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.

The total trial mortgage modifications initiated by JPMorgan Chase include 87,000 loans altered under the Making Home Affordable program and additional 50,900 mortgages through the bank’s own modification program.

Under the program, a distressed homeowner can modify his loan to reduce payments for interest, principal, hazard insurance and property taxes to about 31 percent of his gross income. The modification usually involves extending the loan terms or reducing interest rates to help homeowners protect their homes from becoming bank foreclosure property.

According to Chase, its loan modification plan is the same as the one used for troubled homeowners who failed to qualify for the federal program. JPMorgan Chase retail financial services director Charlie Scharf said that the bank has made significant progress since the federal program was launched last April 6.

He said that the bank was able to help distressed homeowners with its trial loan modifications by increasing its capacity through hiring more people, expanding its office space and technology investment.

He added that JPMorgna Chase understands the desperation of many homeowners to save their homes from becoming bank foreclosure property and they need to hear from the bank as quickly as possible. He said that the bank is committed to do all the necessary things to help distressed borrowers who qualify for the programs.

According to JPMorgan Chase, it has successfully met the demand for serving troubled homeowners by hiring nearly 950 loan counselors in its various operations across the country. The bank now has a total of 3,500 loan counselors and plans to hire more in the coming weeks.

Furthermore, the bank has hired about 2,000 employees for its mortgage operations and opened about 27 Chase Homeownership Centers across the country. It claimed that over 20,000 troubled homeowners visited the centers.

On the other hand, a report released by federal regulators, the Office of Comptroller of the Currency and the Office of Thrift Supervision stated that loan modifications across the country have increased.

The report noted that when distressed homeowners got reduced payments, the number of bank foreclosure property rates dropped.

Between 2007 and 2008, an exodus of residents from both counties was reported. However, a significant number of relocation has been noted in South Florida which prevented a declining population in both counties.

South Regional Planning Council’s Richard Ogburn said that the large growth experienced by towns and cities in South Florida early in 2000 is not happening due to the unabated spread of bank foreclosure homes and recession.

Population in both counties was almost flat, with Broward growing by about 2,500 people to 1.75 million and Palm Beach totaling 1.265 million in population, growing by 4,900.

U.S. Census’s July 2007 to July 2008 data showed that 161 cities in Florida experience a drop in population. The biggest drop in Broward’s population occurred in Pembroke Pines, Coral Springs and Plantation, with each losing over 200 residents for the period.

City officials and planners noted that cities with the most population decline have been among those with the highest growth nationally since 2000. Ogburn tried to play down the figures saying that they are relatively small and the cities are in the process of enticing people in.

Miramar posted the highest population gain among cities in Broward, while Delray Beach and Boynton Beach continue to gain residents since last year but in a slower pace.

Boynton Beach Manager Kurt Bressner said that the reported population increase, albeit slow, is good news for the city. He said that the city lost about 190 people in 2008. But he noted a significant migration activity in the city, attributing it to developments in the area, especially in Congress Avenue and downtown marina where 1,900 units were added.

Meanwhile, the 200 bank foreclosure homes in Plantation resulted to the city’s lost of 205 people. On the other hand, industry experts expected South Florida’s growth to pick up again. But the decline in population is forcing some city officials to recognize the need for changes in their areas, according to Ogburn.

The lender sued the Midtown-based developer in connection with the defaulted loans amounting to $51.7 million for a condominium conversion project located in New York City. Both Manhattan Capital and RREEF Global are converting a 14-story building into an 84-unit luxury condominium.

Bayerische Landesbank filed the bank owned foreclosure lawsuit before the New York State Supreme Court in an effort to repossess the note. According to court records, the bank claimed that Manhattan Capital had missed payments on the loan starting in February.

According to the bank, the borrower defaulted on its loan and has failed to make its account current despite repeated demands made in writing on March 19 and June 15 of this year.

The developer is supposed to make a closing on its first sale but the filing of the foreclosure case put everything on hold. Meanwhile, it plans to file an amendment with the office of the Attorney General to allow buyers to revoke their contracts and refund their money.

Units in the luxury condominium have a price range of $585,000 to $1.825 million. Meanwhile, bank owned foreclosure lawsuits and amendments for rescission are becoming common in the commercial real estate market due to the economic downturn.

Last March, a foreclosure lawsuit was also filed against the Jasper commercial building which was converted into a condominium. In
April, buyers at the Linden78 building were given rights to rescind.

According to data, about 48 percent of the Manhattan Capital-developed condominium units were sold. Aside from the delinquent loan payments on the condominium project, Manhattan Capital also owes contractors over $2.1 million. According to the office of the New York County Clerk, contractors involved in the project have not been paid and they filed mechanic’s lien.

The contractor with the highest lien value is My Jamie Joseph Only, an air-conditioning, heating and plumbing sub-contractor that claims $1 million on the project.

According to attorney Sandor Krauss, once a loan is in default, the borrower is required to notify the buyers. However, several buyers said that they did not receive any bank owned foreclosure notification from the developer.

The current housing market is heavily laden with short sales and foreclosures that help drive down prices. About two-thirds of houses for sale are owned by lenders while short sales and foreclosures accounted for majority of properties on bank foreclosure list. Short sales are properties that are priced less than the total mortgage that homeowners owe to their lenders.

According to industry experts, the great number of foreclosure properties and short sales on bank foreclosure list creates an unpredictable climate for homebuyers.

They suggest that potential homebuyers should be prepared to make a closing when a buying a property by arranging their finances first before making an offer. In the current market, the success of buying short sales and foreclosure houses is contingent on the buyer’s ability to close a deal immediately.

Industry experts observed that potential buyers who have cash and a combination of patience and aggressiveness are the ones who get to have the best deals. They said that banks may require potential buyers to submit a loan application and they may offer reduced closing sale costs if buyers get mortgage loans through them.

Meanwhile, experts warn potential buyers about the intense competition for deeply discounted short sale and lender-owned properties. Earnest money, or the sum potential buyers pay to show their eagerness and sincerity in pursuing the deal, will give buyers leverage on the deal.

However, in the case of properties owned by banks, earnest money are usually non-refundable, meaning buyers could not recover their down payment if they back out of the deal.

On the other hand, prospective homebuyers may find financial help with the U.S. Federal Housing Administration’s (FHA) 203k loan program. The mortgage loan program includes funds for home refurbishment.

First-time homebuyers find the 3.5 percent initial payment and loan cap of $346,250 quite a bit appealing. But the loan amount requires the inclusion of repair costs and the property needs to be appraised for the total amount.

Real estate expert R.L. Brown agrees that now is the right time to buy properties on bank foreclosure list because even if housing prices decline, low interest rates indicate a return on investments.

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.

The Collier County government has taken steps to purchase, repair and sell homes on Bank Forclosure List to clean up or revitalize neighborhoods hardest hit by the foreclosure crisis.

Under the program, Collier will purchase foreclosed properties and hire a contractor to do the repair on them. After that, rehabilitated properties will be sold at a minimal cost to working-class residents of the county. The county government guarantees that rehabilitated homes acquired on Bank Foreclosure List will be sold at zero profit.

Marcy Krumbine, Collier County’s Housing and Human Services director, expresses her excitement that the initiative has finally taken off. She has been working on the stabilization program since last September. For the initiative, she gathered together a crew from several county departments, including purchasing, code enforcement, facilities management and real property.

The first home purchased by the county on Bank Foreclosure List was a rural property in Golden Gate Estates valued at $74,000. According to Krumbine, the house has a garage which means that it does not have to be demolished because it conforms to the county code.

According to Collier housing manager Frank Ramsay, the property will receive new carpeting, hurricane shutters, fresh wall paint, new well pump and appliances.

Krumbine said that the property is in good condition unlike other foreclosed homes that bore the signs of their former owners’ frustrations. Some have outlines of punches on the wall, ripped out lighting fixtures and torn up floorboards.

Meanwhile, Collier County received $7.3 million of federal funding from the Neighborhood Stabilization Program and the money was used right away to purchase and overhaul several foreclosed homes.

Another property purchased by the county government in Golden Gate is a coral-colored house for $42,122. The property features a screened patio, large backyard and a half-covered Jacuzzi. The property was in a worst condition with torn off hinges, yanked out appliances and ripped out electrical wires.

Krumbine admits that the property needs a lot of renovation but there is a potential that it could be restored to its original glory.

County leaders are hoping that purchasing homes on Bank Foreclosure List would restore neighborhoods devastated by the foreclosure crisis and boost the economy by providing work to local tradesmen who will renovate and maintain the properties.

City officials have decided to purchase foreclosed homes, rehabilitate and sell them to interested homebuyers. They will establish the nonprofit Richmond Neighborhood Stabilization Corporation that will use about $3 million from federal funding to purchase repossessed houses at a discount.

However, officials know that the allocated $3 million is not enough to solve the bank owned foreclosures crisis in the city which is one of the cities in Bay Area severely affected by foreclosures. They hope to purchase and rehabilitate several homes, but it will be just a small portion of the estimated 2,300 distressed properties in the city.

City Councilman Jeff Ritterman remains optimistic about the program but admits that the effort will barely scrape the surface of the foreclosure problem.

Redevelopment housing director Patrick Lynch said that the city is the first in the Northern California region to launch this kind of program. He said that several neighboring cities have already contacted Richmond to see if they can participate in its campaign to purchase abandoned, vacant and bank owned foreclosures in their areas at bargain prices.

Richmond would follow the framework establish by the Housing and Recovery Act. It would link into national organizations that have formed partnerships with almost 90 percent of lenders and banks, according to Lynch.

This network of organizations will provide the city with listings of bank owned foreclosures. Richmond officials will visit these foreclosed properties and negotiate for their sale price. Properties that are on top of the city’s purchase list are those abandoned and vacant houses near parks, schools and new infrastructure.

According to Lynch, some properties are escrowed at about $50,000, while others are pegged at $100,000.

City officials have option to renovate and sell the houses to families or redeveloped, placed them in land banks or demolish them.

Meanwhile, the Richmond chapter of the Association for Community Organizations for Reform Now believes that establishing a nonprofit is an important component for a community land trust, which involves the city purchasing bank owned foreclosures, selling them to families while retaining control of the property.

The jobless rate, which is expected to reach 12 percent in the next several months, will make it hard for troubled borrowers to keep up with increases in their monthly loan payments. Big increases in monthly payments will start next year for many borrowers as their ARMs start to reset to higher loan rates.

As discussed in the report, the next couple of years in Riverside will be full of stories of foreclosed homes for sales, slow employment growth and slow improvement in home values.

The scholars blame the artificial housing boom in the Inland Empire as a major cause to the large number of foreclosed homes for sales in the region. They said that borrowers were forced to use ARMs for their home purchases because the boom put home prices beyond their reach. Borrowers could not afford to buy homes if they used conventional home loan products.

During the housing boom in Riverside County, the median house price soared to $415,000. Now, the median price has fallen by more than 60 percent, devastating builders of new homes and putting many construction workers out work.

In May, the median home sales price dropped to $180,000, another big drop from the $290,000 median in May 2008. It was also much lower than the median sales price in Southern California, which dropped by nearly 33 percent in May to $249,000 from the median price in May 2008.

Across the Southern California region, which includes the counties of Riverside, Los Angeles, San Diego, San Bernardino, Orange and Ventura, nearly 21,000 foreclosed homes for sales and non-foreclosure units were sold in May, a 1.3 percent increase from the 20,514 sales in April and an increase of nearly 23 percent from the 16,917 sales in May 2008.

While lenders are claiming that they have been increasing their loan modification activities under the state’s foreclosure prevention program and the federal Making Home Affordable program, statewide foreclosure filings in May surpassed the 41,000 level.

Last month, Riverside County was fourth in California in number of foreclosed homes for sales, with one foreclosure for every 958 households in the county.

JJ Manning Auctioneers has advertised the Bank Owned Foreclosures auction for the property which consists of five buildings located on a 2.61-acre parcel of land. The facilities include two apartments, an office building and two hotel/motel buildings.

According to JJ Manning Auctioneers, the planned auction is on schedule but sometimes, with auctions, cancellation is a big possibility and so potential bidders are advised to call the company for confirmation on the day of the sale.

The property has been used both as a motel and for housing seasonal workers. It contains a 20-room dormitory used by its former owner, Doctor J. Richard Fennell to shelter seasonal workers of the Snow Inn and Thompson’s Clam Bar.

In June 1999, Fennell sold the facilities to Stone Horse Motel Inc. for about $600,000, with Harry Miller as the identified purchaser of the complex. In January 2002, Caribbean Cleaners Inc. bought the complex for a dollar. The following month, the company sold the complex back to Stone Horse Motel, also for a dollar.

Meanwhile, Douglas Levings, who declared himself as the only owner of the complex now under Bank Owned Foreclosures, operated the facilities as housing for seasonal workers and rental motel units. Last year, Levings decided to use the dormitory portion of the property into long-term rentals. He was concerned about the availability of foreign workers who worked seasonally under the H2b visa program.

Levings proposed using the complex to house people who have drug problems. He said that his research showed that there was a lack of housing for individuals who are recovering from drug addiction. He said that his proposal is aimed at providing housing to people who have successfully completed drug addiction recovery programs.

When he put his plan into action, residents living near the property staged a protest. The building department also served Levings a cease and desist order due to his failure to secure permits for conversion work.

The Bank Owned Foreclosures auction requires that successful bidders must have at least $25,000 in certified bank check. They must also be prepared to complete the sale within a month.