Archive for the 'Foreclosure Crisis' Category

Despite the continued downturn and falling home values in Silicon Valley, the supply of foreclosed houses for sale during the spring selling season, including homes in foreclosed listings, has declined.

Realtors in the area said the supply of houses for sale has been declining for 6 weeks. They contended there are two reasons for the continued decline: low-priced pre-owned houses including homes in foreclosure listings are purchased quickly, and higher-priced properties are being held by owners as long as they can, hoping for a recovery in home prices.

This week, there are around 5,110 homes and condos in the Santa Clara County market, including houses in foreclosure listings, a decrease from the 5,890 units available for sale on March 20. In the spring of 2008, there were around 7,340 houses for sale, including homes in foreclosure listings, an increase from the 6,900 available for sale 6 weeks earlier.

The declining supply of houses for sale and falling number of properties in foreclosure listings have led to rising competition among buyers. The decline could also signal the start of housing market recovery in the area, and a signal for owners of high-priced properties to list their homes in foreclosure listings.

James Nichols, a manager of a Keller Williams brokerage in San Jose, said he and other realtors are getting multiple offers for homes within days of adding homes to foreclosure listings. Houses priced at more or less 500,000 are being purchased immediately after they are added to foreclosure listings.

Especially for homes in foreclosure listings that are not bank-owned, houses in the $550,000 price range are being bought quickly. Buyers prefer those not owned by banks because banks oftentimes take a long time in approving short sales or closing sales of bank owned home foreclosures.

However, Creekside Realty owner Richard Calhoun said there have been many home sales transactions that are not being completed because some buyers are unable to get loans while the others are discouraged by the complexities of short sales.

Sean O’Toole, founder of California foreclosure tracking service ForeclosureRadar, said there are around 50,000 properties across the state that have received foreclosure filings but have not been repossessed and added to foreclosure listings. O’Toole estimates that there are 300,000 homes currently available for sale across the state, including California foreclosures.

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The jobless rate in April probably soared to its highest level in 25 years due to the continuing effects of bank foreclosed properties, according to a survey by Bloomberg News.

In April, the jobless rate increased from 8.5 percent in March to 8.9 percent. More than 600,000 workers lost their jobs in April, marking the fifth consecutive month of job losses. The exact figures would be released by the Labor Department on May 8.

Because of the soaring jobless rate, economists contend that the labor sector will have a hard time recovering even after the housing market battered by foreclosure properties has recovered.

Analysts say business enterprises will keep firing employees to cut expenses and push up drowning profits. Even if the problem of foreclosure properties is resolved and the economy stars to recover, job losses and clipped paychecks will slow down expansion.

Michael Gregory, a top economist at Toronto-based BMO Capital Markets, predicted the recession will end in 2009, but economic recovery will be slow and the reduction of jobless Americans will take a longer time. The claws of foreclosure properties have cut holes in the economy that are difficult to patch up.

In April, about 600,000 workers lost their jobs, putting the total number of laid off workers to 5.7 million since December 2007, the month economists identified as the start of the recession. The 5.7-million figure is the highest number of jobless Americans in a recession after the Second World War.

Gregory said job losses will continue to restrict consumer spending, although it increased a bit in April, until the losses slow down. He estimated the jobless rate will further increase to 9.5 percent at the end of December and then level off in 2010 at about 9.7 percent.

Meanwhile, gross domestic product fell at an adjusted yearly rate of 6.1 percent in the first quarter from the 6.3 percent adjusted yearly rate in last year’s fourth quarter.

One positive sign is a rise in consumer spending in April, ending its biggest fall since 1980.

Even so, economists interviewed by Bloomberg predicted that consumer spending will again fall this quarter because of the layoffs and the bleak effects of foreclosure properties, but will show some progress in the last two quarters.

Bloomberg analysts also expect the National Association of Realtors to report that the number of buyers of existing homes in March, including foreclosure properties, is largely unchanged.

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The bankers won the day as the U.S. Senate voted on Thursday 51 to 45 to reject a measure that would have provided President Obama’s government foreclosures program an additional tool to enforce its schemes to help distressed American homeowners.

The amendment would have given judges handling bankruptcy cases to modify a homeowner’s mortgage loan if the lender refused to restructure the borrower’s loan to reduce monthly payments based on home value and income.

The measure failed to collect 15 more votes to reach the 60 votes required, as 12 Democrats joined the Republicans in rejecting the proposed amendment.

Senator Richard Durbin, the Democratic Party Whip from Illinois, reiterated that the banking industry has refused to do something to help the government foreclosures program that would solve the housing crisis the industry caused.

Durbin has tried to negotiate a compromise with major banks such as J.P. Morgan Chase, Bank of America and Wells Fargo, but the parties failed to reach an agreement.

Arizona Republican Senator Jon Kyl argued that lenders will be forced to charge higher interest rates if the government takes away their right to repossess properties from delinquent borrowers.

Senate Majority Leader Harry Reid, a Democrat from Nevada, said that the amendment will be reconsidered and will be passed.

Meanwhile, housing advocates such as the Center for Responsible Lending were shocked that the bankers fiercely campaigned against the amendment after they were helped out of bankruptcy under the government foreclosures program.

Charles Gabriel, head of Capital Alpha Partners, was especially concerned about the 12 Democrats who voted against the bill and about how Durbin handled the party’s stand.

The bankruptcy measure was part of Obama’s government foreclosures program when it was launched in February. It was aimed at compelling more lenders and servicers to restructure loans. Under George Bush’s government foreclosures program, only a few loans were modified because program participation by lenders was voluntary.

Nevertheless, Obama’s government foreclosures program would not become useless, according to Barry Zigas, housing policy director at Consumer Federation of America. He said mortgage servicers handling 75 percent of the country’s mortgage loans are now modifying loans and reducing monthly payments to about 31 percent of borrowers’ income.

According to the Hope Now Alliance, it has helped restructure about 134,000 mortgage loans in March, a jump of nearly 20,000 from the average number of monthly loan modifications since September 2008. It said it hopes to modify more under President Obama’s government foreclosures program.

The glut of foreclosed homes has clobbered not only homeowners and communities, but also home builders, mortgage insurers and mortgage lenders.

From available data, the progress of President Obama’s efforts to fight repo homes can be roughly assessed.

Until lately, the average American homeowner has never heard about MERS. But as hundreds of thousands of houses become repo homes, homeowners are now coming into contact with MERS.

The uncertainty surrounding the health of the banking industry has continued to depress bank lending and overall confidence, according to Treasury Secretary Timothy Geithner, who testified for the Troubled Asset Relief Program, including government foreclosures program, before members of the Congressional Oversight Panel.

About one third of all foreclosed homes across the nation are too damaged to be saved by various government bank foreclosures programs, according to Thomas Popik, a real estate analyst and partner at Washington-based Campbell Communications, a service that provides real estate data to mortgage industry consultants.

In a forum held at the Capital Community College in Hartford, Housing and Urban Development Secretary Shaun Donovan reiterated the reality that not all troubled homeowners will be saved by the government foreclosures program developed by the Obama administration.

In February, almost 3,000 homes in Maryland received foreclosure filings, bringing total Maryland foreclosures to 12,977 housing units. In the city of Baltimore, neighborhood revitalization efforts in the past several years are being destroyed by the rising number of abandoned foreclosed properties being added to foreclosure listings.