Tag Archives: foreclosure

Fannie, Freddie legal fees: $110 million and counting

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WASHINGTON (CNNMoney) — A watchdog agency said Wednesday that the legal tab for former leaders of mortgage finance giants Fannie Mae and Freddie Mac is at least $110 million.

And taxpayers have paid at least $47 million of it, according to an Office of Inspector General of the Federal Housing Finance Agency report.

And the total bill could be even higher since the inspector general report focused on only one particular legal case against Fannie Mae, and isn’t an exhaustive account of the housing giants’ legal bills, reportedly more than $160 million, according to a 2011 congressional hearing.

Yet, a whopping $99.4 million has been paid in legal bills to defend a 2004 case against three former Fannie Mae senior executives accused of inflating the firm’s publicly traded stock price to maximize their own bonuses. About $37 million of that has been picked up by the taxpayer.

For Freddie Mac, the overall legal tab paid by the taxpayers is $10 million, according to inspector general.

The Federal Housing Finance Agency inherited legal bills when it took Fannie Mae and Freddie Mac under conservatorship in 2008. The bills are for employees long gone but must be paid as a part of benefits packages agreed to by legal contract.

Office of Inspector General of the Federal Housing Finance Agency suggested that the housing agency take steps to limit legal expenses, in the report.

With taxpayer bailouts to the housing finance giants hitting $183 billion through the end of December, lawmakers have questioned the “appropriateness” of legal pay outs, the watchdog said.

“Given the significant amounts of taxpayer money involved and the issue’s high visibility, FHFA must continue to scrutinize intensively the enterprises’ advances in order to limit costs,” the report concluded.

The two companies were essentially taken over by the government in September 2008 when they were placed in conservatorship and given large cash infusions to cover mounting losses on the mortgages they owned and guaranteed.

Other efforts, such as the biggest source of money for the bailouts: the Troubled Assets Relief Program (TARP), had a larger initial price tag but the overwhelming majority of the $474.8 billion it gave out has been returned to Treasury.

Tougher lending standards have allowed the mortgage financiers to profit from more recent loans they purchased, even if they continue to suffer losses on loans made during the housing bubble. The two firms are now financing about two thirds of the mortgages being written in the United States.

In response to the inspector general report, the Federal Housing Finance Agency said it agreed with the watchdog’s suggestions about efforts to limit future legal fees, according to a response to the review by FHFA attorney Alfred Pollard.

The report noted that more legal bills are coming down the road, since the U.S. Securities and Exchange Commission just filed a lawsuit against six former senior officers at Fannie Mae and Freddie Mac

 

 

 

Source: By Jennifer Liberto www.CNNMoney.com

Money Woes Forced Half of O.C. Home Sales

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Half of all Orange County homes sold through a broker-run database in January were either bank-owned, a “short” sale or some other type of financially “distressed” home, figures from the California Regional Multiple Listing Service show.

The numbers show that even though there are fewer foreclosures and underwater homes changing hands, the housing market still struggles with high rates of financially troubled properties that remain a drag on home prices.

Distressed homes made up the biggest proportion of all residential sales in nearly a year.

Sales of financially troubled homes have spiked around the start of each year for the past three years, figures from the broker-run multiple listing service database show.

The California Regional MLS maintains an online network for homes for sale throughout much of Southern California, including all of Orange County. MLS deals made up 92% of all of January’s residential transactions in the county.

The MLS’s latest housing report shows:

”Distressed” properties made up 49.8% of the 1,727 homes sold through the MLS in January. Since builders tend to sell homes directly to the public, the bulk of homes in the MLS are resales.

That’s the highest proportion of distressed homes sold since February, when nearly 52% of the sales were troubled.

Of the 860 distressed properties sold in January, 490 – or 28.4% — were “short” sales, or sales of homes for less than is owed on the mortgage.

Another 303 homes sold in January – or 17.5% — were bank-owned properties that had been seized earlier through foreclosure.

Sixty-seven homes sold in January – or 3.9% — were classified as “other distressed.”

In 2009, the year following the global economic meltdown, high rates of distressed properties were more common. About half of all sales were distressed homes on average that year. In January 2009, nearly 64% of all sales were distressed homes.

But during the past two years, distressed properties made up just under 44% of all sales on average, MLS figures show.

 

 

 

 

 

Source: By JEFF COLLINS / THE ORANGE COUNTY REGISTER http://www.ocregister.com

Home Prices Hit New Lows

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A key gauge of home prices in the nation’s largest cities fell in December to its lowest level since the start of the housing crisis in mid-2006.

The Standard & Poor’s/Case-Shiller index of 20 American cities fell 1.1% from November to December and 4% from December 2010. Eighteen out of the 20 cities tracked by the index posted declines and Atlanta, Las Vegas, Seattle and Tampa,Fla., each saw average home prices hit new lows.

“In terms of prices, the housing market ended 2011 on a very disappointing note,” said David M. Blitzer, chairman of the index committee at S&P Indices. “While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended.”

All of the California cities in the index posted declines from the prior month. Los Angeles, San Diego and San Francisco fell 1.1%, 0.7% and 0.8%, respectively. The drop continues a slide that began last year as sales weakened and the jobs picture remained bleak.

In December, Miami and Phoenix were the only two metro areas that posted monthly gains, up 0.2% and 0.8%, respectively.

A separate, national index published quarterly by S&P Case Shiller, also released Tuesday, showed deterioration in home values. The national composite fell by 3.8% during the fourth quarter of 2011 and was down 4.0% versus the fourth quarter of 2010.

The steep drops indicate that the housing market likely began 2012 in decline, as the broader economic recovery was not enough to lift home values. Home prices are now below their low hit in April 2009 — reached during the depths of the financial crisis.

[Updated 7:53 a.m., Feb. 28: Robert Shiller, a professor at Yale University and co-creator of the index, said in a conference call Tuesday he was slightly more optimistic about housing’s future than he was a year ago, “but not that optimistic.”

“We are in a situation where a lot of people think, long-term, this is great, home prices are low,” Shiller said. “But somehow they think in the short-run … we are still in a holding pattern.”

Karl E. Case, the other co-creator of the index and a professor at Wellesley College, said he was more optimistic that the housing market would begin to improve given that, according to Census data, more U.S. households are being created, meaning there will be more demand for housing. If demand remains high — and supply relatively low — the housing market should begin to improve, he said.

“There are some bright spots,” he said.

 

 

Source: www.latimes.com By Alejandro Lazo

Housing’s Dilemma: There’s Not Enough To Buy

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Last week I wrote about how fewer foreclosures up for sale in the housing market could actually mean lower overall home prices.

My reasoning is that foreclosures are in high demand right now, and organic, non-distressed sellers are still not coming back to the market. Without the foreclosures, there really is no competitive market.That may sound counter-intuitive, given that we always talk about how distressed sales deflate comparable home prices.

I hate to say, “I told you so,” but … today the National Association of Realtors reported that inventories of homes for sale in January fell to 2.31 million,the lowest supply since March, 2005. Rather than pushing home prices higher, they are still down, 2 percent, from a year ago.

The Realtors noted that 35 percent of all home sales were distressed (either foreclosures or short sales). Investor demand is high, they say, even claiming that a recent program initiated to sell the foreclosures of  Fannie Mae and Freddie Mac in bulk to investors is unnecessary.

“Based on the swiftness of how REO (bank-owned) properties are moving in the market, it may not be needed,” said NAR chief economist Lawrence Yun. He did admit that such a program would also take away thousands of potential listings from Realtors.

Banks are ramping up the repossessions, as the so-called “Robo-signing” foreclosure paperwork scandal is fading and a settlement with federal and state governments has been reached. But they are not going to flood the market with these properties, for fear of losing pricing power. That’s why we are now starting to see bidding wars in some of the hottest distressed markets.

Sales of existing homes in the West, which comprise the hardest hit states of Arizona, Nevada and California, jumped 8 percent in January month to month. More than half of sales out West are foreclosures and short sales. Demand is definitely rising, but only on the lower end.

If you look at sales distribution by price, 69.9 percent of homes sold in November were under $250,000. That moved up to 72.2 percent in January. Given that there is just a two month difference, seasonality, i.e, higher priced homes selling at different times of year, doesn’t apply.

As I wrote last week, organic, non-distressed sellers are making up less and less of the overall housing market. That does not a healthy housing market make. Without good, move-up homes available, the market cannot see real price appreciation.

“The main limit on sales volume now is willing sellers, not willing buyers,” says Glenn Kelman, CEO of Redfin, a real-estate brokerage.

 

 

 

Source: By: Diana Olick-CNBC Real Estate Reporter; http://www.cnbc.com/id/46482311

Foreclosed Homes Finally “Spreading Out” Across All 50 States

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Annual change in foreclosure volume, all 50 states. January 2012.

Want to buy a foreclosed home? Spring 2012 may be your best chance yet. A combination of legislation and low mortgage rates have left today’s foreclosure market ripe for value.

Bank REO Rising; Faster Foreclosures Coming

According to RealtyTrac, an Irvine, California-based foreclosure tracking firm, the number of foreclosure filings dropped 19 percent last month as compared to one year ago.”Foreclosure filing” is a blanket term comprising (1) Default notices on a home; (2) Scheduled auctions for a home; and, (3) Bank repossessions of a home.

All three foreclosure filing types showed dramatic improvement year-over-year. Default notices and scheduled auctions were down roughly twenty percent and bank repossessions — sometimes called Bank REO — fell 15 percent.

At first look, January’s foreclosure figures look great for housing. Fewer foreclosures means fewer homes sold “on the cheap” which, in turn, supports higher home prices from Marin County, California to Dade County, Florida.

When we look at the monthly foreclosure data, however, a different story emerges.

As compared to December 2011, January 2012′s foreclosure figures shows a market getting ready for more bank-owned homes.

  • Default Notices : Unchanged from December 2011
  • Scheduled Auctions : +1 percent from December 2011
  • Bank Repossessions : +8 percent from December 2011

This trend toward more bank REO should continue — especially because of the recent $25 billion mortgage servicer settlement. The settlement provides clear rules to banks and states on how the foreclosure process should work, and gives banks reason to “un-freeze” their respective foreclosure pipelines.

Expect more bank-owned homes for sale in 2012.

 

Nevada, California Still Dominate Foreclosures

Since 2007, when the foreclosure market became a “hot topic”, foreclosures have been geographically concentrated. Just a few states have accounted for the majority of the nation’s overall foreclosure activity.

That is still true today.

Nevada, California and Florida continue to dominate the foreclosure scene. Their dominance, however, is not as strong as it once was.

In looking at Foreclosures Per Capita last month, 13 states fared worse than the U.S. national average. This is a marked improvement over 2009 when just 6 states beat the national average. The data point suggests that foreclosures are “spreading out” nationwide; that they’re less concentrated by state.

Home buyers in every state, and in many towns, may witness more foreclosures for sale nearby this year. Foreclosures are a national occurrence.

 

Buying A Foreclosed Home? Don’t Buy A Defect.

Expect more foreclosures for sale in 2012. You may want to buy one, too. If you do, though, don’t confuse “cheap” for “value”. Although foreclosed homes can be deeply discounted, they’re often sold “as-is”. This means that the home may be sold with defects and damage that make it uninhabitable for humans.

Mold and absent plumbing are just two problems you may encounter. There are countless more.

When you buy a foreclosed home, make sure to work with an experienced real estate agent. You’ll want a professional to review your contracts and help with negotiations. If you go at it alone, you put yourself — and your household — risk.

CALL US TODAY!  360 Realty 800-399-9659

 

 

 

Source: Dan Green http://themortgagereports.com/7866/foreclosure-reo-50-states

Will You Benefit From The $25 Billion Mortgage Settlement

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Since the Obama administration has negotiated a $25 billion dollar mortgage settlement with 49 states and the 5 largest mortgage servicing banks, it is not likely to significantly help the vast majority of homeowners in crisis, and here’s why.

“The latest mortgage settlement will have little to no impact on the current real estate market. It is limited to non-government backed loans, which accounts for less than 40 percent of the existing loans. If homeowners can’t afford their homes today the majority won’t be able to afford it tomorrow even under the new settlement. Distressed homeowners need to understand all their options and the associated tax and credit implications,” explained Andee Allen of Coldwell Banker Liberty Realty.

While the five mortgage servicing banks will benefit by release from further state claims due to improperly circumventing procedures prior to moving forward on foreclosure, there is no “typical” outcome for the entire pool of homeowners that suffered the negative impact of robo-signing. Some proportion of homeowners have already lost their home to banks and should expect to receive small amounts of compensation, while others remain in their home or are “merely” underwater and may expect an improvement in loan terms.

Note that individual homeowners still retain the right to legal action despite this umbrella settlement, but their ability to pursue banks as a group, would end. And of course, by not joining together, the power of such remedy is greatly diminished.

The disbursement of the $25 billion dollars

The $25 billion is earmarked for distribution over 3 years, with incentives for giving out a larger proportion of the payout in the first year. Since we know from recent experience that there were significant problems with monitoring and enforcement by governmental authorities for oversight of previous mortgage settlement programs, it is not unreasonable to assume that similar complications will arise. (For example, Moody’s Investor Service, New York, predicted in late 2010 that only 400,000 to 1 million homeowners would be saved from foreclosure by participating in the Home Affordable Modification Program, a fraction of the 3-4 million that the U.S. government had projected would benefit.)

Nonprofits that seek to assist homeowners would do well to get in the game early, to lobby on behalf of households for what they have owing and due, and meticulously attend to what their clients receive (or don’t receive) within the legal timeframe that is set.

The lump sum payment anticipated for each “eligible homeowner” who has actually lost their home, is projected to be about $1,800-$2,000 apiece. The legislation strictly defines what comprises an “eligible homeowner.” It includes borrowers who were not offered appropriate opportunities for loss mitigation, other borrowers whose documents were automatically signedwithout the plaintiff properly producing a note as evidence that they have the right to foreclose, foreclosure victims who were on the receiving end of counterfeit and altered documents, and similar instances of fraud. Homeowners also must have lost their home between January 1, 2008 and Dec. 31, 2011, in order to qualify.

The mortgage settlement provides for $17 billion, to be set aside for principal reduction and other modifications of existing loans, in order to prevent future foreclosures. Three-fifths of this $17 billion is tied explicitly to principal reduction. This was a particular sticking point for mortgage servicers, who argued that due to investor obligations and the fact that such mortgages had already been bundled and securitized to Fannie Mae, Freddie Mac and the stock market, the reduction of principal was not pragmatic. However, in the final negotiation, this compromise would seem to represent a softening of the banks’ position, although how it plays out is anybody’s guess since it “seems that the banks can get credit for the principal reductions they offer rather than have to pay toward the actual settlement penalty.”

Homeowners whose loans greatly exceed the current appraised value of their homes—what is commonly known as being “underwater”—will be entitled to $3 billion of the settlement.

Who the $25 billion loan settlement will not help

The five banks that are participating in the mortgage settlement include Wells Fargo, Citigroup, Ally Financial, JP Morgan Chase and Bank of America. Homeowners whose mortgage servicer is not among this group, are out of luck. It is estimated that more than half of all homeowners in America have mortgages with other banks, with Fannie or Freddie Mac, or with the FHA. And in a state like California that is devastated by foreclosure, only 40% of mortgages across the state come from one of the five lenders named above.

However, California and Florida will both greatly benefit from this boon to their housing market. In fact, homeowners in California will get a chunk of change worth about $18 billion, from the mortgage settlement.

Put another way, it is estimated that the settlement may help as many as 1-2 million homeowners whose home value is below the amount they owe on the mortgage. However, one source estimates that there are 11 million homeowners that are underwater.

How would the average Joe fare if he were underwater, but did not miss any payments?

According to Deborah Jacobs of Forbes, the mortgage settlement offers people who are up to date on payments but suffer a valuation below the amount they owe, roughly $3,000 a year in savings by refinancing with the FHA.

How would the average Joe fare if he were delinquent on his mortgage?

This really depends upon how many states actually sign on to the deal, but the law does not provide a specific, minimum amount of mortgage relief by state.

How large is the number of former homeowners that qualify for the $2,000 compensation contained in the mortgage settlement?

About three-quarter of a million families were ousted from their home during the qualifying period, and meet the conditions necessary to receive compensation.

Protecting Your Home & Finances in Tough Times

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With the nation possibly facing the worst financial crisis since the Great Depression, and as many as 6 million homeowners at risk of foreclosure, we all need to review our finances and make sure we are well positioned for the future. Home values, the stock market and the economy will eventually recover, so the main goal is to make sure we protect our finances as best as possible in the meantime.

The appropriate action is related to your liquidity. If you have enough cash and liquid assets to cover one year’s worth of living expenses, you’re in pretty good shape for the near term. Liquid assets include things that are often overlooked, such as IRAs, 401Ks, cash surrender or withdrawal value for life insurance and/or annuity funds that are immediately accessible, so you may be in better shape than you think. There may be penalties associated with some of those withdrawals, so tap them only as a last resort.

While regularly reviewing your financial status is a good idea for everyone, there may be no need to modify a thoughtful and balanced long-term financial plan if you have sufficient liquidity. Homeowners with minimal liquid reserves need to take action soon to strengthen their ability to access cash if they need it in increasingly uncertain times. Uncertain economic times can threaten even the safest jobs, and jobs take longer to find during a recession. For homeowners with less than a year’s liquid reserves, a top priority should be to protect their limited liquid assets, look for ways to expand liquid assets, and look for ways to improve your ability to get additional cash in the future if you need it.

Review your home financing structure and take action if necessary.

If you have a 30-year fixed-rate loan at current mortgage interest rates or less, no action may be necessary if you have enough cash and liquid assets to cover one year’s worth of living expenses. If not, refinancing your mortgage to reduce payments or prevent future payment increases may be a good idea if you have equity in your home.

If you have sufficient equity and your credit score is sufficient, you may be able to take out cash in the process, which is a particularly good idea if you have little savings and/or you can significantly lower your mortgage interest rate through refinancing. If liquidity is a challenge and you’re eligible for a home equity line of credit, apply now so it will be in place in case of a crisis. Things are trickier for homeowners with mortgages that are “underwater” (the mortgage balance exceeds the home’s current market value). Most lenders won’t forgive the difference unless you’re behind on payments and are out of money, and even then they are far more inclined to a restructuring that would temporarily reduce payments to an affordable amount while maintaining the mortgage balance.

A new “Hope for Homeowners” FHA program may enable some homeowners to get part of the mortgage debt forgiven and refinance with a 30-year fixed-rate mortgage. Yet other alternatives may emerge out of the current Wall Street rescue effort over the next few months. In most cases, a foreclosure should be avoided if possible.

In some cases, it may actually be in the homeowner’s best interest. For example, some financially-pressed homeowners whose mortgage balance far exceeds their home’s value have recognized that it will probably take many years for the home’s market value to catch up with their mortgage balance. In the meantime, they are also trapped in their present home and unable to sell and take advantage of better job opportunities in other areas. By the time home values do catch up, many could have restored the damage done to their credit rating by a foreclosure, and they would have advanced in their career as well.

Review the allocation of your other investments.

Experts recommend diversification in good times and bad. If you don’t have enough liquid assets to cover at least one year’s worth of living expenses, rebalance your investments to minimize the risk of further erosion of their value. Sell individual stocks and mutual funds and buy conservative investments like AAA bonds and federally insured savings accounts and federal, state and local bonds. They will hold their values in declining stock markets.

While conservative investments will also trail other investments in appreciation when the market recovers, it’s better for homeowners with liquidity to be safe and miss out on some opportunity for investment growth until the market recovers. Conversely, homeowners who are in good shape financially probably need not restructure a well-balanced investment portfolio.

When recovery begins, appreciation of securities will outstrip growth of more conservative investments. Timing such market changes is notoriously difficult, and homeowners with balanced investment portfolios are usually better advised to stay in the market and benefit from all of that recovery.

ake sure your investments, insurance policies, IRAs, and/or annuities are adequately insured.

Bank deposits are covered by the Federal Deposit Insurance Corporation (FDIC), which guarantees bank account balances of up to $100,000 in a single bank ($200,000 for joint accounts). If you have accounts in more than one bank, each account is covered by those limits. FDIC protects IRAs kept in bank accounts up to $250,000.

Make sure that any other investments through stockbrokers or other financial service firms are insured by the Securities Investor Protection Corporation (SIPC). SIPC protects the assets in your investment account from losses due to a financial services firm’s bankruptcy, but it does not protect you from losses due to stock market declines. SIPC covers up $500,000 per customer, including up to $100,000 for money market funds.

With the failure of giant insurer AIG, many homeowners are concerned about the status of their life insurance and/or annuities. Life insurance policies are insured by each state’s guaranty association. Typical coverage is $100,000 in cash surrender or withdrawal value for life insurance and $100,000 in withdrawal and cash values for annuities.

If you need to improve your liquidity, reduce unnecessary personal expenses and stop making any extra payments on your mortgage.

To build your savings, cut back on expensive vacations and non-essential activities like hobbies and expensive restaurants. Look for other ways to save money as well (never a bad idea even if your finances are strong).

 

 

 

Source:  HGTV Front Door – Provided by the American Homeowners Foundation.

The U.S. Foreclosure Crisis, Beverly Hills-Style

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The dynamics of the residential real estate collapse are very different in elite neighborhoods

The careworn house not far from Santa Monica Boulevard resembles millions of other homes that have been foreclosed on since the calamitous U.S. housing crash four years ago.

Garbage spews from trash bags behind the property. A smashed television leans against broken furniture. A filthy toy dog lies on its side, an ear draped across its face. The garden is overgrown. The house needs a paint job.

Yet the property on North Rexford Drive, Beverly Hills, California, is no ordinary foreclosure.

A sprawling, Spanish-style estate, fringed by majestic pine trees and located near the boutiques of Santa Monica Boulevard, its former owners were served with a default notice in 2010; they were $205,000 behind in their payments on mortgages totaling $6.9 million.

Welcome to foreclosure Beverly Hills-style.

Some 180 houses in Beverly Hills, the storied Los Angeles enclave rich with Hollywood stars and music moguls, have been foreclosed on by lenders, scheduled for auction, or served with a default notice, the highest level since the 2008 financial crash, according to a Reuters analysis of figures compiled by RealtyTrac, which tracks foreclosures nationwide.

As in the default-ravaged suburban subdivisions of Phoenix, Arizona, and Tampa, Florida, plunging realestate prices are the root of the problem in Beverly Hills.

But the dynamics of the residential real estate collapse are very different in elite neighborhoods such as this. The majority of delinquent homeowners here owe more than $1 million. Many are walking away not because they can’t pay, but because they judge it would be foolish to keep doing so.

“It’s a business decision, not an emotional one which it is for normal people,” said Deborah Bremner, owner of the Bremner Group at Coldwell Banker, which specializes in high-end properties in the Los Angeles area. “I go to cocktail parties and all people are talking about is whether it is time to walk away, although they will never be quoted in the real world.”

She said she had seen in Beverly Hills a big increase in “strategic defaults,” in which owners who can still afford to make their monthly mortgage payment choose not to because the property is now worth so much less than the giant loan used to buy it during the housing bubble.

Strategic default is an especially appealing option in California, one of only a handful of U.S. states where primary mortgages made by banks are “non-recourse” loans. That means the loan is secured solely by the property, and banks cannot go after a delinquent owner’s wages or other assets if they default.

Bremner said she helped a client buy a Beverly Hills mansion last year that the prior owner had bought for over $4 million. He decided to stop paying his $3 million mortgage – even though he could easily afford it – when the value of the property had dropped to $2.5 million.

“They were able to comfortably cover the loan,” Bremner said. “They were just no longer willing to see the value of the property drop.”

A huge “shadow inventory” is building of elite homes that are in default but have not been put on the market. Of the 180 distressed properties in Beverly Hills, only 12 are up for sale.

The backlog reflects the pent-up flood of foreclosed properties of all price ranges that are expected to hit the U.S. market this year, especially after five major banks reached a $25 billion settlement last week with the U.S. over fraudulent foreclosure practices.

‘Jumbo’ loans
Across the United States, the largest increase in foreclosures and delinquencies, compared with 2008 levels, is with “jumbo” mortgages – loans too large to be insured by Fannie Mae and Freddie Mac, the government controlled mortgage finance providers. Foreclosures on jumbo loans are up 579 percent since 2008, greater than any other form of loan, according to a report last month by Lender Processing Services, Inc.

Strategic defaults are now more likely among jumbo loan-holders than any other type of borrower, according to a report issued late last year by JPMorgan Chase & Co. Nearly 40 percent of delinquencies among non-governmental mortgages, which are mostly jumbo loans, are strategic defaults, the report said.

“Now that these homeowners with jumbo loans are finding out you can do this, more and more are doing strategic foreclosures,” said Jon Maddux the CEO of YouWalkAway.com, which advises homeowners who are “underwater,” the term for those whose loans exceed the value of their home.

Nathaniel J. Friedman, a Beverly Hills lawyer, insists he is not a strategic defaulter – that he never missed a mortgage payment in his life. But he stopped making payments on his five-bedroom, six-bathroom Beverly Hills house on Schuyler Road three years ago.

Friedman, who had mortgages totaling $3 million with the now-defunct Countrywide Home Loans, returned home one evening in January 2009 to find a letter from Countrywide freezing his $150,000 line of credit, which was linked to his second $900,000 loan. His primary loan was $2.1 million. The property is worth about $2 million today.

Friedman says he decided to stop paying out of a sense of vengeance from the moment he received that letter. He has been in negotiations for months with Bank of America, which took over Countrywide after its collapse, to modify the loan.

“I thought to hell with it,” he told Reuters. “Why should I keep feeding a dead horse if the bank has no confidence in me?”

“I was able to maneuver things my way because of the inertia of the banking sector,” Friedman said. He believes the bank will blink first, and eventually modify his loan.

 

 

Source:   Thomson Reuters, www.msnbc.msn.com/id/46411361/ns/business-real_estate/#.Tz1aT8VSSKY

A Big Step Forward for the Housing Market

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For years, the housing market has been locked in a deep freeze, as a combination of underwater mortgages, reluctant lenders, and a lack of political will have kept a huge mass of homes off the market and in limbo. But as banks are finally coming to the conclusion that it makes more sense to accept smaller losses now to move forward, rather than clinging to the fading hope that they’ll somehow recover more in the future, housing could finally get the catalyst it needs to recover.

Banks and short sales
Banks have had problem mortgages on their balance sheets for years. But after stubbornly hanging on to those trouble assets, some banks are coming around and changing their tone when it comes to so-called “short sales.” In fact, not only are they allowing such transactions to happen, they’re also giving homeowners some big incentives to do so.

Short sales occur when a prospective buyer makes an offer on a home that isn’t enough to pay off the seller’s mortgage. Especially in states like California, where the lender often doesn’t have recourse to hold the homeowner liable for any shortfall, lenders have often resisted short sales. For a while, that made sense, as banks figured that short-sale offers were lowballing the true value of the home and that if they foreclosed on the property, they could resell it at its higher market price.

But lately, banks have realized that the foreclosure process is long, costly, and fraught with peril. With regulatory investigations into foreclosure practices adding to the potential problems of years-long delays and an obstacle course of legal requirements, banks are concluding that it’s better to accept the bird in hand of a short sale than to hope for a recovery that may take years to come.

Gimme some money
What’s most surprising about this about-face is the length to which some banks are going to get short sales done. JPMorgan Chase (NYSE: JPM  ) reportedly offered one homeowner $30,000 to accept a short sale on a $600,000 home, despite having a loan for nearly $200,000 more.

Real estate agents that Bloomberg interviewed said that the company offers $10,000 to $35,000 for many (but not all) of the 5,000 short sales it approves in a typical month. Wells Fargo (NYSE: WFC  ) and Bank of America (NYSE: BAC  ) have made similar offers to certain homeowners, especially in states like Florida, where foreclosure is especially onerous.

Is it the end of the bust?
What the housing market has needed all along is a market-clearing event like this. While refinancing and mortgage modifications only kicked the can down the road, allowing actual purchases and sales to occur is a step in the right direction.

A host of companies could benefit. Already, homebuilder stocks have soared as news on the housing front has gotten progressively better, and improving employment reports suggest that consumers may finally be getting back on their feet.

But other possible winners include companies with land development opportunities. For instance, Howard Hughes Corp. (NYSE: HHC  ) owns master planned communities and other real-estate holdings in 18 states, with key properties near Houston, Las Vegas, New York, and Honolulu. Having the housing market flowing again would open the door to further development. Similarly, St. Joe Company (NYSE: JOE  ) could return to profitability if itsextensive Florida land holdings find themselves back in demand, which could happen once the market starts perking up again.

Move forward
It’s always a tough decision to cut your losses and admit that you’ve made a mistake. Although it’s taken too long, it’s good news that banks have finally figured out that throwing good money after bad doesn’t make any sense. With banks finally biting the bullet and letting the housing market breathe again, a recovery should come a lot faster than it otherwise would have.

Housing is a key component of planning for retirement.

 

 

 

Source: By Dan Caplinger

http://www.fool.com/how-to-invest/personal-finance/home/2012/02/09/a-big-step-forward-for-the-housing-market.aspx

Distress Sales at Near Record Activity

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•  Nearly 4,000 California distressed properties sold last month

•  ‘Foreclosure starts remain near record low levels

Real estate investors started off 2012 with a bang, with sales to third parties, typically investors, rising significantly in January throughout California, according to a new report Tuesday from foreclosure information company ForeclosureRadar Inc. of Discovery Bay.

In California, investors purchased 3,964 properties for $766.2 million last month, it says. Note that trustee sale investors must pay in cash, in full, with no title insurance or inspections prior to purchase. This is the fourth largest month on record in California, and the busiest since March of 2011.

Nevada saw the largest month-over-month increase in the West in foreclosure sales, with investors there purchasing 973 properties for $99.1 million. This increase, coupled with the dramatic decline in new foreclosures that began in October 2011, is quickly depleting the foreclosure inventory that remains scheduled for sale in Nevada. Year-over-year the number of Nevada properties scheduled for sale has dropped 57.6 percent.

Despite what appears to be significant percentage increases in foreclosure starts in California, Nevada and Washington, these increases barely offset the declines seen over the holidays, says the ForeclosureRadar report. Compared to January one year ago, foreclosure starts are significantly lower now — despite the fact that many banks were still under self-imposed moratoriums due to robo-signing last year, it says.

“January’s numbers should put to rest any notion that we will see a wave of foreclosures in 2012, at least in the western states that we cover,” says Sean O’Toole, founder and CEO of ForeclosureRadar. “Foreclosure starts remain near record low levels, significantly lower than a year ago, when many banks still had self-imposed moratoriums in place due to the robo-signing scandal. Add to that a foreclosure timeframe of more than eight months, and there is little chance of a wave this year even if all the banks started the foreclosure process en masse tomorrow.”

In the Central Valley, foreclosure starts dropped year-over-year except in Kings County, which showed a sharp uptick.

Here are ForeclosureRadar’s figures for foreclosure starts in the Central Valley in January, by county, compared to year-earlier numbers.

• Butte: 6; -94.69 percent

• Fresno: 537; -21.49 percent

• Kern: 580; -24.38 percent

• Kings: 147; +56.38 percent

• Madera: 89; – 32.06 percent

• Merced: 157; -25.94 percent

• Sacramento: 1,110; -19.51 percent

• San Joaquin: 558; -22.50 percent

• Stanislaus: 424; -18.93 percent

• Tulare: 295; -8.67 percent

• Yolo: 85; -18.27

• Yuba: 67; -17.28 percent