Forclosures UP - Good News Bad News

Foreclosure starts are reversing course and are back on the rise, which is expected to continue to put downward pressure on home prices, a new report released Monday from Fitch Ratings says. With a jump in the inventory of distressed homes, Fitch predicts home prices to dive another 10 percent nationally before stabilizing.
Foreclosures are up by 7-10% in the last month depending on what source you believe. This trend was expected as the banks start putting their foreclosures on the market after the robo-signing scandal temporarily brought foreclosures to a standstill. Fact is banks need to get rid of these properties to improve their financials. Like they need to have more profit, but that’s another blog!
The spike is nearing the average rate of 14 percent that was seen between 2000 and 2010, according to Fitch’s RMBS (residential mortgage-backed security) Performance Metric.
Foreclosure initiation rates on borrowers who haven’t made a mortgage payment in more than six months also have nearly doubled in the last five months. This means that they are not as patient with the timeline needed for a short sale and are rushing to get into the foreclosure sale. Although the home is sold for less as a bank-owned property, banks do NOT give up their right to file for a deficiency waiver so can come after the homeowner for the difference between mortgage owed and sale price!
The good news is that for buyers there are some very competitively priced short sales and even lower priced bank owned properties. The bad news is for Sellers who find themselves competing on price just to get their house sold. That said, there are many Buyers who don’t want to mess with a distressed property and would rather have the home that is in the best condition and fairly priced. That rule remains the same. The shiny penny sells first in all cases.

Great Bank-Owned Properties to Buy in ABQ

This just in on the real estate stats for the Greater Albuquerque Area:

Listings are down slightly to last year 3.4% but the Federal incentive pumped up those sales.Pendings are down 11.2% which makes sense given the above fact. Closed deals are up 7.3%.
The Average ABQ detached home price was $230,417 15% higher than last year which may be because most of the sales last year at this time were below $150,000 for the first time homebuyers.

But most interesting is this:
Short and Bank owned properties are 28% of total listings, 55% of pendings and 35% of Closed deals. BOTTOMLINE: Great time to get a good deal on a bank owned or short sale property. And rates are still close to 5%. We have buyers who have paid less than the appraised value so walk into the house with equity. Can't beat that!! Call me and we'll go look at some houses. 505-220-9193. On my website you can search for foreclosures. Set up a search and I'll refine it for you and find you something.

Albuquerque Homes Underwater

The Los Angeles Times had a big article on the dilemna of homeowners whose mortgage is greater than their current home value. Essentially they are stuck. If they continue paying the mortgage it's a waste of sorts unless they stay there long enough to see the value rise again. If they foreclose or walk away, their credit is wrecked for years. They don't qualify for Federal refinancing is they haven't lost their jobs and they can't refinance because the house won't appraise. It's a mess.

So i wondered what our situation was here in New Mexico. Turns out we have stronger equity in NM. Fewer homes are underwater here because we didn't see a big bubble and haven't depreciated very much. Whewww!! That's a relief. Granted some homeowners can't sell because the home would sell at the current market value and they wouldn't have the money for closing costs. But most will at minimum breakeven if not make a buck or two. Only 14% of our homes are near negative values. Many of those can refi or foreclose so few are in that no win bind.

I have been doing lots of short sales which is a great alternative in that the house is sold but usually the short sale is not reported to credit or tax agencies. Well, it's not a great alternative but a less onerous one. Call me if you want to discuss your situation. I'll find a way.

STRATEGIC FORECLOSURES ON RISE

"Strategic" mortgage defaults (people who "walk away" from a mortgage they can afford to pay) are on the rise.This week FOX News did an interview with the CEO of HomeFlux and 1-800-CashOffer on the rise of strategic defaults, and how many of the people we talk to each month are considering it as an option. Most people doing "strategic" defaults would be much better off selling their home via a short sale through an experienced real estate agent. The banks are in much better position to expedite and approve short sales now. We haven't lost one approval! They would rather take a loss on your mortgage than to incur the expense of foreclosing and then selling it again. Give me a call if you are thinking of a strategic default or short sale.

FORECLOSURES IN ABQ

Question was asked about where we find the foreclosures. There are two answers. First, there are foreclosures all over and in all price brackets. People who have lost jobs are having great difficulty including those who have been at upper management or executive levels. We see foreclosures in High Desert and NE Heights in the upper price levels reflecting this situation. We see foreclosures by people who have been in their own businesses and with the recession their business volume has forced them to close their businesses and foreclose. The foreclosures related to the decrease in income due to the recession occur all over ABQ. These homeowners try to sell their homes but they have lost equity and cannot sell except as a short sale. With no income they cannot renegotiate with the bank and the only way they can sell as a short sale is to stop making payments. Then after they stop payments and if they can't sell, the home is foreclosed. Many times they can't sell as a short sale because the banks take months to review an offer and the Buyer gets tired of waiting. So it's not that we don't find buyers for their homes, it's that the banks make it almost impossible to complete the transaction. Do I sound bitter???

The second answer is that there are more foreclosures in areas where people bought on loans that they probably should not have gotten involved in. For example, in the SW developments and some parts of Rio Rancho and Ventana Ranch, first time homebuyers bought loans with no money down or at 103% of the value. When the value dropped 20-25% in the last two years, these people are upside down. Also, investors who bought several homes are selling or foreclosing because they can't lease the homes and realize they will never sell to make a profit so they "dump" them.

Hope that answers the question. We, by the way, have had really good success getting short sales to close and if it goes to foreclosure, we have investors who will buy redemption rights. We're trying to stay current in our skills so we can serve our clients.

RENTERS AID ON FORECLOSED HOMES

There is almost nothing worse than a family renting a home coming back to find the locks changed and a notice to vacate within 24 hours. Renters have had no recourse when a home is taken over by the bank in foreclosure. today Fannie Mae said it is implementing a plan to help renters stay in their homes even if landlords enter foreclosure. The will allow renters to lease during the foreclosure and get cash tohelp move. About time........

NEW FORECLOSURE SCAMS

Of course, out of tragedy come the scam artists. USA Today has an article today about a "fraud virus" hitting distressed homeowners. The FTC is quickly putting laws in place to stop these crooks. What happens is that scammers promise to save the owners home by promising to negotiate with the lender. The homeowner can live in the house paying rent but signs the title over to a rescue company that is supposed to pay the mortgage. Instead of doing so, the crooks take the up-front cash the seller pays them for this service and sells the house. Or they just disappear with the cash. The scammers hide a deed-transfer clause in the refinancing documents. Some states have forbidden foreclosure companies from charging up-front fees. Others require a separate distinct written agreement regarding the title transfer. Washington requires that if the house is sold that 82% of the proceeds goes to the original owner. We all are aware of the scum-seekers that are out there now and I, for one, am very cautious about keeping deals on the up and up. It's no time for games.

MORTGAGE FRAUD ON THE RISE

This just in from my favorite lender, Jason Pike from Countrywide.
Arresting Times: Law Enforcement Agencies Cracking Down on Mortgage Fraud Fort Worth Business Press (07/07/08); Howe, Aleshia The FBI has seen its mortgage fraud caseload double to more than 1,400 pending cases over the past three years, and the agency expects the number to rise in the years to come. In fiscal 2007, the bureau pursued 1,204 cases, which produced 321 indictments and 260 convictions of mortgage fraud perpetrators. Appraisers are seen as key figures in mortgage fraud; and the FBI will continue to focus its efforts on industry insiders and schemes that involve inflated appraisals, fake buyers also known as "straw buyers" and loans impacted by identity theft. "The problem is going to get worse before it gets better and just because there's a downturn in the housing market doesn't mean the problem will go away," says Michael Anderson, an assistant special agent in charge of the Dallas division that oversees the FBI's white collar crime program.

ALBUQUERQUE RANKS 86TH NATIONALLY

The performance of ABQ's real estate market ranked 86th out of 292 cities nationally from the first quarter of 2007 to the first quarter of 2008. For the year, our metro's average home prices were up 3.2%. Prices were flat for the first quarter however. Prices have increased 55% in the last five years here. The median price is $190,500 up to the end of the first quarter in 2008.

Buyers seem to be back in the market as the lenders have made more loans available. The homes under $250,000 have not been problems to sell. First time homebuyers have the best opportunities. Investors are around scooping up the foreclosures and many homes are marketed as short sales, which means the bank is considering taking less than is owed. The issue is that the seller also needs to get the lender to agree not to report the pre-foreclosure situation to the creditors and not to pursue compensation of the difference from the seller. There may be tax implications on the money "forgiven" as the IRS considers that "profit". Complicated.

For higher priced houses except for those involved in Relocations, the issue is coming up with 20% or even 10% cash now required by the lender. There are no more loans for that amount and PMI insurance has to be paid. SEllers are carryingnotes. Well, it's challenging, but houses are moving.

FORECLOSURES LOW IN NEW MEXICO

Forbes rated New Mexico one of the state's where you can get the best deal on foreclosures. There will not be as many here and the economy is strong so buying low and selling high is a real possiblity.

The New York Times last week analyzed where the high foreclosures are occurring and we didn’t make the cut. In some States, like Nevada, the number of foreclosures exceeds the number of sales. In CA in 2007 a quarter million homes were subject to some legal action. I spoke today with another realtor friend in Santa Fe who said there are few foreclosures. Everyday I get an investor who calls and wants me to look for good foreclosure deals where they can pay 40% off the list price. It’s just not happening here. Maybe it will, but we aren’t seeing it yet.