (and/ or possible death) incurred by a member of the borrower's "nuclear family" (i.e. co signer of the current mortgage..child...spouse..or other dependent as listed on the borrower's tax returns).
3) They must be downsizing and relocating. Buying a bigger home across the street will not fly.
4)Their current lender(s) must be willing to approve the short sale of their current residence.
5) Their credit scores need to be above 620 and any outstanding collections (usually medical bills) need to be paid THRU ESCROW (ONLY) at COE.
This may help a few of your clients who have already "short sold" their home...or it can make a big difference to your future clients who are considering a "short sale" in the future.
FHA has financing for homeowners who are short selling their home and wants to repurchase another home after the short sale is approved and completed thru their current lender.
There are a number of home owners who will qualify for this program by meeting the "extenuating circumstances" criteria.
If marketed correctly.....this loan program will deposit commissions into your bank account; by persuading those homeowners to "list" with you because YOU have a lender that can provide financing for their next property.
In other words...there will be "life (home ownership) after foreclosure" following their short sale.
The CAVEATS are:
1) They must be current on their mortgage and all other credit obligations for the 12 months prior to the actual short sale completion date.
Editor Note: Contrary to popular belief .. a "short sale" in and by itself is a not a credit score killer! The damage to a borrower's credit score by the number of “lates” incurred during the "ramp up" to the short sale.
Also note...there is absolutely no discernible difference between a "short sale", a foreclosure or a loan mod in relationship to Fico scores.
FHA/Fannie/ Freddie see all 3 events listed below as equally negative to each other.
2) Home owners must document "hardship" defined as:
a) Job loss and subsequent job transfer/ relocation... (a new stream of income will be needed to qualify for the new loan).
b) Catastrophic medical bills (and/ or possible death) incurred by a member of the borrower's "nuclear family" (i.e. co signer of the current mortgage..child...spouse..or other dependent as listed on the borrower's tax returns).
3) They must be downsizing and relocating. Buying a bigger home across the street will not fly.
4)Their current lender(s) must be willing to approve the short sale of their current residence.
5) Their credit scores need to be above 620 and any outstanding collections (usually medical bills) need to be paid THRU ESCROW (ONLY) at COE.
Subscribe to:
Posts (Atom)