Feb222012
Foreclosures rose in wake of bank settlement deal
Last fall the major banks all increased their foreclosure activities. Some banks may feel they are strong enough to take the necessary write downs, and B of A appears to be desperate for cash. Perhaps in anticipation of the Robo-signer settlement deal or perhaps out of a desire to clear out the shadow inventory, for whatever the reason, lenders are increasing foreclosure rates everywhere.
Foreclosures on the Rise Again
Published: Thursday, 16 Feb 2012 | 12:04 AM ET
By: Diana Olick
CNBC Real Estate Reporter
After a year-long reprieve from rising foreclosures, the numbers are going up again.
One in every 624 U.S. households received a foreclosure filing in January, up 3 percent from the previous month, according to a new report from RealtyTrac. Foreclosure activity froze in many states in 2011, due to processing delays after fraud, or so-called “Robo-signing,” were uncovered in the fall of 2010. The thaw is now on.
Last week I noted Foreclosure settlement and bulk sales will dramatically increase foreclosure rates. Banks started increasing their foreclosures in January in anticipation of increased buyer demand in 2012 and the signing of the Robo-signer agreement. I expect to see the foreclosure filings pick up dramatically now that the foreclosure settlement is final.
“We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation’s largest lenders,” said RealtyTrac’s CEO Brandon Moore in a written release. “Foreclosure activity increased on a year-over-year basis for the first time in more than 12 months in Florida, Illinois, Indiana and Pennsylvania, following a pattern we saw in late 2011 in states such as California, Arizona and Massachusetts.”
While states that do not require a judge to preside over foreclosure proceedings, like California, saw a jump in filings toward the end of last year, judicial states have all but stalled. That will now change, thanks to the $26 billion dollar government-lender/servicer settlement. There will still be some delays on individual state levels, but the wheels are turning again, and that means more bank repossessions and more foreclosed properties heading to the re-sale market.
Not necessarily. Lenders may hold these properties while they negotiate bulk sales deals to keep them off the MLS.
Bank repossessions, the final stage of the foreclosure process, increased at least 30 percent year-over-year in several states, including Massachusetts, which saw a 75 percent spike. Bank-owned or REO (real estate owned) activity hit a 16-month high in Illinois and a 15-month high in Indiana. Default notices, the first stage of foreclosure, were flat nationally in January, but spiked in judicial states, like Connecticut and Pennsylvania (up 112 percent) and even in non-judicial states like Maryland (up 100 percent).
Banks have a lot of work to do in the judicial foreclosure states to catch up on the foreclosures delayed by Robo-signer.
Nevada still posted the highest foreclosure rate, with one in every 198 households receiving a filing, despite an 8 percent drop in foreclosure activity. Nevada is a non-judicial foreclosure state, so the foreclosure backlog has been clearing for the last several months.
The situation is the same in California, where foreclosure activity dropped to a 50-month low, but the state still posted the second highest foreclosure rate in the nation. More than 51,000 borrowers received a foreclosure filing in January. California cities still account for nine of the top ten metro foreclosure rates, according to RealtyTrac.
…Until banks work through the enormous backlog of foreclosures, which number in the millions, home prices will not hit a firm bottom, especially in the most troubled local real estate markets.
Expect house prices to be choppy at the low end and slowly decline at the high end over the next few years. Since many properties will be sold to private equity groups as rental holds, don’t expect much appreciation after that. The supply will slowly come onto the market as the demand is capable of absorbing it.
California Foreclosures
NODs were up in January from the low in December. It’s too early to tell if this is a new uptrend, but based on recent news events, foreclosure processing will greatly increase.
January saw a dramatic increase in foreclosures as well as a large decline in cancellations from December. These third-party sales will make their way onto the MLS as flips within the next 60 to 90 days.
Inventories are down over last year as lenders have slowed foreclosure rates and increased sales rates.
Low interest rates are stimulating buyer demand, and lenders will likely take advantage of this demand to liquidate more properties.
Orange County Foreclosures
Orange County witnessed the same increase in NODs over December’s lows.
The uptick in foreclosures was particularly dramatic in Orange County. Banks took back 20% more REO than December. The number of sales to third parties in January 2012 exceeded the largest month of foreclosures in all of 2011. More supply should be on its way.
The inventory of REO in Orange County has been remarkably steady. Lenders have found the carrying capacity of the market, and they manage to that number.
Irvine Foreclosures
NODs are down in Irvine as compared to 2011, but the NOTs are up substantially. Notice the oscillating pattern. There is a 90-day delay between NOD and NOT, so I anticipate NOTs falling off in the spring due to the lowereed processing in the 4th quarter of 2011. I also expect lenders to increase their NODs to further clear out the shadow inventory.
The foreclosure numbers are small in Irvine, so tiny variations in the numbers look huge on a percentage basis. The number of properties sold to third parties was up a whopping 225%! Of course, that’s only 9 more properties, but it displays a willingness to increase foreclosure processing.
Inventories are down, and NODs were well down over last month and last year. Are they out of delinquent mortgage squatters in Irvine? I doubt it. Expect the NOD number to rise going forward.
Return to 1990′s home values…a possibility
By Mike at North Orange County Housing News
First, I’m not saying this will happen but there is a possibility this can occur only if certain economic and financial conditions are met. For this event to occur the right conditions would have to happen in the right order and they would have to be severe. But if the home values did return to 1990′s prices, I think eventually demand would return and boost prices back to the early 2,000′s. However, according to historical data, there’s possibility of a return to 1990′s home values.
MORE
Proposed Bill to Speed Up Short Sale Process and Prevent Foreclosure
To avoid losing homes to foreclosure due to long response times for short sale transactions, three senators introduced legislation to speed up the short sale process.
Senators Lisa Murkowski (R-Arkansas), Scott Brown (R-Massachusetts), and Sherrod Brown (D-Ohio) proposed the bill addressing the issue of short sales timelines on February 17. A short sale is a real estate transaction where the homeowner sells the property for less than the unpaid balance with the lender’s approval.
“There are neighborhoods across the country full of empty homes and underwater owners that have legitimate offers, but unresponsive banks,” said Murkowski. “What we have here is a failure to communicate. Why don’t we make it easier for Americans trying to participate in the housing market, regardless of whether the answer is ‘yes,’ ‘no’ or ‘maybe?’”
The legislation, also known as the Prompt Notification of Short Sale Act, will require a written response from a lender no later than 75 days after receipt of the written request from the buyer.
The lender’s response to the buyer must specify acceptance, rejection, a counter offer, need for extension, and an estimation for when a decision will be reached. The servicer will be limited to one extension of no more than 21 days.
The bill will also allow the buyer to be awarded $1000, plus “reasonable” attorney fees if the Act is violated.
According to a release from Short Sale New England, short sale homes do not bring down neighboring home values like foreclosed homes do, and 83 percent of short sale buyers are satisfied with their purchase, according to a 2012 Home Ownership Satisfaction Survey conducted by HomeGain.
“The current short sale process can be time consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure,” said Moe Veissi, president of the National Association of Realtors. “As the leading advocate for homeownership, realtors are supportive of any effort to improve the process for approving short sales.”
Equi-Trax released a survey last year on the issues real estate agents face when completing short sales. Guy Taylor, CEO at Equi-Trax, said 71.9 percent of respondents reported that a short sale can take four to nine months to complete, and they think that is simply too long.”
The survey also found that 18.2 percent of deals require less than three months to complete, with 10 percent requiring more than 10 months.
When agents in the survey were asked to how the short sale process can be improved, 57.6 percent said lenders should take less time to close transactions, 14 percent said borrowers should be better educated about short sales, and 40.4 percent said both of these changes are necessary to improve the process.
In April 2011, a similar bill was introduced by Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey), but this version requested a response deadline of 45 days instead of 75 from lenders. The legislation never came up for debate before a House committee.
Just in case anyone thought they were running out of delinquent mortgages to foreclose on:
Overdue Mortgages Number 6,082,000
New data from Lender Processing Services (LPS) shows that as of the end of January, there were 6,082,000 mortgages in the U.S. going unpaid. That tally includes loans that are 30 or more days delinquent and loans in foreclosure.
LPS’ mortgage performance statistics are derived from its loan-level database of nearly 40 million mortgage loans.
The national mortgage delinquency rate as of January month-end was 7.97 percent. LPS determines the delinquency rate as a measurement of all loans behind by at least one payment, excluding those already in the process of foreclosure.
The delinquency rate registered a decline, both for the month and the year, with January’s rate down 2.2 percent from December 2011 and down 10.5 percent from January 2011.
The total foreclosure inventory rate hit 4.15 percent last month – up 1.1 percent compared to December 2011, but down a slight 0.1 percent when comparing year-over-year numbers.
According to LPS’ report, there were 2,084,000 properties that were counted as part of the foreclosure inventory last month.
The number of properties with mortgages 30 or more days past due but not yet referred to a foreclosure attorney tallied 3,998,000. Of these, 1,772,000 had been delinquent for 90 days or longer.
LPS says Florida had the highest percentage of non-current mortgages last month, followed by Mississippi, Nevada, New Jersey, and Illinois.
Non-current totals combine foreclosures and delinquencies as a percent of all active loans in that state.
States with the lowest percentage of non-current loans in January included Montana, Alaska, Wyoming, South Dakota, and North Dakota.
$700 per month in Assoc dues + PMI? LOL
btw, regarding your proprietary OC Housing News home purchase analysis…. well done overall, but IMHO, considering the current prevailing deflationary under-tow influencing debt-based asset values, factoring-in an ‘Equity Hidden in Payment’ amount is mis-guided because accruing equity is simply not a given. Thus, until a sustained price-trend shift actually commences, I would discard that particular element altogether. just say’n. Also, I find the ‘Maintenance and Replacement Reserves’ amounts estimated are far too low
The cost of ownership reports are intended as a static model. I do not factor in future increases or decreases in anything. The equity hidden in payment is there if prices do not change. If they go down, then this equity evaporates. If prices go up, then this equity is magnified. To ignore its existence is to make an assumption prices are going to go down. Although I believe they will likely decline for another year or two, I don’t think prices will decline forever, and accounting for the reduction in loan principal through amortization is a more accurate way of looking at the costs.
The maintenance and replacement reserves are too low for investment properties, but for owner occupants who take care of minor items themselves, this number is generally sufficient. Most people budget zero and expect to get a HELOC if they need anything done. That isn’t realistic these days either.
NAR December home sales data was just revised from +5% to -0.5%. LMAO!
Do you the link for the that figure? Might use for a post.
Thanks in Advance,
Mike
**if this number (Dec) had been unrevised, the January +4.3% increase would have been a decline.
http://www.zerohedge.com/news/nar-continues-tradition-making-mockery-itself-revises-december-home-sales-5-05
That is classic.
That is worthy of a post. The NAr is a pathetic joke.
If I were a realtor, I’d be mad as hell at the idiocy of the NAR.
They were calling a “bottom” in real estate before they actually mentioned the words “soft landing” … this was going on back in 2008 for God’s sake.
Home prices at lowest point in more than 10 years
NEW YORK (CNNMoney) — Home prices fell to their lowest point in more than a decade in January, which helped to lift the pace of home sales, according to a report from an industry trade group.
The National Association of Realtors reported that the median home price in January fell 2% from December to $154,700. That’s the lowest price reading since November 2001, before the run-up in home prices that became known as the housing bubble.
The median price is the point at which half of homes are sold for a higher price, and half are sold at a lower price. (Multi-million dollar foreclosures)
Serving as a drag on existing home prices is a large inventory of homes in foreclosure. Distressed home sales, which includes homes in foreclosure and so-called short sales in which the home is sold for less than what is owed on the mortgage, made up 35% of sales in January.
“Prices will continue to fall through the first half of 2012 due to the high share of distressed sales,” said Stuart Hoffman, chief economist with PNC Financial. “The recent agreement between the big mortgage servicers, state attorneys general and the Obama administration will also result in more homes going to foreclosure over the next few months, adding to downward pressure on prices.”
But the pace of sales rose to the highest level since May of 2010, helped by the low prices and rock-bottom mortgage rates. The seasonally-adjusted annual sales pace of 4.57 million homes was up slightly from the revised 4.38 million in December. The last time homes sold at that pace, buyers were rushing to qualify for an $8,000 homebuyer’s tax credit that was about to expire. The latest reading was roughly in line with the expectations of economists surveyed by Briefing.com.
“The uptrend in home sales is in line with all of the underlying fundamentals — pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” said Lawrence Yun, chief economist for the Realtors.
The housing market has been showing signs of recovery in recent months. The combination of low mortgage rates and a decline in home prices means homes are more affordable than they’ve been in decades. PNC’s Hoffman agreed that the report is a further sign of recovery in the market, although he cautioned “it will remain a long process.”
New home starts by builders have been rising, along with their confidence and customer traffic, according to an industry survey.
The supply of existing homes on the market tightened slightly in the Realtors’ latest report, slipping 0.4% to 2.3 million homes, roughly a 6 month supply. That is down 20% from the supply of homes a year ago
Realtors Slam Obama Foreclosure-Rental Plan
Some nice nAr slams by rEALTORS in the comments section.
[…] are approving short sales that will count as loan modifications for this agreement. Also, banks need cash right now and banks like Bank of America have started increasing foreclosures to recapture some of those […]