The biggest driver of residential mortgage delinquencies is the unemployment rate and this Friday is ‘E-Day’ — when the Bureau of Labor Statistics issues the job cut figures for April. It’s pretty much a lock that U.S. businesses shed jobs during the month, the big question being how many. Barclays Capital estimates the national unemployment rate will rise to 8.9% (for April) compared to 8.5% the previous month. The increase means less income for consumers and less income means less money to pay the mortgage. However, because there are foreclosure moratoriums in place in many states we may not see the loan delinquency numbers rise much, at least not immediately.

Plummeting home values have left nearly one-third (28.9 percent) of all Americans under water on their mortgages in the first quarter of this year, according to a newly released report from Zillow, an online real estate information company.

That’s up from one-fifth, or 17.6 percent, who owed more on their mortgage than their property was worth in the fourth quarter.

The rate of homeowners who are upside down is slightly higher in the Miami-Fort Lauderdale market, where 29.3 percent owe more than their mortgage is worth.

Home values in the Miami-Fort Lauderdale market have fallen 23.7 percent, year-over-year, to $182,847. During the fourth quarter, home values fell 24.9 percent.

Homes in the Miami-Fort Lauderdale area lost $15.7 billion in value during the first quarter and a total of $107.6 billion in the last year.

Broken down, home values in Broward County fell 24.3 percent, year-over year, to $169,101, while values in Miami Dade County were down 25.2 percent, year-over-year, to $206,087.

In the Palm Beach County market, home values fell 23 percent, year-over-year, to $169,514.

Deerfield Beach-based real estate analyst Jack McCabe predicts prices will continue to drop an additional 10 percent to 15 percent, on average, in South Florida, with more homeowners becoming upside-down.

“It’s our estimate prices will hit bottom in the middle of next year, and then stay there for the next two years,” McCabe said, noting that prices in South Florida have fallen about 41 percent since their peak in November 2005.

Nationwide, foreclosures and short sales remained steady in the first quarter. About one-fifth, or 20.4 percent, of all transactions were foreclosures in the previous 12 months, compared with 19.9 percent in the fourth quarter. Short sales made up 11.9 percent of all transactions in the last 12 months, compared with 10.9 percent in the fourth quarter.

However, McCabe expects the rate of foreclosures in South Florida to skyrocket as toxic adjustable-rate mortgages reach their first-term change and more people become unemployed.

There have been some early signs of improvement in some of the harder-hit markets in California, where there have been smaller year-over-year declines.

“Slowing declines in select markets are a bright spot – or, at least, what passes for one, given current market conditions, said Stan Humphries, Zillow vice president of data and analytics, in a news release.

However, he added that we’re still many months away from the bottom and an even longer wait before there’s a meaningful recovery in home values.

Meantime, those who are thinking about selling their homes are still holding off until they see better evidence of an improved housing market, according to Zillow.

One-third of all U.S. homeowners said they would be at least somewhat likely to put their home up for sale in the next 12 months, if they saw signs of a recovery. Twelve percent said they would be “very likely” to put their home on the market, eight percent said they would be “likely” and 12 percent said “somewhat likely.”

McCabe said those who think they can sell generally have greater equity and smaller mortgages. But, for those who bought their homes at the peak of pricing “there is no hope for these people, McCabe said. “When they go to sell, they will have to turn in the keys and go into foreclosure.”

By Kate Berry

Trying to cut its losses, Bank of America Corp. has changed its policy on short sales, making it easier for borrowers to sell their homes instead of going into foreclosure.

Until a month ago, B of A and its Countrywide Financial Corp. had required that 10% of a home’s sale price go toward paying off home equity lines of credit before they would agree to a short sale. But Terry Francisco, a spokesman for the Charlotte company, said Monday that it changed its policy last month, agreeing to accept 5% of the sale price when there is no equity available to holders of the first or second liens.

The new policy “is based on the assumption that it is in the best interest of all parties involved to accept a short sale, as opposed to proceeding to a foreclosure,” Francisco said. “We believed that the previous policies set an arbitrary amount that did not take into account the savings derived from proceeding with a short sale.”

B of A expects the change to increase the number of short sales, he said, and even though it is releasing the liens, it reserves the right to pursue deficiency judgments against borrowers.

With foreclosure moratoriums being lifted in the past month, bankers are looking for ways to deal with an anticipated flood of distressed properties and are trying to determine which borrowers will get loan modifications and which will go into foreclosure.

Experts on short sales say they have been difficult to negotiate with lenders that are often reluctant to accept discounted payoffs when a home is sold for less than the balance due on the mortgage. But losses on foreclosures can be as much as 30% higher than on short sales, and housing prices are still falling, so servicers are slowly starting to change their policies, experts said.

One critical issue is second liens, particularly home equity lines of credit; these lenders are even more loath to permit a short sale, knowing that the primary lien will likely receive almost all the sale price, leaving little or nothing for holders of secondary notes.

Raffi Tal, chief operating officer at IShortSale Inc. in Woodland Hills, Calif., said holders of second liens are often offered payoffs of $1,000 to $3,000 in short sales, and many such deals are held up because the lenders refuse to accept these payoffs.

“The banks are holding short sales hostage,” Tal said. “They don’t care that a year from now they will have to take over the property and sell it for 30% less when they could have sold the property in a short sale in 30 to 90 days.”

Experts have long complained that the largest lender-servicers — B of A, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. — are also the largest holders of second liens.

The four largest banking companies own 52% of residential revolving lines of credit, or $441 billion of loans in the second lien position, according to Laurie Goodman, senior managing director at Amherst Holdings LLC’s Amherst Securities Group LP. That includes $92.6 billion of second liens on their balance sheets, she said.

Tom Kelly, a spokesman for Chase Home Finance, said it has a “disciplined process” for handling short sales with HELOCs.

The process includes determining if the offer is at fair market value, which may require a new appraisal, requiring that borrowers submit hardship information to determine their ability to contribute to the shortfall and investigating for misrepresentations and “non-arm’s-length transactions,” Kelly said. “This doesn’t happen overnight.”

Norm Miller, a professor of real estate at the University of San Diego’s Burnham-Moores Center for Real Estate, said 77% of foreclosures in California have second mortgages, most of them HELOCs, which often scuttle short sales.

There are other factors holding up short sales, including the commissions paid to real estate agents and mortgage insurance.

Some servicers have cut real estate commissions on short sales from the standard 6% to 3% or less, experts said. To combat that practice, Fannie Mae adopted a policy March 1 saying the sales “may not be conditioned upon a reduction of the total commission” paid to real estate agents.

Matt McCabe, the president of Loan Resolution Corp., a Scottsdale, Ariz., company that helps lenders resolve defaulted loans, said servicers “put themselves in a position” to get a short sale rejected. “Some realtors were shying away from short sales because it takes so long and commissions were being cut, even though it saves lenders a lot of money.”

Rich Rollins, the president and chief executive of National Quick Sale LLC, a Jacksonville, Fla., start-up that specializes in short sales, said mortgage insurance companies also are holding up the process, because the insurers take the first 25% loss on a short sale.

Experts agree that many servicers are ill-equipped to handle the negotiations that typically involve several lenders, a defaulted borrower and a willing buyer, who typically waits months before a package is approved. In some cases, short sale offers are rejected because the calculation for the property’s fair net value does not match the buyer’s offer — even if that offer is higher.

“Short sales have always been the last tool that servicers ever use, because they have to coordinate with too many stakeholders in the loan, and it takes a lot of follow-up,” said Cheryl Lang, the president of Integrated Mortgage Solutions, a Houston consulting firm.

Servicers typically have a small staff with knowledge of short sales working out of the loss mitigation department, which is separate from real-estate owned specialists with expertise valuing properties. Many servicers “just don’t have the technology and infrastructure to deal with short sales,” Lang said.

Because the majority of short sales involve multiple lien holders, a buyer often waits at least 90 days before getting a response from a lender on an offer. In a rapidly changing housing market where prices are falling every month, many buyers are unwilling to wait that long and often walk away.

“The banks really need to get short sales done faster,” McCabe said.

Some specialists said the government should not have given the largest lender-servicers money through the Troubled Asset Relief Program, because they were then unwilling to accept short sale offers and are waiting for the housing market to recover.