Archive for the 'Foreclosure Crisis' Category

It used to be that many neighborhoods in Mesa, Arizona are inundated by abandoned and vacant foreclosed properties, an everyday reminder of the housing market collapse and economic downturn.

But now, many properties on bank foreclosure list are starting to show some life as homebuyers take advantage of cheap houses. Industry experts have noticed a dramatic rise in foreclosed homes purchases and attributed the development on the federal tax credit given by the Obama Administration to first-time homebuyers.

Experts said that the tax credit helps shave off the bank foreclosure list with bank owned properties and short sales. They added that demand for bargain foreclosure houses helped boost home prices.

They pointed out that a foreclosed property that used to fetch $115,000 on the market could now be sold for $140,000. Home prices in some areas in Mesa have inched up by almost 10 percent.

In the East Valley, there are some significant improvements in the existing home market with homes on bank foreclosure list selling and the inventory declining. But industry analysts are expecting a second wave of foreclosure this year.

January 1 inventories of existing homes declined slightly, particularly in Mesa, Gilbert, Chandler and Queen Creek/San Tan Valley. Cromford Associates LLC owner Mike Orr pointed out that homebuying competition is notably intense for foreclosed properties under $350,000. Meanwhile, prices continue to fall for properties above $500,000 because of the abundance of supply.

In outlying areas of Arizona, prices for homes on bank foreclosure list continue to drop significantly.

But on a positive note, prices for properties located at South East Valley are stabilizing, according to Arizona State University’s Realty Studies Department director Jay Butler. However, he warns that a true housing market recovery is still not feasible in the near future.

Butler pointed out the flatness of the traditional segment of the housing market, which involves owners selling and buying their distressed properties. He believes that there is real recovery if the traditional process of owners dominating the housing market instead of investors and foreclosures occurs.

May data showed that bank owned houses represented almost 44 percent of home sales in Chandler, 61 percentage in Queen Creek/San Tan Valley and 57 percentage in Mesa and 51 units in Gilbert.

Industry experts noted that competition among bank foreclosure list buyers is intense and many make multiple offers.

The sales pace of foreclosed houses for sale and other residential properties is being influenced by the loan limits imposed by the U.S. Federal Housing Administration, based on a study of residential real estate sales nationwide.

Housing units, including foreclosed houses for sale, priced below $417,000 are selling much faster than homes priced above $417,000 – the price limit set by FHA for home loans that it buys in most areas across the U.S.

Because more than half of all home buyers who purchased pre-owned homes and foreclosed houses for sale in recent months were first-time home buyers, most of the properties bought were priced below $417,000 – the FHA loan limit.

Unlike during the housing boom in 2006 and 2007 when even first-time home buyers were buying higher-priced homes, first-time home buyers now are very conscious about their ability to sustain monthly payments.

Also, they are now considering and using FHA loans, unlike before when many prospective home buyers were ignoring FHA loans because of the loan limits.

Lawmakers increased FHA loan limits to address the needs of home buyers in high-cost areas, but still, many homebuyers in recent months preferred foreclosed houses for sale and other properties priced below the FHA loan limit of $417,000.

In 76 high-cost counties across the country, lawmakers allowed Fannie Mae and Freddie Mac to increase the loan limit of $417,000 to $729,750. But the higher loan limit is set to drop to $625,000 in January next year.

In 600 other areas of the country, lawmakers have increased the $417,000 loan limit to amounts ranging from $417,001 to the higher limit of $729,750.

However, despite the increase in FHA loan limits, mortgage lenders are still wary about providing jumbo loans because investors in mortgage-backed securities have not returned to the market.

Economist Lawrence Yun said the jumbo housing market is not moving because even people who have the needed income level to buy higher-priced homes have not been buying because of the higher mortgage rates for jumbo loans.

According to recent real estate sales data, home loans higher than $417,000 comprised only ten percent of the home mortgage market in eleven states and Washington, D.C. This figure shows that foreclosed houses for sale and other homes priced below $417,000 comprised the bigger portion of recent housing sales.

A panel of consumer advocates and government officials told participants at the National Association of Real Estate Editors conference not to expect an end to bank forclosure listings anytime soon.

Panelists agreed that whatever progress made by the Obama Administration’s foreclosure prevention programs, such as refinancing and loan modification, will be derailed by recession, re-defaults and misinformation disseminated by for-profit repossession prevention firms.

Deputy Treasury Secretary Seth Wheeler said that the loan modification program failed to perform as expected, with only 75 percent of mortgage servicers participating. He said that only 150,000 trial loan modifications have been finalized while thousands are still in danger of being placed on bank foreclosure listings as mortgage servicers struggle to boost the number of their staff and training.

Office of the Comptroller of the Currency Chief of Staff John Walsh said that refinancing also failed to perform as expected because of worsening economic conditions. He explained that the drastic decline in home prices and increasing unemployment rate are starting to take their toll on homeowners.

According to market data, a 52 percent failure rate was posted for mortgage modifications.

Meanwhile, National Community Reinvestment Coalition executive vice president David Berenbaum urged the media to refrain from running advertisements by for-profit foreclosure prevention companies that charge an average of $2,900 to homeowners for poor advice.

He cited as examples advises not to pay mortgage loans or contact lenders. He said that counselors approved by the Department of Housing and Urban Development (HUD) are available to provide help to distressed homeowners for free.

Some organizations that may help troubled homeowners how to avoid placing their properties on bank foreclosure listings are NeighborWorks America, a nonprofit, congressionally chartered network of over 240 affordable housing and community development organizations.

NeighborWorks Chief Executive Officer Kenneth D. Wade pointed out the need for transparency on results. He said that more information is needed about distressed homeowners who are receiving assistance to determine what is working and what is not.

He said that if the new programs designed to help troubled homeowners avoid placing their properties on bank foreclosure listings can keep pace with changes brought about by the housing problems in the country, then they have better chances of working.

Florida neighborhoods severely affected by the foreclosure crisis may find revitalization soon with an initiative funded under the Neighborhood Stabilization Program.

Properties on bank foreclosure list still have a significant share in home sales, with one out of three houses sold last month was a repossessed home.

Luxury homes are starting to sell in San Francisco Bay Area, California. The area’s real estate market, which was once dominated by bank owned homes sales, is seeing its median price increased by 12.3 percent last month from the previous month.

For the first five months of this year, the office of Arizona Attorney General Terry Goddard has seen an almost 35 percent increase in the number of distressed homeowners who complained against fraudulent bank owned foreclosures prevention schemes.

City commissioners of Fort Lauderdale in South Florida will vote on a law to require owners of bank foreclosure property to maintain it to reasonable standards.

If the economy will not improve soon, the number of homes on bank foreclosure list will increase three times its current level by the end of this year. This is the dire forecast that the Mortgage Loan Delinquency Rate report provided.

Regulators have ordered Colonial BancGroup Inc., a lending company based in Montgomery, Alabama, to stop the operation of its banking unit until such time that it has increased its capital and reduced problem and non-performing assets. Colonial blamed the increasing bank owned foreclosures on its portfolio on the financial woes that its banking unit is currently experiencing.