RealtyTrac, a leading online marketplace for foreclosure properties released its Q2 2010 U.S. Foreclosure Sales Report, which shows that foreclosure homes accounted for 24% of all residential sales in the second quarter of 2010 and that the average sales price of properties that sold while in some stage of foreclosure was more than 26% below the average sales price of properties not in the foreclosure process—down slightly from a 27% average discount in the first quarter.
A total of 248,534 U.S. properties in some stage of foreclosure—default, scheduled for auction or bank-owned (REO)—sold to third parties in the second quarter, an increase of nearly 5% from the previous quarter, but still down 20% from the second quarter of 2009.

“While foreclosure sales increased in the second quarter, non-foreclosure sales increased even more, spurred on by the home buyer tax credit that expired during the quarter,” said James J. Saccacio, chief executive officer of RealtyTrac. “That had the net effect of lowering foreclosure sales as a percentage of total sales during the quarter, but that may be a temporary dip as the removal of the tax credit could drive more buyers back to discounted short sales and REOs.”

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Posted in: Foreclosure
Tags: bank owned reo, foreclosure homes, foreclosure properties, foreclosure sales, home buyer, reo sales, residential sales, second quarter

The Home Affordable Modification Program (HAMP) was expected to help between three to four, million Americans who could no longer afford their mortgage payments. To date, less than 500,000 homeowners have gained modification help.

Homeowners seeking loan modifications are finding it difficult to keep up with payments, while trying to obtain answers from lenders.

Home prices are at an all-time low, as some homeowners wait to sell unaffordable homes. Low mortgage rates, coupled with a semi-optimistic buyers’ market, may mean changes are underway. Yet, home sales remain stagnant as buyers consider alternative housing options. Thousands of homeowners caught in limbo are seeking lender assistance.

According to a Treasury Department press release, lenders are receiving more than 8,000 phone calls related to HAMP daily. This pales in comparison to the number of lender representatives available to answer these calls. As a result, thousands of homeowners seeking a HAMP application or mortgage modification application are being put on hold, in more ways than one.

Another reason why home-modification applications are not being approved is directly linked to Fannie Mae. Homeowners who have Fannie Mae loans can no longer qualify for a modification arrangement, if unemployed. Previously, unemployed homeowners were applying for modifications by including unemployment benefits as a form of income. Fannie Mae has recently put a stop to these applications by disallowing the use of unemployment benefits as a means of steady income.

Fannie Mae representative, Amy Bonitatibus, recently told CNN that the company does not “want to set up borrowers to fail.” Instead, Fannie Mae has employed a tough-love tactic that has left thousands of homeowners in the dark. The Treasury Department issued a similar restriction involving HAMP loans this past July.

There are some other speculations as to why more mortgages are not being modified. Some believe that banks simply aren’t seeing enough government incentives, while others believe that fees charged for missed payments are more enticing to servicers than loan modifications.

Lenders argue that home modifications take time, and that many homeowners aren’t qualifying for a mortgage modification regardless of current hardships. Whatever the reason, HAMP hopefuls will have to keep making mortgage payments or risk foreclosure.

Posted in: Foreclosure
Tags: fannie mae, HAMP, modification applications, mortgage payments, unemployment benefits

Remember how everyone complained that banks weren’t doing enough to help troubled borrowers?

Well …

Banks have realized that foreclosing on home after home after home may not be in anyone’s best interest — least of all their own. So they’ve ramped up the number of loan modifications they’re handing out to their delinquent clients.

Banks are doing nearly twice as many modifications under their own foreclosure prevention initiatives than under the Obama administration’s signature Home Affordable Modification Program, known as HAMP.

But before homeowners rejoice, they should take a close look at the terms of their bank modification offers, consumer advocates say. Many may not be as good as HAMP, which lowers monthly payments to 31% of pre-tax income.

“We don’t know if they are sustainable based on the monthly payment,” said John Snyder, manager of foreclosure prevention programs at NeighborWorks America, adding banks don’t release a lot of information about their modifications. “We’re not sure what to think.”

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Posted in: Foreclosure
Tags: consumer advocates, foreclosure prevention programs, mortgage servicers, obama, prevention initiatives

Unemployed homeowners cannot count jobless benefits as income when applying for mortgage modifications if they have loans backed by Fannie Mae. That could greatly limit their ability to get a long-term reduction in their monthly payments.

Because the jobless benefits can’t be considered permanent income, the lender will instead evaluate troubled borrowers for forbearance plans of up to six months. The new guidelines, released Tuesday, will take effect Nov. 1.

“We don’t want to set up borrowers to fail, said Amy Bonitatibus, Fannie Mae spokeswoman.

Fannie Mae’s announcement broadens a ban already put in place from the Treasury Department. In July, the agency quit allowing unemployment insurance to be used as income when applying for the administration’s signature Home Affordable Modification Program, known as HAMP. Previously, borrowers had been allowed to do so.

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Posted in: Foreclosure
Tags: delinquencies, fannie mae, jobless benefits, mortgage market, unemployment benefits, unemployment insurance

Is it really a good idea to purchase a distressed home? What is a distressed home anyway and why is everyone talking about it? A distressed home is a property under foreclosure or a home sold because the homeowner could no longer afford to continue paying the mortgage. Other lenders would agree to a short sale because they can earn more through this than foreclosing the home. However, most lenders would foreclose the property and have it for sale at a discounted value.

There are a lot of distressed homes sold in the country today. In fact, they take up about half of the properties sold in the market. Although this is the case, not all homebuyers are excited to make the purchase. This is because transactions related to these types of properties are longer. There are also more requirements and more paper works. The processes are even frustrating at times and no buyer would want to deal with it.

The advantages

The process is long and there are different drawbacks you might want to avoid, but there are also advantages especially in this type of market. First, you have lots of options. Not only are the properties inexpensive but there are also a lot to choose from. You do not have to worry about the condition of the homes too because most of them are in good shape. Sellers are aware of the competition, thus they know that they have to take care of their properties if they want to sell it.

Since we are in a buyers’ market, negotiation is much easier. Sellers are friendlier and are more open to different conditions set by buyer. This is because sellers are more motivated. They want to sell the property as soon as possible.

Aside from homeowners, lenders want to sell the foreclosed properties right away too. This is because they will not earn from the property while it is in their possession. They even have to spend for its maintenance. The faster they can sell the homes, the faster they can generate money.

The auction

Lenders sell foreclosed properties through an auction. This means that the property will be given to the best bidder. This can be a challenge because there are a growing number of bidders. However, if you do your homework and research about the value of the home, you can come up with a bidding strategy. This will also prevent you from bidding more than what you should.

Purchasing a distressed home

Purchasing a distressed home is not easy, which is why it is best to work with a professional. An agent can present you with all possible options as he has access to updated MLS. He will also help you with many things like finding the most suitable home, making an offer and negotiating. He will also help you with all the requirements you need. This means that the purchase will be more bearable.

It is also important that you value time when purchasing a distressed home. So make sure that you have your loan approved to avoid problems.

Purchasing a distressed home can be difficult. However, if you are prepared you will do just fine.

Original Article

Posted in: Foreclosure
Tags: auction, buyers market, foreclosed properties, Foreclosure, homebuyers

You want to buy a foreclosure? Remember, there are both great opportunities and great pressures and pitfalls in this market.

First, you have to decide at what stage of foreclosure you want to buy. There are three options: 1. pre-foreclosure; 2. sheriff’s auction; 3. repossession, called REO (for real estate owned by the bank).

“The safest and best way to buy is when it’s a bank-owned property,” said Rick Sharga, a spokesman for RealtyTrac, the online marketer of foreclosure properties.

Pre-foreclosure: These homes are in the foreclosure process, but they have yet to be sent to auction. Owners are typically trying to unload them because they are “underwater,” owing more on the homes than they are worth.

As a result, potential buyers must negotiate a deal with the lender as well as the owner. That makes buying at this stage of foreclosure complicated and slow. But, you have the advantage of being able to inspect the home before purchase — which isn’t the case in other types of foreclosure sales. Sharga warned, however, that prices are usually higher than at other stages of foreclosure.

Sheriff’s auction: These sales yield the lowest prices, but they are fraught with difficulties. Often the house is unavailable for inspection, leaving buyers with a long list of expensive repairs — and much larger bill than they intended. This stage is usually best left to the professionals, the contractors and investors who regularly bid on these places and know what they’re doing.

Repossession: This occurs after the home has gone through a sheriff’s auction but does not sell and the bank gains possession of the property. Homebuyers may not get the best bargains during this stage, but they can nearly always perform a thorough inspection before closing, minimizing costly surprises. Plus, the property comes with a clear title.

In addition, the banks selling these places may extend preferential financing terms to the buyers and may have made some repairs before putting the property on the market.

Even in this safer stage, though, homes are still usually sold in “as is” condition. “That means the bank won’t pay for cosmetic issues,” said Adam Wiener, a spokesman for the Redfin, the online real estate marketer. “Although, they will often pay for some or all of repairs that are health and safety issues. That makes the home inspection even more critical.”

He also pointed out that, since you’re buying from a corporation, not an individual, the buying process can be faster, so be prepared to move quickly. Many times a listing goes on sale on a Friday and is sold over the weekend.

“The buyers and their agents need to be on top of everything from the inspection to the financing,” said Wiener. “Some banks will even charge a per diem fee for late closings.”

Once you’ve decided which type of home to buy, there are several common mistakes foreclosure buyers should take care to avoid. These include:

Getting caught up in a bidding frenzy: The banks often under-price repossessions, hoping to generate excitement, attract multiple bids and sell them quickly. The problem is, as in any auction-type sale, bidders get excited and pay too much.

“Remember,” said Sharga, “there are 800,000 REOs in the banks’ inventories. There’ll be another home to bid on tomorrow.”

Underestimating repair costs: Take full advantage of the home inspection and don’t delude yourself about much the repairs will cost.

“Take along someone who can give you a good estimate of how much repair costs will come to,” said Sharga.

Redfin coaches its agents to warn buyers to factor in a cushion of 10% to 20% of the purchase price to pay for unexpected repairs. “If you end up not using it, go on vacation after 6 months,” Wiener said.

Not knowing what comparable properties cost: This is important in any market but especially in this endeavor. In high foreclosure areas, prices can be eroding very quickly. You want to have the latest homes sale prices on repossessed properties and try to keep your bid comparable or lower.

Buying in a neighborhood flooded with foreclosures: This is most important for people buying for the short-term. Any neighborhood saturated with REOs and foreclosures may be headed for further price falls. If you’re planning to relocate within a few years or buying a bigger house, that could mean selling at a loss. A better bet, if you can find it, is to buy the only foreclosed home in an otherwise stable community. That’s more likely to hold its value.

Not having financing in place: If you don’t have a pre-approved mortgage, you’re really not in the market. “You have to be able to move quickly,” Sharga said.

Banks don’t want to dilly-dally on sales; they’re losing money every day that homes sit on the market. That means they’ll often jump on the highest bid with the best financing already in place.

Having a loan beforehand carries another advantage: It tells you how much credit you have available. You won’t spend time shopping for homes that are too expensive.

Remember that pre-approved financing is different from pre-qualified financing; it means the loan is ready to go. Pre-qualified is more like an opinion of a loan officer and there’s still work to be done before final approval.

Posted in: Foreclosure
Tags: auction, bank owned property, banks, foreclosure properties, foreclosure sales, Real estate

Can rates of car ownership predict mortgage performance?

According to some new research from two environmental groups, the answer is yes.

The National Resources Defense Council, an environmental advocacy organization, and the Center for Neighborhood Technology, a Chicago group that promotes urban sustainability, have completed a study of 40,000 mortgages in three cities over a 30-year period. After controlling for income, the groups found that the probability of mortgage foreclosure increased as neighborhood car ownership levels rose.

In other words, “location efficient” communities – where public transit options are available – can contribute to the financial stability of its residents. The reasoning: If the homeowners don’t need to own a car, they can save money on transportation costs (including lease and purchase costs, maintenance, insurance, gas and parking). They are then better positioned to weather negative financial circumstances – say, a spike in the price of gas or a job loss. (Transportation costs account for roughly 17% of the average American household’s expenditures, the second-largest budget item behind housing, according to 2008 figures from the Bureau of Labor Statistics.)

The report recommends that lenders include measures of location efficiency and borrowers’ transportation costs in their underwriting decisions – “providing proportionally better borrowing terms for purchasers of location-efficient homes,” the report says. But Jennifer Henry, the real estate sector manager in the Center for Market Innovation at the NRDC, says that location efficiency isn’t a determining factor in mortgage default or foreclosure – it’s an additional characteristic that, when taken into account, “makes your ability to predict foreclosure more accurate.”

Indeed, the link between transportation expenses and ability to pay the mortgage is somewhat tenuous, says John Taylor, president of the National Community Reinvestment Coalition, a housing advocacy group. Transportation costs represent “a tangential relationship” to mortgage default, he says. For homeowners who are behind on their mortgage – because of a job loss or an increased monthly payment – getting rid of a car might help only so much. Job loss and unsuitable mortgages with unsustainable terms and conditions are more directly tied to foreclosure, adds Taylor.

Talk of how “walkability” boosts home values isn’t new. A study by CEOs for Cities, a network of urban leaders and corporate executives, published last year found a positive correlation between an area’s walkability – proximity to shopping, services, schools and parks – and housing prices in 13 of the 15 housing markets studied.

“Prices of property around transit-oriented developments – especially new developments – have increased or at least kept their value,” says Sarah Catz, a research specialist at the University of California, Irvine’s Institute of Transportation Studies. Catz says she is currently doing research that shows that property increases in value when you bring transit into a region or area.

A mortgage product based in part on a borrower’s access to public transit has existed. The Center for Neighborhood Technology (in partnership with Fannie Mae) developed a location-efficient mortgage program in the 1990s. Just a few cities experimented with these products, including Seattle and Chicago, but only about 300 of the mortgages were made, says Henry, but none went into default.

Under the program, which no longer exists, a statistical model calculated the monthly savings a typical household would realize based on the property’s proximity to local services and public transportation and how walkable the area was. That amount would be added to their income, which would reduce the borrower’s debt-to-income ratio, thus potentially qualifying them for a bigger mortgage on the theory that with lower transportation costs, they could afford it, says Diane Wasson, a vice president at Home Street Bank in Seattle, who was involved in the program. (Debt-to-income ratio is one of several criteria, including loan-to-value ratio and credit history, lenders use to consider an application.)

Getting lenders to incorporate this into their practices might be a stretch. But last year the House passed a bill that would promote energy- and location-efficient mortgages for home buyers through incentives from Fannie Mae and Freddie Mac. And a spokeswoman from the Department of Housing and Urban Development (HUD) says supporting location efficiency in community development practices is absolutely a priority for the agency. “If we can reduce energy and transportation costs through more location efficient housing, it will make homes more affordable generally, and thus reduce the risk of foreclosures,” she says.

Read more: No Car, No Foreclosure? at SmartMoney.com http://www.smartmoney.com/personal-finance/real-estate/no-car-no-foreclosure/#ixzz0gTAtxV8S

Posted in: Foreclosure
Tags: bureau of labor statistics, environmental advocacy organization, location efficiency, mortgage default, mortgage foreclosure, national community reinvestment coalition

The equity the people did have was artificially inflated due to market conditions and the ease with which people could get money to buy homes as well as the rampant use of homes as ATMs with home equity loans and 2nd (and 3rd!!) mortgages. Of course home prices were going to rise dramatically when people could get loans without downpayments or even proper income documentation – two of the biggest obstacles to home ownership. Not that those obstacles are bad things, they were what had kept the housing market strong until the last few years.

Right now we are going to have to swallow the tough medicine and learn from what happened.

More bad news on the housing bust front: Nearly 25% of all mortgage borrowers were underwater, meaning they owe more on their loans than their homes are worth.

First American CoreLogic, the research firm that monitors housing equity, reported Tuesday that 11.3 million homeowners — or 24% of all homes with mortgages — were underwater as of the end of 2009. That’s up from 23% and 10.7 million borrowers three month earlier.

Nevada was the state with the worst record at 70% of all mortgaged properties underwater. That was followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%).

For many homeowners, being underwater, also know as negative equity, has few consequences. If they’re not planning to sell and can afford their monthly bills, they can wait out the downturn.

For others, however, plunging underwater can spell disaster. If they become unemployed or have a financial emergency, they have no equity to tap. Or, if they need to downsize or sell their home to relocate for a job, they can’t.

“Negative equity is a significant drag on both the housing market and on economic growth,”said Mark Fleming, chief economist with First American CoreLogic. “It is driving foreclosures and decreasing mobility for millions of homeowners.”

Traditionally, being underwater was one of two main factors in determining a borrower’s likelihood of foreclosure. The other is having sufficient income to pay bills. But, there’s an increasingly important exception: strategic default. As equity gets more and more negative, some homeowners are choosing to quit paying and give the keys to the bank.

As long as negative equity remains a big problem, it will be difficult to stem the tide of foreclosures that continue to plague many local real estate markets around the nation.

“Since we expect home prices to slightly increase during 2010, negative equity will remain the dominant issue in the housing and mortgage markets for some time to come,” said Fleming.

Posted in: Foreclosure
Tags: downpayments, financial emergency, foreclosures, home equity loans, Housing Market, income documentation, mortgage borrowers