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More foreclosures coming
The number of long-term adjustments completed under the president’s foreclosure prevention plan rose to 66,465 at the end of December, or 7.4% of all trial modifications started, up from 31,382 a month earlier. Another 46,056 modifications are pending borrowers’ final signatures, according to Treasury statistics released Friday. Another 48,924 were denied permanent modifications, mainly because they did not make their trial payments on time, did not hand in the needed paperwork or did not meet the program’s criteria. Meanwhile, the number of delinquent homeowners in trial modifications rose to 787,231, up from 697,026 a month earlier.
Housing experts remain concerned that the rate of foreclosures still outpaces the help homeowners are receiving under the program. A record three million homeowners received at least one foreclosure filing in 2009, according to a RealtyTrac report released last Thursday. A lot of borrowers are too far underwater or don’t have enough income to qualify for a permanent modification, said Celia Chen, senior director at Economy.com. Others will not be able to provide all the documentation needed. Administration officials said they continue to review the program to make sure it is helping those in need, Chen said she doesn’t think there’s anything the government can do to keep these borrowers in their homes. “As more of these loans fail to make it to permanent modifications, a lot will go back on the market as foreclosures and that will depress home prices,” said Chen, who expects home prices to fall another 10% by the third quarter of this year.
President and Democrats trying to whip up populism in Massachusetts
The Democrats and the White House are scrambling to salvage the special U.S. Senate election in Massachusetts by trying to whip up a populist furor over banks. Amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks’ role in the economic crisis, Senate candidate Martha Coakley (D), Vice President Joe Biden and others used the issue to portray Ms. Coakley, who is vying to succeed the late Edward Kennedy, as tough on bank executives and Republican Scott Brown (R) as coddling them. This sort of anti-bank populism was popular in the 1930s by demagogues like Father Coughlin, but rarely has a president engaged in this sort of bareknuckle politics to save his agenda. Polls show declining voter enthusiasm for Mr. Obama’s health-care plan, and Brown has campaigned on a promise to provide the 41st GOP vote to secure a Senate filibuster to scuttle a health-care bill.
Democratic strategists concede Mr. Obama’s support in the past for a Wall Street bailout has fueled voter anger, particularly among conservatives and supporters of the antiestablishment Tea Party movement who are pouring money and volunteer hours into Mr. Brown’s race. With the bank tax, “we can take populism back to our side,” a Democratic Party strategist said. Mr. Brown he opposed the tax because it would most likely be passed on to consumers through ATM fees, among other things. He said banks would have to pay a hefty tax rather than use the money to extend much-needed loans to small businesses. “If you’re having an uphill battle selling health care in a blue state like Massachusetts, that should send shivers down the spine of Democrats looking at races across the country,” said Brian Walsh, a spokesman for the National Republican Senatorial Committee. A new Suffolk University poll finds Republican Scott Brown leading Democrat Martha Coakley, 50% to 46%. If Brown wins, ObamaCare dies. He would be the 41st vote to prevent any compromise legislation from coming to the floor of the Senate.
Questionable practices by banks on second liens?
Diana Olick of CNBC has exposed an alleged practice by banks to recoup second mortgages by demanding cash, off the HUD settlement statements, from either real estate agents or the buyers in short sales. Olick says she has personally heard a recording of a phone conversation between a short sale real estate agent and a second lien lender, during which the second lien lender clearly asked for cash outside of the settlement and threatened to kill the deal without it. “AGENT: Well yes, I don’t want to lose my license, go to jail, I mean, I have to sign… LENDER: You’re not going to lose your license – we have plenty of realtors who do this, who actually understand how this whole process goes – and they realize that OK, if I want to get this done, this will take place.”
When asked about the practice, these are the replies from three of the biggest banks: JP Morgan Chase simply answered, “No Comment,” Bank of America denied the practice, and Citi ‘s reply was interesting: “We work very hard to help distressed homeowners find solutions for their financial challenges. In our attempt to amicably resolve the debt, we will generally negotiate a reduced settlement with the homeowner in order to release a second lien. Unlike some lenders who refuse to reduce the payoffs on second liens, we choose to reduce the payoff amounts in some situations to assist the borrower. We do not provide instructions to settlement agents on how to fill out the settlement statement or any other closing documents, and we certainly do not require settlement agents or any other parties to violate applicable laws.”
House List Prices Down 1% in December
Altos Research’s listing price index declined 1% in December and 1.4% during Q409, but the 10-city composite price index was up 5.2% for the year, the company said, adding it projects asking prices to continue to decline during the winter 2010 months. The average listing price decreased to $494,426 from $499,267 from November to December. The index took a bigger monthly drop in December than it did in November, a result of the season decline in sales activity, Altos Research said. Miami was the only market of the 26 that Altos Research measures that experienced a gain in listing prices. San Diego and Salt Lake City experienced the greatest listing price declines, down 4.3% and 3.5% respectively.
Inventories also declined in 24 of 26 markets, the largest drops in Boston and the California markets of Los Angeles, San Francisco and San Jose. New York (2.1%), and Phoenix (0.7%) experienced the only increases for the markets covered. The 10-city composite experienced a 5.1% decrease in listing inventory. All markets except San Francisco (99 days) had a median days on market of 100 or more days in December. Miami had the slowest turnover with a median of 247 days, more than eight months. The days on market for the 10-city composite was up 8% to 166 days. The Altos Research study includes existing single-family homes and does not measure condos, town homes or new construction. Each market measured uses results from Census Bureau Metropolitan Statistical Areas (MSA).
Now on to our real estate investing educational section…
In the Know…Startling Starts & Other Frightening Facts
Information is power so it should come as no surprise that savvy short sale investors make a point of staying in the know. Today the ShortSale blog is reporting on startling starts and other frightening facts that should motivate even the strongest procrastinator to begin shopping for short sale deals in earnest.
Housing Starts
Housing starts have traditionally been a lagging indicator for the real estate market but it is a delicate balance at best. On one hand the population continues to grow even as older homes become obsolete. Data recently released by HUD indicates the number of housing starts at the end of 2008 were a mere 905,000…the lowest in recorded history. In fact, the last time housing starts approached this level was in 1975…since then we’ve added several hundred millions to the population. It should also be noted, the late 70′s and early 80′s were marked by rapidly rising interest rates and tremendous price jumps in the rental market. Short sale investors should take note and position themselves for potential gains. Remember, history may not always repeat itself but it often rhymes.
Not Privately Built
For those that point to private builders as possible rationale for the low number of housing starts, it should be noted the number of new privately owned housing units completed has also fallen to one of the lowest rates in recorded history – barely topping 1,119,700 by the close of 2008. In contrast, 1982 recorded the absolute lowest number of private completions with only 1,005,000 yet again reflecting a higher percentage of the total population.
Not Manufactured
Forget manufactured homes – sales are so dismal the entire industry is facing possible ruin. In fact, sales and shipments are so lackluster they are but a fraction of former years with a mere 82,000 units shipped in 2008. Compare to 378,000 ten years ago, it’s easy to see manufactured homes are not picking up the slack when it comes to affordable housing alternatives.
Bottom Line: Although the number of delinquent properties and shadow inventory continue to rise, early indications seem to point toward a day of reckoning in the future. Once existing inventory is purchased, expect a significant lag time to meet growing demand. Currently distressed homeowners have reduced expenses, moved in with family members and made other temporary arrangements in the hope of “riding out the storm” but short term solutions will eventually give rise to the need for permanent housing. The statistics speak for themselves, inventory is no longer growing sufficiently enough to meet long term need. Position yourself for profitable opportunities both today and tomorrow by using short sales to build a long term portfolio from the proceeds of short term profits.
See you at the top!
Chris McLaughlin
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
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* Long-time authority on real estate investing
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{ 1 comment… read it below or add one }
very interesting post. thanks for sharing.
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