“Despite a government program designed to streamline and incentivize the process, short sales have not even come close to keeping up with foreclosure sales. That may be about to change. If banks see higher losses from foreclosures than from short sales, they may put more resources into approving these deals, where the borrower is allowed to sell the home for less than the value of the loan. ‘Loss severities on distressed U.S. residential mortgage loans are likely to increase an additional 5-10 percent from current levels due to higher loss mitigation and foreclosure expenses and weakening home values,’ according to a report from Fitch Ratings. Fitch: The anticipated increases for each sector’s average loss severities are expected to be as follows:
- Prime loans: currently 44%, increasing to 49%-54%
- Alt-A loans: currently 59%, increasing to 64%-69%
- Subprime loans: currently 75%, increasing to 80%-85%.
We are already seeing home prices double dip in many markets, and that is expected to continue at least through the first half of 2011. One way to mitigate the losses is through short sales. ‘Short sales generally experience recovery rates about 10 percent higher than foreclosure sales,’ according to Fitch. Will this be enough to push the banks? Unclear. Servicers actually rake in a lot of money from fees surrounding foreclosures, and so far the government’s ‘Home Affordable Foreclosure Alternative,’ program, which pays servicers cash incentives for doing short sales, has had pretty poor results, really still in the hundreds of loans. Second liens pose a big problem, but many big bank servicers also hold the second liens. It’s all about where the math comes out. If home prices fall far enough, the equation may tip from foreclosure to short sale.”
Tuesday, December 21, 2010
Monday, May 3, 2010
Where is the housing market going?
If you are at all like me you must be wondering when we will see a return to normalcy in the home selling world, right? I mean people buying and selling because they want to move up, move down, or move out of state...not because they are upside down, 60 to 120 days late on their mortage and stressing, or staring foreclosure right in the face! This is, by far, the worse real estate market I have seen in my lifetime as an adult and certainly the worst in my real estate career!
OK, so now what! The tax credits, which are now expired were most effective with first-time buyers not stuck with an existing home to sell. The end of the credit has stirred fears that the housing market, which has showed signs of stabilizing in much of the country over the past year, might face further steep price declines. Meanwhile, many of the same obstacles remain.... unemployment is high, and the foreclosure crisis continues to dump more distressed properties on the market.
Furthermore, more than 7.3 million mortgages in the US are non-current or in REO status through March 2010, according to the Lender Processing Services (LPS) Mortgage Monitor report. Data and analytics firm LPS reported the modest improvements in the amount of loans becoming current has been overshadowed by this large pool of non-current assets, which represent more than 12% of all active loans in the country. The volume of distressed mortgages is up 19.3% from a year ago. The amount of REO in the US as of March reached its highest levels since 2008, according to the data. Since the beginning of 2008, when LPS measured more than 675,000 REO, the volume has increased 62.2% to more than 1.09 million properties.
The amount of delinquencies in March decreased 10.3% from February but remains 15.7% higher than levels measured a year ago. The foreclosure rate in March also dropped 3.27% from the month before but increased 32.9% from last year. In addition, LPS reported a positive impact from the Home Affordable Modification Program (HAMP). The amount of early-state cures – meaning loans that are brought from 30 or 60 days delinquent to current status, increased...indicating a higher rate of self-cures. (Hmmm...seems that the market doesn't have to rely on Big Brother after all) The HAMP itself has seen only a modest amount of success so far. Fewer than 200,000 have actually graduated from the trial program into a permanent modification, and in his report, Neil Barofsky, the special inspector general for TARP, warned that many borrowers are at risk of redefaulting on their mortgages even after receiving help under the federal program! Add to that the fact that many owe significantly more than their homes are worth, or have second mortgages or other debts. Barofsky expressed skepticism that offering modifications was a meaningful goal. In a response included in the report, Herbert M. Allison, assistant Treasury secretary for financial stability said the program "should be measured by how many eligible homeowners are able to avoid the pain and stigma of foreclosure by reducing their mortgage payments to affordable levels while either remaining in their homes or transitioning with dignity to more suitable housing. The number of permanent modifications is one element, but not the only element of gauging the success." " Huh?" So the problem is not that it's failing, but rather that Barofsky is not measuring its lack of success the right way? Even Treasury knows that's nonsense, which is why Allison added that permanent modifications are only "one" way to help struggling homeowners, noting servicers' own foreclosure prevention initiatives and alternatives such as short sales. It should also be noted that permanent modifications that do not include meaningful principal reduction will, in all likelihood, fail. Having said that mouthful, we all know that banks are NOT going to reduce the principal on their portfolios of delinquent mortgages!! Not a chance that common sense will sway that greedy bunch!
So...now comes HAFA and now we are in the government sponsored "short sale" phase of this ridiculous mess! Anyone trying to work shorts knows what a maddening process it is, not to mention the time frames involved. I guess we will just have to see how the HAFA guidelines help us work through the backlog and more importantly, whether the banks will play ball!
OK, so now what! The tax credits, which are now expired were most effective with first-time buyers not stuck with an existing home to sell. The end of the credit has stirred fears that the housing market, which has showed signs of stabilizing in much of the country over the past year, might face further steep price declines. Meanwhile, many of the same obstacles remain.... unemployment is high, and the foreclosure crisis continues to dump more distressed properties on the market.
Furthermore, more than 7.3 million mortgages in the US are non-current or in REO status through March 2010, according to the Lender Processing Services (LPS) Mortgage Monitor report. Data and analytics firm LPS reported the modest improvements in the amount of loans becoming current has been overshadowed by this large pool of non-current assets, which represent more than 12% of all active loans in the country. The volume of distressed mortgages is up 19.3% from a year ago. The amount of REO in the US as of March reached its highest levels since 2008, according to the data. Since the beginning of 2008, when LPS measured more than 675,000 REO, the volume has increased 62.2% to more than 1.09 million properties.
The amount of delinquencies in March decreased 10.3% from February but remains 15.7% higher than levels measured a year ago. The foreclosure rate in March also dropped 3.27% from the month before but increased 32.9% from last year. In addition, LPS reported a positive impact from the Home Affordable Modification Program (HAMP). The amount of early-state cures – meaning loans that are brought from 30 or 60 days delinquent to current status, increased...indicating a higher rate of self-cures. (Hmmm...seems that the market doesn't have to rely on Big Brother after all) The HAMP itself has seen only a modest amount of success so far. Fewer than 200,000 have actually graduated from the trial program into a permanent modification, and in his report, Neil Barofsky, the special inspector general for TARP, warned that many borrowers are at risk of redefaulting on their mortgages even after receiving help under the federal program! Add to that the fact that many owe significantly more than their homes are worth, or have second mortgages or other debts. Barofsky expressed skepticism that offering modifications was a meaningful goal. In a response included in the report, Herbert M. Allison, assistant Treasury secretary for financial stability said the program "should be measured by how many eligible homeowners are able to avoid the pain and stigma of foreclosure by reducing their mortgage payments to affordable levels while either remaining in their homes or transitioning with dignity to more suitable housing. The number of permanent modifications is one element, but not the only element of gauging the success." " Huh?" So the problem is not that it's failing, but rather that Barofsky is not measuring its lack of success the right way? Even Treasury knows that's nonsense, which is why Allison added that permanent modifications are only "one" way to help struggling homeowners, noting servicers' own foreclosure prevention initiatives and alternatives such as short sales. It should also be noted that permanent modifications that do not include meaningful principal reduction will, in all likelihood, fail. Having said that mouthful, we all know that banks are NOT going to reduce the principal on their portfolios of delinquent mortgages!! Not a chance that common sense will sway that greedy bunch!
So...now comes HAFA and now we are in the government sponsored "short sale" phase of this ridiculous mess! Anyone trying to work shorts knows what a maddening process it is, not to mention the time frames involved. I guess we will just have to see how the HAFA guidelines help us work through the backlog and more importantly, whether the banks will play ball!
I'd love to hear from anyone in the biz and get their take on this mess! This is one of those periods in history when we will look back and say "remember when?"
http://HomeOwnerHelp.program3648.com/
http://www.AmericanRiverRealEstate.com/
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