RealtyStore Real Estate Blog

The following article explains that 20% of all U.S. homeowners with mortgages are paying back loans that are worth more than the homes they purchased.

The numbers seem skewed by seven states. Hardly more than 1/3 of all mortgages with negative equity are held by homeowners living in the remaining 86% of the country.

The upside to having so many underwater loans in specific areas? The supply of homes being sold could increase exponentially in those states, driving prices down even further.

A few years ago, most people could only dream about homeownership in the cut-throat markets of Atlanta, southern California, and Orlando (etc.). With the current state of affairs, homeownership in these areas is a real possibility… and nothing satisfies an investor’s sweet tooth quite like profit.

Here are the details:

NEW YORK (Reuters) - Nearly one in five U.S. mortgage borrowers owe more to lenders than their homes are worth, and the rate may soon approach one in four as housing prices fall and the economy weakens, a report on Friday shows.

About 7.63 million properties, or 18 percent, had negative equity in September, and another 2.1 million will follow if home prices fall another 5 percent, according to a report by First American CoreLogic.

The data, covering 43 states and Washington, D.C., includes borrowers nationwide, even those who took out mortgages before housing prices began to soar early this decade.

Seven hard-hit states — Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio — had 64 percent of all “underwater” borrowers, but just 41 percent of U.S. mortgages.

“This is very much a regional problem, and people tend to forget that,” said David Wyss, chief economist at Standard & Poor’s, who expects home prices nationwide to fall another 10 percent before bottoming late next year.

“Most of the country is not in bad shape,” he continued. “Things seem to be stabilizing in Michigan, but the big bubble states — Florida, California, Arizona and Nevada — are still very overpriced.”

About 68 percent of U.S. adults own their own homes, and about two-thirds of them have mortgages.

JPMorgan Chase & Co, one of the biggest mortgage lenders, on Friday offered to modify $70 billion of mortgages to keep a potential 400,000 homeowners out of foreclosure. Bank of America Corp, which bought Countrywide Financial Corp in July, also has a large loan modification program.

Continue…

Source: Stempel, Jonathan. One in five homeowners with mortgages underwater. Copyright 2008 Reuters.com

Foreclosure auctions are hot right now. Recognizing that deals are to be made on foreclosures, more and more first-time home buyers are attending auctions and buying their dream homes in today’s real estate market.

Why, you might ask? The answer is very simple: homes in foreclosure are far more affordable than homes being sold by owner.

Part of this stems from the overabundance of foreclosure properties created from the bad lending practices of the early 2000’s. Currently, a desperate mortgage company is more likely to cut a deal with you than a private homeowner looking to upgrade to a larger home, whereas two years ago, the case would have been exactly the reverse.

Take the following article about foreclosure auctions occurring in Dallas, TX:

DALLAS - More than 500 bargain hunters hit the Dallas Convention Center Saturday to bid on the American Dream that has ended up in foreclosure.

The misfortune of others is now an opportunity for those trying to buy into the housing market.

In this tough housing market, more first-time home buyers are attending these auctions, to see if they can get their dream home for less.

Today, two families gave the auction a shot and walked out of the convention center saving thousands of dollars.

This intense, fast-paced event at the Dallas Convention Center featured more than 200 foreclosures in North Texas, an opportunity that’s now drawing more than just investors.

It was an overwhelming experience for the rookies.

More first-time home buyers are heading to auctions during this housing crisis, trying to find a bargain.

Christy Bond and her soon to be father-in-law came looking to score a deal on a foreclosure in Rockwall valued at $149,000.

“It went around once, the property that we were bidding on and it went higher than what we were willing to pay for it, so we waited and waited,” she said.

The first contract fell apart so they got another shot to bid on the home. They got it and saved nearly $20,000.

“We decided let’s make a gamble and go to the auction and it turned out to be a good decision,” she said.

Banks and lenders are turning to auctions to get rid of their foreclosure inventory - an inventory that’s growing because of the mortgage meltdown.

For one immigrant family, their dream of homeownership has finally come true.
They will soon call a house in Corsicana home.

“We have a big family and most of us don’t fit, most of the time,” said Isabel Cruz.

Source: Diaz, Monika. Foreclosure auction makes house ownership possible for some. Copyright 2008 WFAA.com

Imagine, it’s a snowy December morning in New York City. You live in the Magnolia Apartment structure, which totals some 300 units.

A man is walking around the building, nailing papers to the doors. You examine yours and learn that it’s an eviction notice; your landlord has been foreclosed upon and you have thirty days to get out.

Winter months are some of the hardest to move during, partly because of the holidays and partly because the availability of rental property during this time is low. No one is moving out and no one is building new real estate.

In the current economy, many homes once serving as rentals have been foreclosed and remain vacant. There are less rental availabilities out there than what would be available under normal circumstances, as a result.

You’re instantly in competition with the 300 other families in your complex. After doing some research, you find out that your landlord had three other large complexes, quadrupling the amount of people that will be looking for new homes and competing against you.

Your job is really good and you doubt you can find something comparable in another town. Commuting would be a very difficult, if not expensive, option with the snow and rain. You also don’t want to uproot your child from his school and friends.

You have very little money saved and moving expenses in winter weather are likely to be higher than during the summer. If you go it alone, the risk of injury or accident could be higher.

Singles and people with pets have a harder time finding rental property. Would you give up a beloved furry friend to find shelter? If you cannot afford a rental on your own, would you be able to keep your job living in your car, out of a friend’s living room, or under a bridge?

Where will you go? What will you do if you cannot find a place to stay? How will your family stay warm?

That’s what New York City advocates are concerned about in today’s featured article. Despite claims that there is no substantial evidence to prove that any metropolitan city complex owner is close to foreclosure, the current state of the economy and real estate market means that large-scale investors who secured their loans with mortgage-backed securities are not exempt from experiencing foreclosure.

In recent months, foreclosure has been spreading to commercial real estate. The possibilities are frightening. You might think you’re safe because you rent, but you’re only safe if you are the one in charge of your residence.

It might be the right time to make that decision to buy. With all the special lending options offered by federally owned and operated companies, ownership may be a real possibility.

A growing number of apartment buildings in the city are at risk of going into foreclosure, making thousands of tenants the next potential victims of the mortgage crisis, housing activists warn.

Nobody knows precisely how many tenants are at risk, but advocates say a minimum of 580 buildings, containing 40,000 units, have one or more factors that could lead to default.

Over the past four years, private equity firms have gobbled up at least 90,000 affordable-housing units in the city at inflated prices and in highly leveraged deals with the hopes of raising rents and maximizing profit, according to the Partnership to Preserve Affordable Housing.

But the debt service on many of the buildings is not being supported by rental income because the apartments are still governed by regulations that limit rent increases. In many cases, owners envisioned unrealistic rent growth, but lenders—caught up in the same free-flowing credit frenzy that led to rampant single-family home foreclosures—made the loans anyway. They sold the loans to investment banks, which packaged them into mortgage-backed securities.

“If you want a Cadillac, buy a Cadillac,” says Dina Levy, project director of the Urban Homesteading Assistance Board. “Don’t buy a Chevy and try to turn it into a Cadillac. You’re not going to be able to do that.”

Housing advocates are increasingly worried that if the loans go into foreclosure, the tenants in these buildings will suffer. Maintenance levels typically go down and capital improvements are put on hold when properties enter the foreclosure process.

Some real estate experts say advocates’ fears are overblown. “They are making assumptions when nobody knows whether there’s any truth to it,” says Steven Spinola, president of the Real Estate Board of New York. “We’re going through a period when money is not as available as it has been, but that doesn’t mean these projects are in danger.”

Apartment complexes like Riverton in Harlem and Stuyvesant Town on the East Side have received much of the attention for their financial troubles, as new owners have had a harder time upping rents than expected. Last week, Standard & Poor’s put three loans tied to Stuyvesant Town’s mortgage on a watch list for downgrading, and last month, Riverton’s owners indicated they were on the verge of defaulting.

One complex already on the brink is Savoy Park, a 1,802-unit development in Harlem that has been placed on a watch list. In 2006, Apollo Real Estate Advisors and its partners bought the seven buildings, which were then known as Delano Village, for $175 million. A year later, Apollo refinanced the property, bringing its total debt to $367.5 million, according to credit rating agency Realpoint. The agency says the risk of default on that loan is now “moderate to high.”

Source: Massey, Daniel. More city apartments facing foreclosure. Copyright 2008 Crain’s New York Business

Veros, a “proven leader in enterprise risk management and collateral valuation services” for more than five years, released their Market percentage data from December 1, 2007 to December 1, 2008.

If you are interested in metropolitan investing, their latest data shows you some of the best cities to explore, as well as some of the worst.

Based on 180+ markets for Single Family Residences in Metro areas with populations of 500,000+

FIVE STRONGEST MARKETS
#1 - Wichita, KS: +4%
#2 - Raleigh/Cary, NC: +3%
#3 - Sioux Falls, SD: +3%
#4 - Fargo, ND: +3%
#5 - Tulsa, OK: +3%+2.8%

FIVE WEAKEST MARKETS
#1 - Modesto, CA: -15%
#2 - Riverside/San Bernardino, CA: -15%
#3 - Palm Bay/Melbourne/Titusville, FL: - 14%
#4 - Cape Coral/Ft. Myers, FL: -13%
#5 - Sacramento/Roseville, CA: -12%

Source: VerosFORECAST. Copyright 2008 Veros.com

5,000 people knew where the deals could be had last weekend.  So many people showed up to bid on 35 Uniondale homes that room capacity was met and exceeded, prompting security to ask individuals not bidding on the first batch of homes to leave until those they were bidding on were at the podium.

According to the article, more mass auctions like this one are likely to occur in other major cities across the Nation.  Lenders are teaming up to get rid of their foreclosure inventory en masse, which spells
o p p o r t u n i t y for you.

Newsday has the story:

“Auctioneer John Lynch, his voice racing and urgent, furiously ticked off bids on a five-bedroom Colonial in Hempstead, guiding the offers from $250,000 into the low 300s.

“‘How about $317, $317?’ Lynch pleaded, as his assistants stalked the room looking for a raised paddle. A paddle shot up. “$317,000!”

“As the first home sold Sunday at the New York Foreclosure Showcase, the final price of the Warner Avenue house — near the epicenter of Nassau’s mortgage crisis — represented the kind of bargain available these days. Four years ago, the two-story woodframe house had sold for $358,000, financed by a loan that apparently didn’t work out and led to foreclosure two years later.

“In search of such deals, nearly 5,000 people flooded the foreclosure showcase, held at the Marriott Hotel and Conference Center in Uniondale Sunday to sort through the wreckage of the area’s mortgage meltdown.

“It’s a different market today,” said Todd Yovino, the lead organizer of the showcase and the owner of Island Advantage Realty in Huntington, which has dealt in foreclosed properties for 20 years.

“With the economy doing what it is doing, more people are struggling to keep their properties,” Yovino said. “There are opportunities to buy that didn’t exist before.”

“Organized during the past three months, the foreclosure showcase featured seminars on pre-qualifying for loans and the compressed closing schedules of properties owned by banks that want quick sales.

“There were information booths for Realtors specializing in foreclosed properties, attorneys advising of the risks (and, of course, the opportunities), and renovators with estimates for fixing up a fixer-upper.

“And, drawing the most attention, 35 recently foreclosed homes were auctioned to the highest bidders — who had to show up with a $10,000 certified check and be pre-qualified for a mortgage.

“Benjie Acunis, 28, a Legal Aid attorney from Valley Stream, signed up for the auction “to learn about the process,” though she did not bid.

“She was concerned about the risk of buying a home “as-is,” meaning the owner — usually a bank — will make no repairs.

“Even if you get it cheap, with all the repairs, it could still bust your budget,” Acunis said.

As foreclosed homes have become a larger share of the housing market, events like Sunday’s have been arranged across the country, including bus tours of the properties in Boston, Fort Lauderdale, Detroit and Phoenix.

“For Sal Albanese and Karen Garvey, who are engaged to be married, the hunt for their first home got a little bit easier Sunday, as they learned about federal loans, tax credits and “203k mortgages” — financing that includes the cost of renovations.

“‘I learned I really have to take my time and do my homework,’ said Albanese, 52, of Port Jefferson.”

Source: Amon, Michael. 5,000 show up at foreclosure showcase. October 12, 2008. Copyright 2008 NewsDay.com

More and more potential homeowners are choosing renting over ownership in the current market. Given the high number of foreclosures that have been plaguing the Nation and plummets in consumer and business confidence, this makes sense.

Particularly interesting are the implications for American foreclosure (and property) investors globally. If you plan to pay off multiple real estate investments by establishing rental income properties, this is great news - there will be plenty of people looking for rental housing and even preferring it, which means you can be picky about the people you rent to and competition for blow-out deals will be lower!

“Chicago–An increasing number of housing foreclosures seen across the nation have turned more and more homeowners into renters, according to a national survey conducted by Apartments.com.

“The survey, which questioned nearly 2,000 people, revealed that a majority of U.S. renters are families who consciously choose renting over ownership, as it is more affordable and allows for a lifestyle they prefer. Of the surveyed, 11 percent have been renters less than one year, and 41 percent have been renters less than five years.

“Half of all survey respondents said they rent because it is a more affordable living option compared to the expenses associated with home ownership including mortgage interest, taxes and repairs.

“Nearly 30 percent of renters also said they enjoy the many benefits apartment living affords them including flexibility and a maintenance-free lifestyle, convenient access to apartment amenities and a variety of more affordable living options in superior locations and neighborhoods. Taking into account the current climate of the national economy, flexibility is key.

“This summer, more than half of renters surveyed by Apartments.com listed relocating for jobs and moving closer to work as the top two reasons for moving. Unlike renting an apartment, financial advisors recommend owning a home for at least a five year period prior to selling. More than 80 percent of a monthly mortgage payment is interest that goes directly to the bank for the first five years before being able to build any real equity.

“While 35 percent of renters surveyed live alone, more than half live with loved ones and family defined as significant others, single-parent homes and immediate family members limited to spouse and children.

Source: Kher, Anuradha. Online News Editor. Survey Finds More Homeowners Turning to Renting. October 09, 2008. Copyright 2008 Multi-Housing News

The rate of foreclosures spiraled out of control when the real estate market collapsed, opening the door of opportunity for foreclosure scams and defrauders claiming they could help distressed homeowners save their homes and their credit scores.

Thankfully, some of these defrauders have been seized by the police and brought to justice. Maurice MdDowall was one such individual, committing foreclosure fraud in New York; he was sentenced last weekend.

The North Country Gazette brings you the story:

“NEW YORK—A New York man has been sentenced to 10 years in prison for his participation in a wide-ranging home foreclosure rescue scheme, which defrauded homeowners who were facing foreclosure and banks and other lenders who made mortgage and home equity loans.

“According to the indictment to which Maurice MdDowall, 50, pleaded guilty in June, from November 2003 through April 2005, he engaged in a fraud scheme targeting homeowners whose homes, primarily in Brooklyn and Bronx, were in foreclosure or facing foreclosure, by offering them a plan to “save” their homes.

“The plan included the refinancing of the homeowners’ debt with new, larger mortgages. Because the distressed homeowners typically had poor credit and were not eligible to refinance their debt at favorable terms, the defendants induced them to “sell” their homes to third parties, or “straw buyers,” who would apply for loans to be used to “save” the home. The defendants promised that once the straw buyer obtained the mortgage, the proceeds would be used to payoff the homeowners’ old debt and make one year’s worth of payments on the new loans.

“The homeowners were told that, during that year, they could continue to live in their homes and work on improving their finances and credit.

“Finally, the defendants explained to the homeowners that, at the end of the year, the title to their homes would be returned to them by the straw buyers, with their credit repaired and their homes saved. There were also cases in which the defendants did not explain to homeowners that the plan to “save” their home required them to deed their house to a third party and did not obtain permission to deed the homes to others. In such cases, the defendants effectively stole the property of the homeowners by forging the homeowners’ signatures on various documents that transferred the homes to straw buyers without the homeowners’ knowledge.

“In furtherance of the scheme, McDowall submitted loan applications to various banks and lending institutions on thestraw buyer’s behalf. In submitting these applications, the defendants regularly used documents containing false or misleading information, including information concerning the straw buyer’s income, assets, and existing debt, to improve the straw buyer’s credit-worthiness. In addition to false statements concerning the straw buyers’ financial profile, the defendants misrepresented to lenders that the straw buyers intended toreside in the property that would secure each mortgage or loan, when, in fact, the properties were already occupied by the distressed homeowners.

“McDowall, who directed the daily operations of the scheme, obtained more than 80 home mortgages and/or equity loans valued at over $20 million. In some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately; in nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby “cashing out” on the properties. As a result, the distressed homeowners lost the titles to their homes and faced eviction, the straw buyers owed the lenders hundreds of thousands of dollars that they were unable to repay, and the lenders suffered losses from the defaulted loans.

“The defendants’ profit consisted of the difference between the value of the new and old loans; they also earned at least $1.4 million in fees.

“McDowall was sentenced to 120 months in prison and three years of supervised release, with 100 hours of community service to be performed in the first year after release.

“In addition, McDowall was ordered to forfeit $2.5million and indicated that restitution would be determined at alater date.

“Of the five other defendants charged in United States

“v. Maurice McDowall, et al.: Aleksander Lipkin, Marina Dubin, and Kerri Clarke have pleaded guilty and await sentencing; and Andrea Moore and Michael Irving await trial, which is scheduled for Oct. 20. 10-5-08″

Source: Leader Of Foreclosure Rescue Scheme Sentenced. Copyright © 2008, North Country Gazette.

Default notices in Illinois up 26% from July 2008 and 37% from August 2007

Santa Barbara, September 15, 2008 – RealtyStore (www.realtystore.com), the nation’s leading provider of foreclosure listings, released its monthly Illinois Foreclosure Report.

RealtyStore.com recorded 7,075 notices of default (NODs) statewide for August 2008. This was a 26% increase from those recorded in July 2008 and 37% rise from August 2007. An NOD is filed by the lending institution, when a homeowner falls behind on mortgage payments. NODs provide important information about which homeowners have home loans they cannot afford. Over the past year, Illinois has had the 12th highest foreclosure rate in the nation. For August 2008, 1 out of every 735 households in Illinois received a default notice, which is more than 3 times the national average.

“Mounting inventory in the Chicago real estate market has lenders slashing prices by as much as 60% on foreclosed properties,” said Tim Chin, CEO of RealtyStore. “Such attractive pricing has investors clamoring for bargains.”

Approximately, 70% of foreclosures in Illinois are occurring in Cook County. Cook County, home to the Chicago Bears and the second most populous county in the nation after Los Angeles, had 4,881 defaults in August 2008. This was a 31% increase from the previous month of 3,720 defaults and 42% rise from August of last year. Although foreclosure activity in Chicago may seem moderate when compared to counties in California such as Los Angeles which has twice the number of defaults at 9,985 for August 2008, it is still considered high by historic standards. As such, lenders are eagerly offloading property to Chicago bargain hunters.

Illinois has long been viewed as a microcosm of the United States due to its demographics. Peoria, Illinois, in particular, has the legendary test market status of the average American city. Major TV networks would visit Peoria during Presidential campaigns to ‘take the pulse’ of everyday Americans on candidates and national issues. If the saying “Will it play in Peoria?”, meaning will something appeal to mainstream America, still holds water, perhaps the foreclosure crisis will be tempered by eager investors hunting for deals.

Written by: Eng, Jaymie. Market Analyst for RealtyStore.com
Copyright © 2008, RealtyStore.com

If you are one of the many real estate professionals who are out of work because of the current state of the real estate market and economy and you live in or around Sacramento, California, you may benefit from attending this training expo. It is designed to help you apply your skills to find unemployment in other fields and is part of the Governor’s initiative to help people like you find work.

WHAT:
A “Put Your Talent to Work” job and resource expo designed to help unemployed workers in housing-related industries find jobs that require similar skills, along with training opportunities to help prepare them for new jobs. The event is part of a Talent Transfer initiative to which Governor Schwarzenegger has committed $10 million to help out-of-work Californians and stimulate the economy.

WHO:
Laid off workers from the residential construction, mortgage, and real estate industries, more than 40 service providers and employers with immediate job openings, including Golden 1 Credit Union, the Census Bureau, Platt Electric, Primerica Financial Services, and a five-year construction project at Thunder Valley Casino. Representatives of the Employment Development Department; California Workforce Investment Board; Employment Training Panel and other valuable resource providers will also be available to assist jobseekers.

WHERE:
Lions Gate Garden Pavilion
Grand Ballroom
5640 Dudley Blvd.
McClellan (Sacramento) CA 95652

WHEN:
Thursday, September 25, 10 a.m. to 3 p.m.

WHY:
Job losses in the construction, mortgage, and real estate industries are fueling an increase in unemployment that is now affecting other areas of California’s economy. The most recently released data continue to show that the housing and real estate industries are the key sources of the slowdown in state job growth over the last two years. The Talent Transfer initiative is designed to match the unemployed workers with in-demand occupations. Residential construction workers could transfer their skills to jobs in commercial construction including highway, bridge, and other infrastructure projects. Mortgage and real estate workers, for example, could find job opportunities in administrative fields and growth industries such as health care, green technology, and biotechnology.

Source: Jobs, training expo for laid-off real estate workers. Copyright 2008 Sacramento Bee.

In an interview with “Merrill Ottwein, a broker and past president of the National Association of Exclusive Buyer Agents,” the Chicago Tribune learned of five useful tips for buyers considering the purchase of a home that has been vacant.

As foreclosures rise, banks inventories rise and a larger quantity of properties available are vacant than ever before. A vacant home can spell trouble, however.

Depending on the neighborhood, the previous tenants and their reason for leaving, weather, the length of time the home has been vacant, and a number of other factors that should be considered.

In particular, the article emphasizes the importance of having a professional inspect the home. The best time to have an inspection conducted on a property seems to be between the time you make a serious commitment to buying it and submitting an offer.

“Here are pointers for buyers considering a home that’s vacant:

“Seek out information on a home’s former occupants. It’s tough to gain details on a house that’s been vacant for months. It’s still harder if the empty property has fallen into the ownership of a bank through foreclosure.

“‘The folks at the bank—or the real estate agent they’ve hired—probably won’t know much about the people who lived there,’ Ottwein says, adding that your best sources are often neighbors.

“Consider a “pre-inspection” of a vacant place. Perhaps the property you like has gone unsold for so long that you’re nervous about hidden defects. In fact, you don’t even want to make an offer until you know more. In such cases, Ottwein advises you to consider hiring a home inspector to take a preliminary look.

“One of his clients, an Air Force colonel who wanted to learn more about a handsome rambler that had gone vacant nine months before he spotted it.

“On his agent’s advice, the colonel spent $200 for a brief home inspection. This revealed that the house had a serious crack in its foundation. Consequently, he walked away from the property and bought a two-story place in the same neighborhood that proved a better choice, even though it was marked $30,000 higher.

“‘If you decide to go through with the purchase, a pre-inspection will let you set your bid based on findings from the inspection. If you decide to back out of the deal, you can walk away without complications,’ Ottwein says.

“Make sure the utilities are on when the inspection is done. As Helfant points out, cost-conscious banks that own foreclosed property often shut off utility service to the vacant homes they own—including gas, electric and water.

“‘It’s useless to do an inspection when the utilities are off. You can’t tell if the cooling, heating and plumbing are functioning correctly,’ she says.

“And even if you have to pay to get utility service restored, she says it’s worth the expense.

“Double-check your bid before making a final offer on a vacant home. “Before you shape your offer, you and your agent should take a careful look at the recent sales history in your neighborhood. These days you have to be extra vigilant to avoid overpaying,” Ottwein says.

“Ideally, you’ll want to examine at least three similar properties that have sold in the immediate area in the past three to six months—adjusting for differences, such as a larger garage or a second fireplace.

“Although you’ll want to take a home’s condition into account when judging its market value, Ottwein cautions against seeking out-of-proportion discounts to compensate for superficial shortcomings.

“Be on the lookout for sizeable savings. In the past, many banks insisted on unrealistically high prices for their properties. Yet recently, as inventories have swelled, Helfant says more are slashing prices.

“She urges homebuyers and their agents to stay alert to the possibility that bank-owned homes could appear on the Multiple Listing Service at rock bottom prices.”

Source: Tips for buying a vacant home, Universal Press Syndicate. Copyright © 2008, Chicago Tribune.