RealtyStore Real Estate Blog

Proof that hindsight is 20-20, a three-page report issued Tuesday, June 10, 2008, by the Washington Post made it clear that HUD is currently in the spotlight, given how many of their borrowers have entered or lost their homes to foreclosure. Not only are real estate professionals looking in their direction and shaking their heads, but now Congress is expected to consider changing HUD’s regulatory responsibilities, as well.

Carol D. Leonnig
Washington Post Staff Writer

“In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending.

“Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more “affordable” loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.

“Housing experts and some congressional leaders now view those decisions as mistakes that contributed to an escalation of subprime lending that is roiling the U.S. economy.

[…]

“Congress is expected to vote before its Fourth of July recess on legislation that would strip HUD of its regulatory authority over Fannie and Freddie and give it to a stronger regulator.

“Fannie and Freddie finance about 40 percent of all U.S. mortgages, with $5.3 trillion in outstanding debt.

[…]

“HUD officials dispute allegations that the agency encouraged abusive lending and sloppy underwriting standards that became the hallmark of the subprime industry. Spokesman Brian Sullivan said the agency and Congress wanted to increase homeownership among underserved families and could not have predicted that subprime lending would dominate the market so quickly.”

Read the full story, How HUD Mortgage Policy Fed The Crisis: Subprime Loans Labeled ‘Affordable’.
Copyright 2008, Washington Post

Mortgage and Trust Deed lenders are growing desperate to reclaim their assets on loans in default. A recent Associated Press article explains how the current market situation, however bad it may seem, is opening up a world of opportunity for qualified buyers looking to save money on a home investment through auctions and “Short Sales.”

June 6, 2008

By ALAN ZIBEL
AP Business Writer

“A record of almost 3 million American homeowners were at least one month late on their mortgages in the first quarter, the Mortgage Bankers Association said Thursday. And another record of almost 450,000 had entered the final stage of foreclosure.

“Wherever the turning point, buyers are finding that the deep discounts on bank-owned homes can be a fabulous opportunity, but also a source of anguish. Sally Zuniga, 29, and her husband have been looking to buy their first home outside Sacramento and have been unsuccessful so far due to the intense competition.

[...]

Jeff Dolfinger, a broker in Poughkeepsie N.Y., who specializes in managing and selling foreclosed properties, estimates that about 90 percent of those homes in his market are being bought by investors.

“‘To them, this is the best real estate market ever,’ he said. ‘They’ll wait for this turmoil to end and they’ll put the properties right back on the market again.’

[...]

“A quick way for a lender to dispose of properties is through an auction. However, lenders lose an average of 56 percent of a property’s value through auctions, compared with a 40 percent loss for ordinary sales, according to a report last month by Fitch Ratings.

“Nevertheless, the report found that the use of auctions has been rising as lenders try to cope with rising inventory.”

View the full story, Lenders Slash Prices on Foreclosed Houses as Numbers Surge, on the Associated Press web site. Content is Copyright 2008 by The Associated Press

As we all know, timing is everything, especially in the real estate market. The question on every home buyer and investor’s mind is - should I invest in a home today, in a month, or a year from now? Predicting the future is not possible. However, we can make pretty accurate assumptions. The Opinion selection of the New York Times offers important housing market statistics and takes a quick glimpse into the past, present and future of the US mortgage crisis.

New York Times - OPINION
May 19, 2008

“In responding to the subprime mortgage crisis, most Congressional Republicans and many Bush administration officials apparently believe they have time on their side. They are wrong.

“The housing bust is feeding on itself: price declines provoke foreclosures, which provoke more price declines. And the problem is not limited to subprime mortgages. There is an entirely different category of risky loans whose impact has yet to be felt — loans made to creditworthy borrowers but with tricky terms and interest rates that will start climbing next year.

“Yet the Senate Banking Committee goes on talking. It has failed as yet to produce a bill to aid borrowers at risk of foreclosure, with the panel’s ranking Republican, Richard Shelby of Alabama, raising objections. In the House, a foreclosure aid measure passed recently, but with the support of only 39 Republicans. The White House has yet to articulate a coherent way forward, sowing confusion and delay.

“The fits and starts are harmful. The housing bust is in the downward spiral of price declines and foreclosures. Single-family-home prices dropped 7.6 percent from the first quarter of 2007 through the first quarter of 2008, the largest year-over-year decline since the National Association of Realtors began reporting prices in 1982. Conservatively estimated, 2.2 million homes will enter foreclosure this year. An additional nine million homeowners — those with zero or negative equity — are considered at high risk of default because they have no cushion if recession or inflation, or both, make it impossible for them to keep current on their mortgages.

“That is because a category of risky adjustable-rate loans — dubbed Alt-A, for alternative to grade-A prime loans — is scheduled to reset to higher payments starting in 2009, with losses mounting into 2010 and 2011. Distinct from subprime loans, Alt-A loans were made to generally creditworthy borrowers, but often without verification of income or assets and on tricky terms, including the option to pay only the interest due each month. Some loans allow borrowers to pay even less than the interest due monthly, and add the unpaid portion to the loan balance. Every payment increases the amount owed.”

You can read more at NY Times - Teeing up the Next Mortgage Bust
Copyright 2008 by the New York Times

Proof that the foreclosure crisis is affecting not just the lower and middle classes, James R. Hagerty and Glenn R. Simpson of the “Wall Street Journal” bring you the scoop on Ed McMahon’s recent announcement regarding his mansion’s pending foreclosure.

By JAMES R. HAGERTY and GLENN R. SIMPSON
June 4, 2008; Page A3

“Ed McMahon, the longtime sidekick to U.S. talk show host Johnny Carson, has blamed the possible foreclosure of his Beverly Hills mansion on a “perfect storm” of problems facing Americans caught in the housing downturn.

“It’s a combination, it’s like a perfect storm,” McMahon, 85, told CNN talk show host Larry King in an interview on Thursday night. “Economy problems… We’ve had this house on the market for two years.”

“McMahon, most famous for his “Heeeeeeeeere’s Johnny” introduction to “The Tonight Show” for 30 years, said he was $644,000 in arrears on the mortgage for the six bed, five bathroom house in Beverly Hills, which is listed for sale at $5.75 million.”

Read more at The Wall Street Journal - Ed McMahon May Lose Beverly Hills Home

Copyright 2008 by the Wall Street Journal

Former heavyweight boxing champion, Evander Holyfield, recently joined the ever-growing list of celebrity foreclosures. Holyfield appears to be having financial problems. The home, whose estimated value is around $10 million, is going to be auctioned off to the highest bidder on July 1, 2008.

Interested in purchasing Evander Holyfield’s home? If so, you can get the process started in the RealtyStore Home Loan center.

Note: You’ll need around $10 million - That’s “7″ zeros!

NY Times writer, Michael M. Grynbaum, says 10% of all U.S. homeowners could be facing trouble with their mortgages.

“Nearly 1 in 10 American homeowners with a mortgage faced foreclosure or fell behind in their payments in the first three months of the year, according to a report released Thursday, a figure that offers a look into the toll caused by the collapse of the housing market.

“The period from January to March marked the worst quarter for American homeowners in nearly a quarter-century, according to a widely watched report put out by the Mortgage Bankers Association, a trade group.

“Both the rate of new foreclosures and late payments surged to the highest levels since 1979. (The delinquency rate includes Americans who are more than a month past due on their home loans.)

“A breakdown of the statistics showed problems at nearly every level of the mortgage industry.”

You can read more at NY Times - Nearly 1 in 10 Homeowners Face Loan Problems

CNNMoney.com writer, Chris Isidor, talks about the latest static - over 1 million home foreclosures reported in the first quarter of 2008. We will see nationwide foreclosure rates increase before they decrease, making 2008 a great time for home buyers to invest or purchase a new home.

More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that the crisis will continue to worsen.

“The Mortgage Bankers Association’s first quarter report showed that a record 2.5% of all home loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That’s up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.

“The report also showed that 448,000 homes, or about 1% of loans being serviced, began the foreclosure process during the first quarter. That’s up from about 382,000 homes, or 0.83%, that entered foreclosure in the last three months of 2007.”

You can read more at CNN - Homes in Foreclosure Tops 1 Million

Santa Barbara, CA June 5, 2008 — RealtyStore (www.realtystore.com), the nation’s leading provider of foreclosure listings, released its quarterly Arizona Foreclosure Report.

Declining home values, mounting inventory and slowing residential construction have led to skyrocketing foreclosure rates in Arizona. For Q1 2008, 1 out of every 80 Arizona households received an auction notice, almost 3 times the national average. RealtyStore.com recorded 23,607 auction notices statewide for Q1 2008, representing a 46% increase from Q4 2007 and a 304% jump over Q1 2007. An auction notice, also known as a Notice of Trustee Sale (NTS) or Notice of Foreclosure Sale (NFS), is filed by the lending institution when a homeowner fails to cure their default. This is the second stage of foreclosure where the lender formally records its intent to sell the property through a public auction.

“Over the past two years, Phoenix home values have dropped 25% while foreclosures have increased six-fold. For-sale signs and vacant storefronts are a common sight,” said Tim Chin, CEO of RealtyStore. “Stimulus plans proposed by Congress will not outpace the damage caused by plummeting home values in an economy heavily reliant on residential growth. Arizona housing prices will continue to slide through 2008 and will only begin to stabilize during the second half of 2009.”

Maricopa County, the nation’s 4th most populous county and home to Arizona’s largest city and capital Phoenix, started off the first quarter with 17,214 auction notices. This was a 350% spike from the auction notices recorded in Q1 of last year. With over $600 billion worth of ARMs due to reset this year, many Arizona homeowners will find their payments soaring by as much as 100%. Distressed borrowers unable to cope with payment increases will enter the foreclosure process at an increasing rate. Home values will be further suppressed by the glut of bargain-priced foreclosures flooding the Arizona home sale market. Unfortunately, the bottom of the Arizona housing market is yet to come; as more and more homeowners are simply walking away from homes that are now worth less than what they owe to the bank.

RealtyStore (www.realtystore.com), the nation’s leading provider of foreclosure listings, released its quarterly Arizona Foreclosure Report. Auction notices in Arizona have jumped 304% since Q1 2007 due to declining home values and residential construction activity. Many homeowners are simply walking away from their homes that are now worth less than what they owe to the bank.

Peter Y. Hong (LATimes) serves up hors d’oeuvres, fine wine and a little bit of foreclosure news. Hong explains how the foreclosure wave has moved past the guarded gates and into Napa Valley’s exquisite high-end real estate housing market.

Buyers last week of a Spanish-style, 3,220-square-foot house on a cul-de-sac here got a bargain: $1 million for a hilltop home in Northern California’s wine country, with views to San Francisco in the distance.

Two years ago, the same property sold for $1.4 million. But after the lender foreclosed on the property, the home was deeply discounted. Real estate agent Michael Snider, who handled the sale, thinks more such sales are on the way.

You can read more on the Napa Valley foreclosure problem by purchasing the full article in the LA Times’ Archives.