Housing Doom

“He who defends everything defends nothing.” – Frederick the Great

February 5th, 2010

Lenders Refinancing Homeowners AFTER Foreclosure

I received an interesting email yesterday from Tim Harris, who runs a real estate coaching company along with his wife Julie.  Tim said that I would find this interesting, and he was right.  He wrote a post Wednesday entitled URGENT BREAKING NEWS: New ‘Secret’ Program, Homeowners Given New Mortgages Immediately After Foreclosure! Here's an excerpt:

[B]anks are now extending opportunities to REINSTATE mortgages loans…after a foreclosure…to the former homeowners!

You read that right….homeowner ‘loses’ their home to foreclosure. Legally, its no longer their home. Home is legally in the hands of the bank. In the past…after the homeowner loses the home in a foreclosure sale….they move out…afterall, its no longer their home..home becomes a REO listing.

Now, homeowners are being offered the opportunity to stay in their home…reinstate their mortgage reflecting the value as established at the foreclosure sale. New mortgage terms, market interest rates.

It seems that this new ’secret’ program is being tested in many major markets across the US. The former homeowner is now able to REINSTATE their mortgage…at the new value as established by the foreclosure sale. In other words, the negative equity is gone…the second mortgage is gone….back property taxes paid off…back HOA fees gone.  Their new mortgage amount IS the amount the lender paid at the foreclosure sale!

I want you to think about that for a moment. This means that even AFTER a homeowner missed payments…loses the home to foreclosure…that they can now IMMEDIATELY secure another loan for the homes current market value. WOW!

Consider this, 25% of all homeowners with mortgages are upside down by at least 10%…..10% of all homeowners with mortgages are upside down by at least 25%. HREU Students know that this trend of underwater homeowners will increase before it levels off. There are 50,000,000 mortgages in the US….as of today…6,000,000 aren’t ‘performing’. In other words, homeowners aren’t paying their mortgages!

What happens when all of these millions of upside down homeowners  discover that they can have their negative equity wiped out….secure a new mortgage…and keep their home…if they let it go into foreclosure?

I asked Tim if he could tell me any more particulars.  He said: Read the rest of this entry »

February 1st, 2010

Arizona Anti-Deficiency Laws Only Cover Foreclosure, Not Short Sales

Considering a short sale in Arizona?  It pays to be careful.  M forwarded me the following information that he received, which came from a discussion with Tom Farley, CEO of the Arizona Association of Realtors. It stated:
 

One issue that Tim made perfectly clear, and we all felt was important to get out to those of you who may not have attended, is this.  In Arizona, there is anti-deficiency protection for a large number of property owners who go through foreclosure, however, there is no statute that proves anti-deficiency protection to any property owner in the case of a short sale.  Our anti-deficiency laws only cover foreclosure.

Tom Farley stressed that it is important that we not make incorrect representations to the sellers in this regard.  The deficiency protection they may be able to receive is only found in the terms of the short sale approval letter provided by the lender. If the lender does not fully release them from the lien, but only releases the property to close and transfer, there is not any guarantee that the lender will not pursue the seller for the remainder of the unpaid balance on the note.

One popular myth that was dispelled at yesterday's meeting is that there was protection if it was purchase money.  This is not true.  While some lenders are providing the release in these cases they are not obligated to do so.  Tom stressed the importance of legal counsel for sellers facing short sale with regards to this issue once again. Read the rest of this entry »

January 25th, 2010

Housing Market IS As Bad As The Number Indicate

Existing home sales are due to be reported today and analysts expect a serious drop in sales.  The WSJ launched a preemptive strike against panic by declaring that The housing market isn't as bad as new numbers indicate: [Thanks John!]

The National Association of Realtors is expected to announce an 11.6% drop in December existing-home sales to a seasonally adjusted annual rate of 5.78 million, according to economists polled by Dow Jones.

The large drop is exaggerated by the initial Nov. 30 expiration of the government's first-time home buyer tax credit, which previously boosted sales by some 28% from August through November to an annualized rate of 6.5 million units, the most since early 2007.

The tax credit has been extended through June, but most analysts don't expect sales growth to resume until February or March. In the meantime, further declines in existing-home sales, which make up nearly 90% of the market, are sure to raise concerns about the recovery in housing and the broader economy.

But there are scattered signs of improvement. Home-price declines have slowed; the S&P/Case-Shiller index out Tuesday is expected to show prices in 20 major cities down about 5.4% in November from a year ago, compared with a trough of nearly 20%.

It's interesting that while the WSJ feels that the numbers are "exaggerated" by the drop, back in November, they didn't seem to think that the rise in sales was "exaggerated" by the tax credit when they announced that Existing Home Sales Jump 10.1%: [Although they indicated that the tax credit was a factor.]

 

Home resales leaped in October, rising far more than expected as a fat tax credit offset fears about joblessness.

Sales of existing homes increased by 10.1% to a 6.10 million annual rate from 5.54 million in September, the National Association of Realtors said Monday.

Inventories kept shrinking. Prices fell, but the NAR said the decline was the smallest in more than a year.

The 6.10-million rate was the highest since February 2007. Economists surveyed by Dow Jones Newswires expected a 2.3% increase in sales during October, to a rate of 5.70 million.

"Many buyers have been rushing to beat the deadline for the first-time buyer tax credit," NAR economist Lawrence Yun said.

Aside from the tax credit, low prices and mortgage rates have drawn in buyers, concerned as the U.S. unemployment rate climbed in October to 10.2%.

Along with the cheery news last November, the WSJ included this video interview with noted expert Ken Rosen of the Fisher Center for Real Estate.  Rosen indicated then that the extension of the tax credit was going to have an even bigger effect over the next six months:

Read the rest of this entry »

January 23rd, 2010

California’s “Official” Inventory Shrinking. Shadow Inventory Is Another Story.

For those of you who like baloney with your breakfast, might I recommend this article from the Wall Street Journal, California's housing inventory shrinks to 5-year low:

SAN FRANCISCO—California's inventory of unsold, previously owned homes shrank to a five-year low in December, in another sign that the state may be coming out of its worst housing slump in decades.

The supply of unsold single-family homes dropped to 3.8 months from 5.6 months a year ago and 16.6 months in January 2008, when inventories were at a peak, according to estimates released Friday by the California Association of Realtors. The inventory levels are now at their lowest level since 2005, resulting in frenzied sales with multiple offers in some cities.

In Northern California's Santa Clara County, where inventory has dropped to 50 days from 243 a year ago, Amanda Garcia said she and her 62-year-old father Luis Garcia finally gave up a nine-month search for a home last month, after they kept losing out on homes priced in the highly competitive sub-$500,000 market.

"It's more like an auction nowadays," said Ms. Garcia, 26, a medical coordinator from Milpitas, Calif. "They shouldn't call it a house sale."

The WSJ also says:

The current inventory rate is running well under California's historical average since the 1980s of about an eight-month supply of existing homes on the market. That's partly because a once huge supply of foreclosures in the state has dwindled. In November, foreclosed properties accounted for 40% of all single-family sales, new and used, in California, compared with 58% in January, according to the most recent estimates by Zillow.com, a market tracker.

This is a curious statement, given this comment from RealtyTrac's latest report:

A total of 632,573 California properties received a foreclosure filing in 2009, the nation’s largest state foreclosure activity total and an increase of nearly 21 percent from 2008.

This is in spite of the reluctance of lenders to foreclose and all of the foreclosure prevention efforts of governments and lenders. It's hard to keep borrowers in homes though when borrowers don't have jobs:

California got coal in its stocking for the holidays as employers cut 38,800 jobs in December and the unemployment rate registered 12.4 percent, according to an Employment Development Department report that showed little sign of life in the state's labor market.

Also, the November unemployment rate – initially reported as 12.3 percent – was revised upward to 12.4 percent on Friday.

December's figure would have been even higher had not 107,000 Californians quit looking for work last month and thus fallen out of the calculations.

December's labor force dropout figure was the highest on record and marks the eight consecutive month of shrinkage in the number of Californians looking for work.

The state estimates that 2.254 million people were unemployed in December.

In addition to the jobless, state officials say 1.53 million Californians were forced to work part time in December because they couldn't find anything full time and another 903,000 people had stopped looking but wanted jobs.

So why the low inventory then?  One explanation is offered by Sean O'Toole, CEO of ForeclosureRadar.com: Read the rest of this entry »

January 11th, 2010

Who did this agent make the prediction to?

I was forwarded an interesting article on rising apartment vacancies in Tucson by our friend M.R. I might have even posted on how Tucson’s vacancy rate has risen faster than any other metro area in 2009, but then I read the comments and got distracted.  Does this comment by J. Saba bother anyone else, or just me? [Edited slightly for clarity]

Long time owners cashed out from 2004-2007 and the new owners leveraged their properties greatly.  They were sold on the idea that rents in tucson were too LOW. But hey, with property prices rocketing up, it took no genius to realize the time bomb investors where sitting on, and we’ll see a few more of them explode soon this year.

I sold some apartments in 2007 which are now in bankruptcy – this guys problem was that he didn’t have good financing and not a lot of money behind his grand dreams.

I predicted it when I sold it and EARNED MY COMMISSION.

Now I am looking at buying them for a steep discount.

It’s not clear to me if Saba was merely the seller’s agent, or if he owned those apartments in 2007. Whatever the case was, I’m wondering who he made his predictions to when he "earned his commission".  Did he warn the buyer, who ignored him?  If so, I suppose there’s a certain poetic justice if the agent buys the apartments now.  Why do I get the feeling though that he made his predictions to someone else? Read the rest of this entry »

December 18th, 2009

“We Cannot Overcome The Lender’s Incompetence”

 

M told me that he found the following in the Realtor Remarks of a Scottsdale short-sale:

REALTOR Remarks: Lockbox removed 11/1/2009. It looks like this one will go to trustee sale despite a reasonable offer being presented to the lender. Another fine example of the inefficiencies and lack of logic on display by a lender. Sorry, fellow agents, I know many of you tried to help your clients buy this one. I appreciate your hard work, but we could not overcome the lender’s incompetence. Read the rest of this entry »

November 28th, 2009

“Price Does Not Include Kitchen Cabinets Or Appliances”

M just sent me the listing for 9866 E Granite Peak Trail in Scottsdale, AZ. In the "Remarks" section it says, "List price does not include kitchen cabinets and appliances.  Owner is taking them with him.  M asked, Is the agent openly aiding bank fraud??

Read the rest of this entry »

November 23rd, 2009

Luster Of First-Time Buyer Credit Is Going To Wear Off

Home sales are up this month, but this "good news" is not going to last:

Sales of previously owned U.S. homes rose in October at a faster-than-expected pace to the highest in more than 2-1/2 years as buyers rushed to take advantage of a popular tax credit, a survey showed Monday.

The National Association of Realtors said sales surged a record 10.1 percent month-over-month to an annual rate of 6.10 million units, the highest since February 2007, from a downwardly revised 5.54 million-unit pace in September.

Analysts polled by Reuters had expected October sales to jump to a 5.70 million-unit pace from the previously reported 5.57 million units in September. Compared to October last year, home sales were up by a record 23.5 percent.

Why such a jump in the slow season for housing?

"Many buyers have been rushing to beat the deadline for first-time buyer credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November," said Lawrence Yun, NAR’s chief economist.

Yun, as usual, was positive about the data:

"Existing home sales have already bottomed. Home prices are almost there. We are seeing a less of a decline in house values," said Yun.

The problem for the housing market now however, is how the extension of the housing credit is likely to be perceived.  The relatively short time period that the housing credit was originally available gave it the appeal of those late night infomercials. Realtors peddling it sounded like,  "You need to act now! This offer only available for a limited time.  If you are one of the first 200 callers, we’ll throw in a free vegetable peeler!" Read the rest of this entry »

October 29th, 2009

Agents- Is there someone living in your vacant listing?

When no one calls to see a vacant listing for awhile, some agents don’t bother stopping by.  This can be the result: [Thanks L!]

A recent scam reported in the Phoenix area involves tenants moving into a pending short sale listing. The surprised listing agent contacted the owner who had not rented the property to anyone. The tenants (two women with two children) were physically moving in and had turned on utilities in their name. The sign and the lock box were removed, and all locks were re-keyed. 

The tenants responded to a "For Rent" sign in the yard. They gave someone $1,800 as rent and signed a lease. While the short sale was able to close, the unfortunate victims of this scam were out $1,800 with no place to live.
 
This down economy encourages some people to take advantage of others.  Listing agents should check their vacant listings regularly and provide neighbors their contact information in case they observe any suspicious activity.
Read the rest of this entry »

October 28th, 2009

AEI Subprime VI: Zimmerman Presentation

Doom Transcripts: Index & Guide

Housing Doom is pleased to present a second selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".1

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

This is the presentation by UBS fixed income researcher Tom Zimmerman.  Tom’s the most moderate of AEI’s Six Bears but in my opinion the scariest, because he usually brings the hardest data to the table.


Tom Zimmerman: [0:11:43] Thanks a lot, Alex, it’s great to be here again. [slide 02] What’s amazing about coming down here every 6 months is that I’m usually viewed as one of the more bearish people in my shop, and also when I speak at conferences around the country I’m usually sort of sitting on the bearish side of these discussions. But I come down here, [laughs] and I’m not … it’s a … I feel like I’m a raving bull about what’s going to happen in the world when you listen to some of these people talk. So anyway, that hasn’t changed, in the last 6 sessions, so …

We had lunch together today, and it’s exactly the same.

I see some green shoots here and there, but I think that it’s not something the other panelists see some real major problems down the road.

What I thought I’d do today is just continue some of the things I’ve talked about before in terms of the housing market, mortgage market. And then at the end talk about some of the lessons that we’ve learned from this bubble which isn’t over with yet, but we’ve learned some lessons or at least some take-aways from it.

Read the rest of this entry »