Short Sales No Great Alternative To Foreclosures [Housing Tracker]

Quotes of the Day

 

"I can find the same exact house as what I live in right now for half the price." - Michelle Augustine of Sacramento, California, who plans to let her 4BR home in Sacramento fall into foreclosure after she buys another home nearby on better terms. Lenders and brokers are calling this new phenomenon the “buy and bail,” where homeowners with good credit buy a new home, and then let their credit slide on their first mortgage. (Wall St. Journal, June 11^th)

 

"The stars don't align with a short sale. We don't know what price the lender will take or how long it take to get an answer." - Joan Peaslee, a top-selling agent at Prudential Slater James River, in Richmond, Virginia, on why homebuyers shy away from short sales, even when there’s a good deal.  (InRich, June 14^th)

 

Foreclosure Data

 

Where Short Sales Stumble.  “Short sales can happen only when the lender agrees to accept [a] shrunken payoff.  Desperate sellers pursue them to avoid a foreclosure, which would be even more damaging to their credit history. Buyers pursue them in hope of snagging a home at a deep discount. [Many] short sales stand little chance of getting the bank's approval… Lenders aren't in the business of accepting less than they are owed, and their paperwork machinery isn't even set up to work that way efficiently. Their approval of a short sale is always slow in coming -- if it ever comes at all.” (Washington Post, June 15^th)

 

Foreclosures Rise 17.6 Percent In May.  Washington: “RealtyTrac: The number of Washington state foreclosure filings [are] up 17.6% on an annual basis. Last month, one in every 1,081 Washington households experienced a foreclosure filing, well below Nevada, the nation's leader with one in every 118 households, or California, where one in every 183 households was in distress. The incidence was lower in King County — one in every 1,357 households — and higher in Snohomish County, where a new foreclosure hit one in every 936 households.” (Seattle Times, June 14^th)

  

Foreclosure On Hold.  “Short sales… can be extremely difficult to complete and require months of delays because a third party - a mortgage company - must approve every aspect of the deal, including the sales price… Some mortgage companies won't even consider letting their borrower participate in a short sale until they are two months behind on a loan. In other cases, a borrower can be in dire financial straits but still current on payments.  [Also, many] loans involve two different mortgage companies, [where] one holds the first mortgage, and [another] holds a home equity, or second mortgage.” (Salt Lake Tribune, June 14^th)

 

Buyer Sues Calif. Congresswoman Over Foreclosure.  "A Sacramento investor who bought the foreclosed home of Representative Laura Richardson is suing the congresswoman and her bank for rescinding the sale. James York claims Richardson used her influence as a congresswoman to force Washington Mutual (WM) and a subsidiary to back out of the sale. York, who operates Red Rock Mortgage, bought the foreclosed home in an upper-middle class Sacramento neighborhood for $388,000 in May, after Richardson failed to make her mortgage payments… Richardson bought the house in January of 2007 for $535,000.” (AP via KTNV, June 14^th)

 

U.S. Foreclosures Up 48 Percent.  “RealtyTrac's May 2008 U.S. Foreclosure Market Report: Foreclosure filings in May, in the U.S. overall and in New Mexico, were up 48% from a year ago. The report defines foreclosure filings as default notices, auction sale notices and bank repossessions. Foreclosure filings were made against 261,255 properties in May nationwide, up 7% from the previous month. One in every 483 U.S. homes was filed against. New Mexico ranked No. 36 among the 50 states, with 448 total filings, which is a 26.55% increase from the previous month and a 37.85% increase over May 2007.” (New Mexico Business Journal, June 13^th)

 

Foreclosures Rise 48% in May as Repossessions Double.  “RealtyTrac: The foreclosure rate was the highest rate since RealtyTrac began reporting in January 2005 and the 29th consecutive month of year-over-year increases. Nevada, California and Arizona posted the highest rates in the U.S. and New Jersey entered the top 10. Devin Reiss, owner of Realty 500 Reiss Corp. in Las Vegas. “We used to sell homes in a day. Now 50% of our sales are foreclosures.” (Bloomberg, June 13^th)

 

Hawaii Foreclosures Down 22% In May.  “RealtyTrac: Hawaii ranked No. 42 in the nation for foreclosures in May, up from 36 in April. Hawaii had 162 foreclosure filings in May, down 22% from April and up 25% from May 2007. There were 210 foreclosure filings last month and 129 foreclosures in May 2007. Hawaii had a foreclosure rate of one filing for every 3,087 households.” (Pacific Business News, June 13^th)

 

State Ranked 7th In Foreclosures.  “RealtyTrac: Colorado ranked No. 7 in the nation for its foreclosure rate in May. However, local experts continue to criticize RealtyTrac's figures, saying they overstate the number of foreclosures in Colorado, making the situation appear worse than it is… Local experts say Colorado is the only state in the country that uses a public trustee system rather than a judicial process… In Colorado, if a homeowner has a first and second mortgage on a home and stops paying both mortgages, the public trustee would count that as two foreclosures, even though it involves one owner and one house.” (Rocky Mountain News, June 13^th)

 

Florida May Foreclosure Activity No. 2 In Nation.  “RealtyTrac: Florida [had] the second highest foreclosure activity [in May] at 37,364, which is 14% of the nation's total 261,255 foreclosures. California tops the list with 71,930 foreclosed properties, and Arizona comes in third with 12,959. In the Tampa Bay area, Hillsborough County had 1,912 foreclosures, Pinellas County had 971, Sarasota County had 872, Polk County had 847, Pasco County had 715, Manatee County had 554 and Hernando County had 549.” (Tampa Bay Business Journal, June 13^th)

 

8 Accused Of Loan Scheme. “Mortgage schemes have become pervasive around the country, particularly as the number of foreclosures has skyrocketed. The Federal Bureau of Investigation found that suspicious activity reports related to mortgage fraud jumped to nearly 47,000 in fiscal year 2007, a seven-fold increase over the previous four years. Financial institutions are required to file such reports.” (Baltimore Sun, June 13^th)

 

 A Glimmer Of Hope On Foreclosures.  “ForeclosureRadar: Lenders sent 43,011 "notices of default" to California homeowners last month, or 2.5% fewer than in April. Default notices… the first step in the foreclosure process, declined 8.5% in Santa Clara County, with 1,291 homeowners receiving them last month. ForeclosureRadar founder Sean O'Toole:  “While the dip in defaults could indicate that fewer people got into trouble with their loans last month, the decline might simply be because May had one fewer business day than April, giving lenders less opportunity to file the notices… In fact… the average number of defaults filed each day rose 2.4%, to an average 2,009 filings per day.” (San Jose Mercury News, June 12^th)

 

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Comments

[theinvestingspeculator]

House price are the major problem for the economy. I think the problems are going to take years to clean out. Longer if the government gets involed. I think it will be 20 years before house price rise on an inflation adjusted basis. The Fed has no good option-rising rates will hurt housing-but we have crazy inflation with low rate. What can the Fed Do?
theinvestingspeculator...

[rm]

Not only are short sales "difficult to complete" and drawn-out, but often the lenders are terribly unrealistic on price, and completely inflexible in negotiations, particularly with regard to concessions.

In addition, I've heard many a tale from REO brokers that the mortgage companies are EXTREMELY slow in reimbursing real estate agents and other vendors on their invoices.

[WAKEUP]

It's a new day, in this country. The house, as King of the Hill, is dead.

[bjforeclosures]

Some lenders are beginning to become more realistic when it comes to short sales. It is not uncommon in my area, which was supposed to be insulated from the bubble burst according to local RE professionals, to see official foreclosure notices that contain text similar to the following.

"ATTN: The Plaintiff may let the bid go for less than the judgment amount consistent with the adjusted FMV of the property at the time of sale. Plaintiff may also agrre to a short sale. Please address any inquiries to: xxxx@xxxxxxx. Please use our File No. and "3rd party" or "Short Sale" in your subject line. "

Inventory is rising and prices are falling and indications are that it is only going to get worse. The foreclosure process can be fairly long. By the time the lender even gets a judgment, they have missed out on 3 months worth of payments. By the time the auction actually happens it could be 6-9 months or more.

If you own a home with an upside down mortgage and are having a hard time with payments, contact your lender. You may be surprised how willing some will be to discuss options.