Archive for the 'Foreclosure Crisis' Category

Foreclosure has started to ease in some cities across the country where the large volume of bank foreclosed houses caused devastation on their housing markets and economies. However, industry experts are quick to point out that the current development could be just a lull before the next wave of foreclosure which they expected to hit some unlikely cities.

In the first half of 2009, the bulk of bank foreclosed houses were located in the cities of Arizona, California, Florida and Nevada. Twenty-nine cities from the four states were among the top 30 in the list of places with highest foreclosure rates. The Colorado city of Greeley was the odd place on the list dominated by cities from the four states.

But recent market data showed that some of the cities hardest hit by foreclosures, such as California’s Central Valley cities, showed some improvement by posting declining foreclosure rates.

However, industry experts said that a third wave of bank foreclosed houses is looming in cities with over one million populations. The first wave of foreclosures was due to the subprime mortgage collapse. The second wave of the foreclosure crisis was triggered by massive layoffs and the economic consequences of the subprime collapse.

Experts said that the anticipated resetting of the option-adjustable rate mortgage (ARM) will trigger the third wave of foreclosures.

One of the cities that was not pummeled by foreclosures the past year is Seattle, Washington. The city posted the highest rate increase in foreclosure filings in the first half of this year. Data showed that one out of 107 homeowners in Seattle received notices of foreclosure, representing a 72 percent increase compared with the same period the previous year.

Seattle is followed by Minneapolis, Minnesota where 1 out of 90 households received foreclosure filing, a jump of 58.6 percent. Phoenix, Arizona is third on the list with filings on one out of 22 houses, representing an increase of 51.7 percent.

Some cities that showed significant declines in foreclosure filings are New York by 23.5 percent, Boston, Massachusetts by 40.7 percent and Houston, Texas by 31.3 percent.

Leading the highest foreclosure filing list is Las Vegas, Nevada with 56 percent increase. The city took the lead from Stockton, California by posting foreclosure filing on one out of 13 properties from January to June.

Six California cities are among the top 10 places with the highest filings for bank foreclosed houses.

Renters are the latest unsuspecting victims of the foreclosure crisis that have been sweeping across the country for several years now. Most often, renters of foreclosed condos would just find themselves being evicted in a moment’s notice despite paying their rents diligently.

Most owners of foreclosed condos never warned renters about the foreclosure and continue to collect rents until such time that eviction is inevitable.

And adding to the woes of renters of foreclosed condos is the refusal of owners to return their security deposit. Tenants Together, a renter’s rights group, said that last year, over 225,000 renters in California lived in foreclosed properties.

Housing lawyer Christina Skaf Hathaway said that President Barak Obama’s Helping Families Save Their Homes Act gives tenants more rights. Under the law, lenders are required to give renters at least 90 days to remain in the property or until the lease expires. It also requires that an eviction notice should be written.

On a separate note, some apartment owners in New York are finding ways to survive the current economic downturn. Buildings that have started out as condominiums were converted into rentals. Many condominium developers, who cannot sell, have come into agreement with their lenders, to rent the units to get cash flow.

However, the trend is a potential turn off to most buyers who often shy away from buildings that are rented. According to industry experts, apartments that have been rented could not be placed on the market as new units. This would force developers to reduce the prices of apartments that have been rented.

Adding to the problem is the lack of motivation on the part of renters to take care of the apartments. According to experts, renting out apartments has less impact on values than having a vacant building with no tenants.

Developers who want to rent their unsold apartments must do so under the original condominium plan filed with the attorney general’s office in New York. This document is reviewed by potential buyers before closing an apartment sale.

Developers have the option to amend the condominium plan to adjust for rentals, provided that no units have been sold. It is the standard practice of developers to include rental provisions in the plan.

Developers said that they need to have the right to rent their units in all their condominium projects in order not to turn them into foreclosed condos.

The number of government repo homes is expected to increase further following the significant rise in the percentage of loans insured by the Federal Housing Administration in June, based on data released by the Mortgage Bankers Association.

Out of all home loans provided to homebuyers in June, FHA-insured home loans comprised 36 percent, the biggest FHA share of the home loan market since 1990.

In August 2005, FHA loans accounted for only 5.8 percent of the home loan market.

Analysts expect government repo homes to increase because of the rising trend in FHA loan default. Based on FHA data, the default rate increased to 5.65 percent in February this year, a substantial increase of nearly 23 percent from the default rate of 4.6 in October last year.

As of the last months of 2008, more than 4 percent of loans insured by FHA were delinquent by 90 days or more. These delinquencies increased the number of government repo homes.

Many housing analysts are worried that the factors that largely caused the current subprime mortgage crisis will also cause another crisis involving FHA loans and government repo homes. They pointed out current housing programs that enable many borrowers to get loans with zero down payments.

In many states, housing officials are providing financial assistance so borrowers can use the federal $8,000 tax credit to make their down payments and their closing costs.

The popularity of FHA loans exploded sharply since 2008, soaring by a staggering 314 percent nationwide. In the first two months of this year alone, 670,000 homebuyers took out FHA loans, compared to the 425,000 taken out in all the 12 months of 2007.

FHA officials expect to insure a total of 1.75 million of new loans in 2009, according to Meg Burns, head of the Office of Single Family Program Development at FHA.

Dennis Maag, a home lending regional vice president at JPMorgan Chase, said his mortgage firm has been carefully screening FHA loan applicants, putting its FHA default rate to only 0.4 percent.

Fifth Third has a 1.6-percent default rate and Huntington has a 2.4-percent default rate.
But FHA loan defaults in other mortgage banks are rising. Strategic Mortgage has a staggering 12.1-percent default rate nationwide while Countrywide Homes Loans holds a delinquency rate of 16.2 percent in Ohio.

To prevent another wave of government repo homes similar to what the subprime crisis caused, analysts said FHA must examine current FHA loan defaults and its loan insurance policies.

A growing number of banks and lenders are delaying bank forclosures activity and this troubled industry experts who claimed that the trend will not benefit cities with weak housing markets.

Six jurisdictions in the Washington region and the Metropolitan Council of Governments are applying for federal funds that will help stem the tide of bank owned homes sale in the area. The funds are under the Obama Administration’s Neighborhood Stabilization Program aimed at helping neighborhoods across the country severely affected by the foreclosure crisis.

The Senate Banking Committee recently held the hearing, titled “Preserving homeownership: Progress needed to prevent foreclosures.” One of the highlights of the hearing was Chairman Chris Dodd of the Senate Banking Committee’s venting of his frustration over what to him is a lack of progress on bank owned foreclosures prevention efforts.

Last month’s 4,702 existing home sales in Las Vegas, Nevada topped the June 2004 record of 4,414. This development created some excitement within the residential real estate market which is hoping for some signs that may point to a housing market recovery. But industry experts pointed out that bank foreclosure property is a major threat to the housing recovery market.

A growing number of condominium developers are trying to stave off the effect of the growing number of discounted properties on bank foreclosure listings by auctioning off and offering discounts on properties.

A growing number of American families who lost their homes to bank owned foreclosures are placed in motels or homeless shelters. Most homeless people are crowding out shelters which forced some states and cities across the United States to find alternative housing.

A homeownership survey showed that home buyers are motivated to buy bank foreclosure homes because of low interest rates and property prices. The survey indicated that 65.2 percent of potential homebuyers are driven by affordability to hunt for bargain-priced foreclosure properties.