Archive for the ‘real estate short sales’ category

18,500 Ohioans to get foreclosure relief

August 5th, 2010

Starting next month, 18,500 unemployed and underemployed Ohio homeowners will benefit from $172 million in federal foreclosure prevention funding, or up to $15,000 per household.

Ohio’s program will help homeowners statewide who have been unable to qualify for existing loan modification and foreclosure prevention programs.

Residents of Lucas, Ottawa, Fulton, Henry, Defiance, Williams, Huron, and Erie counties are among those who could receive benefits because those counties were deemed areas of concentrated economic distress by the Ohio Housing Finance Agency, which will distribute the federal funding. Plans from Ohio, North Carolina, Oregon, Rhode Island, and South Carolina to collectively allocate $600 million in foreclosure prevention funding to 50,000 residents were approved by federal officials, Herb Allison, assistant secretary for financial stability at the U.S. Department of Treasury, said Wednesday. Ohio received the largest amount among the five latest states getting aid.

“The housing crisis is national, but it’s very much a local crisis as well,” Mr. Allison told reporters during a conference call.

He added: “We believe that the money should be spent according to local needs.”

The Ohio Housing Finance Agency will select housing counseling agencies statewide to provide services, and the program will begin Sept. 27. Funding will go directly to those providing mortgages, not home owners, a state spokesman said.

The Fair Housing Center of Toledo, which has helped hundreds of residents prevent foreclosure through other government programs, has applied to provide services to struggling homeowners in Lucas and Wood counties, said vice president Michael Marsh. “We’ve been hit here really hard,” he said. “They don’t want to lose their homes, and we don’t want them to lose their homes.”

Last year, Ohio had a record high 89,053 residential foreclosures, a 3.8 percent increase from 2008. Lucas County had 4,160 foreclosures, up 1.6 percent.

This is the second of three rounds of federal foreclosure prevention funding expected to total $4.1 billion. Michigan was among five states selected in the first round, and it expects to use $154.5 million in federal funding to help more than 17,000 Michigan homeowners avoid foreclosure with benefits of up to $10,000 each.

So far, Ohio has received the third largest allocation. California has received $700 million, the highest amount, and Florida received $418 million.

Under the Ohio Hardest-Hit Fund plan, services will include:

• Partial mortgage payment assistance to help unemployed homeowners while they search for a job or participate in job training.

• Rescue payment assistance to help bring homeowners current on delinquent mortgages.

• Assistance modifying mortgage principal amounts to reduce them to a 115 percent loan-to-value ratio or less.

• Providing lenders with incentives to complete short sales and deed-in-lieu agreements, which will avoid foreclosure and reduce negative impacts on homeowner credit ratings.

Homeowners getting federal funding who sell or refinance their homes within five years must use net proceeds to repay the assistance, according to the state.

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Are Short Sales Really Better Than Foreclosure?

August 5th, 2010

Many factors have contributed to the large numbers of families presently losing their homes, but the current recession would be the biggest issue to blame. Thousands of families are facing the devastating choice of either foreclosing on their homes, or attempting a short sale. It is important for those families to learn the risks and benefits of each before making a decision on which to choose.

Foreclosure is when the homeowner defaults on mortgage payments for multiple months, leading the bank or other lien holder to take repossession of the home. This legal process ends when the home is sold at public auction, however, banks can ask for reimbursement for back mortgage payments due, foreclosure fees, and interest.

A short sale is when the mortgage holder realizes that they can no longer keep up with the payments and works with the bank and a buyer to negotiate a sale that is significantly less than what is owed. This is usually done to avoid foreclosure, but is completely determined by the bank’s willingness to consent to it. Repayment of interest may also be expected, but usually with better terms than with a foreclosure.

Foreclosure and short sales affect credit scores in different ways. Foreclosing on a home may bring a credit score down as much as 200-300 points. As a consequence, it will be difficult to obtain new credit for many years to come. It may also take up to 3 years to be eligible to buy a house again.

A short sale reduces the amount of time that it takes to get the credit score back to a respectable place. The score will typically only drop 80-100 points, and buying a new home may be possible in as little as 18 months. The process for a short sale is usually shorter than with a foreclosure and costs less for both parties involved.

Losing a home is a very traumatic event, and should only be considered as a last resort. The homeowner should ask themselves if all other possibilities have been exhausted, such as asking a family member for money, or getting a second or third job. If there is no other way out of the situation, the choice between a foreclosure and a short sale should be discussed. Neither option is spectacular, but when stuck with the difficult decision, a short sale is obviously the better way to go.

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Short Sale Commander Reaches $600 Million!

June 25th, 2010

Short Sale CommanderTM Reaches $600 Million Milestone in Closed Short-Sale Transactions Since ‘09 Launch

Livonia, Michigan – June 24, 2010: ELK Software’s industry leading short-sale software “Short-Sale Commander” has announced that their users have closed more than $600,000,000 in short sales with the software since its 2009 launch.

“The Commander platform’s measure of success is whether we’re helping Realtors, agents and homeowners complete sales in these challenging times”, says Lee Moraitis with ELK Software. “Getting beyond ½ billion dollars in closings and generating more than $38 million in agent commissions plus helping lenders with loss mitigation and homeowners with foreclosure alternatives speaks for itself.”

ELK operates its “Short-Sale Commander” software application together with co-branded offerings with national real estate industry partners. “With more than 22,000 active residential short-sale listings valued at over $3.3 billion each using Commander tools such as our BPO Builder©, Auto-Comp & AVM Pricing©, and Bank Package Direct© our success will continue to build.” adds Moraitis,”The necessity of working with short-sales in today’s market has created opportunities for technology to assist Realtors and Lenders improve profits and reduce losses. Our agent users are making money by closing more transactions in less time. Banks appreciate the professional, standard packages submitted through the Commander platforms.”

Unlike other short-sale assistance applications, the Commander platforms feature built-in Comp & AVM tools enabling agents to price their distressed listings with a single-click. “My files instantly have the latest valuation reports allowing our agents to be on the same page and our homes to close quicker. Our homeowner clients and Buyer’s agents see The Henderson Group as a leader with this technology”, offers Gayle Henderson, RE/MAX Excalibur, Scottsdale, Arizona

ABOUT ELK SOFTWARE: ELK Software develops and markets innovative technology based applications for the real estate industry. Under ELK’s Commander brand, ELK offers REO, Short-Sale and Default Servicing platforms where Realtors, Agents, Title professionals and Homeowners collaborate for profit in easy-to-use private-label and co-branded marketplaces. ELK’s “Short Sale Commander” users have more than 22,000 active short-sale listings valued at more than $3.3 billion on the platform. More information on Short Sale Commander is available at: http://www.shortsalecommander.com

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Las Vegas Real Estate Posts 2009 Positives Despite Recession

January 12th, 2010

According to newly released statistics, the hard-hit Las Vegas real estate market is poised for a comeback. Data compiled by the Greater Las Vegas Association of Realtors

(GLVAR) and the locally-based real estate firm Prudential Americana Group show that approximately 95,000 transactions, or an estimated 47,500 home sales, were made there in 2009.

Mark Stark, CEO of Prudential Americana, which says it was involved in more than one out of every 10 home sales in Las Vegas last year, explained, “Even though the average sales prices are down, we posted nearly 50 percent more transactions than we did the previous year. That is a great sign that the market is stabilizing.”

Based on GLVAR’s records, the average single family home sold in the area in December 2008 was $204,000 in December 2008. By December of 2009, that number had fallen to $165,000.

“Prices are down 14 to 15 percent year over year, but that is a victory after dropping three percent per month,” said Forrest Barbee, Prudential Americana Group’s corporate broker and a GLVAR board member.

Barbee says 2009’s annual drop is a definite positive compared to the 33 percent plunge seen from December 2007 to December 2008.

One other bright spot Stark saw was the overall affordability of homes. “People who thought in the past

that homeownership was out of reach have now come to understand that they have a golden opportunity to not only purchase a home, but look forward to long-term appreciation,” he said.

Perhaps the figure that stands out the most from the data is that 67 percent of all current pending sales in Las Vegas are short sales – 8,935 out of 13,406.

Another attention-grabber is that GLVAR now lists just 2,367 available REO properties, compared to nearly 10,000 one year ago.

“In 2009, the big trend in the Las Vegas resale market included the significant increase in cash sales for both investors and first time homebuyers,” said Barbee. “We saw 41 percent of home closings in December 2009 made with cash while FHA/VA buyers continue to make up one third of the closings and conventional loans.”

Barbee noted that over the past 12 months Las Vegas has experienced a shrinking inventory of available properties – most notably bank-owned listings. “This came in the wake of a significant increase in overall demand, which resulted in record high resale closings in the last half of 2009,” he said.

According to Stark, 2010 should be the beginning of a recovery for residential real estate in the area, but he says the extent of that recovery will depend in part upon how successful Southern Nevada is in continued job creation.

Barbee predicts that with 2010 will come a more efficient climate for conducting short sales and loan modifications.

“Short sales have been very, very difficult the past two years,” he said. “Banks have not been truly motivated to work on them expeditiously and as a result they have taken anywhere from 6 months to 18 months to complete. The lengthy timeframes have led to unusually high fallout rates in those escrows.”

But Barbee is hopeful that the administration’s new Home Affordable Foreclosure Alternatives (HAFA) program will pave the way for a much needed streamlined short sale process in Las Vegas and Nevada.

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Luxury Homeowners in U.S. Use ‘Short Sales’ as Defaults Rise

December 17th, 2009

Dec. 17 (Bloomberg) — Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate and some are turning to so-called short sales to unload properties as stock-market losses and pay cuts squeeze wealthy borrowers.

“The rich aren’t as rich as they used to be,” said Alex Rodriguez, a Miami real estate agent with JM Group USA Inc., whose listings include a $2.9 million property marketed as a short sale because the price is less than the mortgage, leaving the bank with a loss. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”

Payments on about 12 percent of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages, according to data from First American CoreLogic Inc., a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7 percent a year earlier.

As defaults on the biggest mortgages rise, borrowers such as Steve Holzknecht are turning to short sales to exit loans that now are larger than the market value of the house. In such a transaction, the lender agrees to accept less than a 100 percent payoff on a mortgage to expedite the property’s sale.

Holzknecht, 53, last month cut the asking price for his 7,280-square-foot home in Kirkland, Washington, by $550,000 to $1.25 million, lower than the balances of his two mortgages. Holzknecht, the former owner of Four Suns Inc., a Seattle luxury homebuilder that went out of business two months ago, constructed the Craftsman-style home in 2000. He declined to identify his lenders or the amount he owes.

Common Plight

“It’s not uncommon to see this situation on the high end of the market — homes selling for less than it would cost to build them,” said Holzknecht’s agent, Joe Flick of Roanoke Group in Seattle. The property came on the market eight months ago priced at $1.85 million, he said.

Porter Michael Peterson, a 33-year-old linebacker for the National Football League’s Atlanta Falcons, bought a mansion near Tampa, Florida, four months ago for $1.1 million — almost half the amount of the mortgage taken out by the sellers three years earlier, according to real estate records. Reggie Roberts, a spokesman for the Falcons, didn’t return a call seeking comment.

Short sales almost tripled to 40,000 in the first six months of 2009 from the same period a year earlier, according to data from the Office of Thrift Supervision. The bank regulator doesn’t break out short sales by size of mortgage.

Upside Down Mortgages

“You are just starting to see the tip of the iceberg with luxury short sales,” said Adrian Heyman, owner of Property Advisors, a real estate broker in Scottsdale, Arizona. “A lot of wealthy people are upside down in their mortgages and they just can’t afford the second or third vacation home anymore.”

There are 114,000 home loans of more than $1 million, according to First American. About a quarter of all mortgaged homes in the U.S. have loan balances bigger than their current value, known as being upside down or underwater, the data company said.

The Dow Jones Industrial Average lost more than half its value as it tumbled to a 12-year low in March. The number of U.S. households with a net worth of more than $1 million, not counting primary residences, fell to a five-year low of 6.7 million last year from a record 9.2 million in 2007, according to Spectrem Group, a Chicago-based consulting firm.

The financial-services industry was among the hardest hit by the recession. While Goldman Sachs Group Inc. set aside a record $16.7 billion in the first nine months of the year for employee bonuses, some Wall Street executives will see pay cuts, according to Johnson Associates Inc., a New York-based compensation-consulting firm.

Distress

Year-end bonuses for people at hedge funds, asset- management firms and insurance companies probably will drop an average 20 percent, the firm said.

“There’s a lot of distress,” said Tracy McLaughlin, co- owner of Morgan Lane Real Estate in Ross, California, north of San Francisco. “You have hedge-fund guys whose funds evaporated and a year-and-a-half later they’re still not working.”

The entry-level segment of the housing market was aided this year by an $8,000 first-time buyers tax credit that pushed resales to a 6.1 million annual pace in October, the highest since February 2007, the National Association of Realtors said in a Nov. 23 report.

President Barack Obama signed a bill last month extending the program into next year. The new version keeps the first-time buyer benefit and makes a smaller credit available to some move- up buyers. It can’t be used for homes priced above $800,000.

Luxury Market Left Out

The Federal Reserve set out in January to lower fixed mortgage rates by purchasing $1.25 trillion of bonds backed by home loans. The 30-year fixed rate for so-called conforming loans that can be bought by Fannie Mae and Freddie Mac dropped to an all-time low of 4.71 percent in the week ended Dec. 4, according to McLean, Virginia-based Freddie Mac, the second- largest U.S. mortgage financier. The rate rose to 4.81 percent last week.

The Fed purchases haven’t affected the high end of the market because they exclude so-called jumbo loans. Mortgages above the $729,750 limit set by Congress for the nation’s highest-priced markets cost almost 1 percentage point more than conforming loans, according to Keith Gumbinger, vice president at HSH Associates, a mortgage-data company in Pompton Plains, New Jersey. That’s quadruple the historic spread.

“There is no refinance market for you if you are underwater and outside the Fannie and Freddie framework,” Gumbinger said. “High-end neighborhoods are all suffering from the same problems of diminished income at a time when there is little equity to work with.”

Trapped by Market

Masoud Bokaie, co-founder of engineering firm BORM Associates Inc. in Irvine, California, owes $2.6 million on a 3,664-square-foot house with marble floors and granite counters about 10 miles (16 kilometers) away in Newport Beach. He’s waiting to hear whether lenders Luther Burbank Savings and Wells Fargo & Co. will approve a short sale.

He received an offer last month “close to” the loan balances, said Shirley Cameron, his agent at Coldwell Banker Platinum Properties in Irvine, who declined to specify how much. Bokaie said he doesn’t want to pay $7,000 a month in net costs including the property’s mortgages and taxes when real estate values in the area continue to tumble.

“What’s the point when the market is going in the other direction?” Bokaie said in an interview.

The U.S. median home price was $173,100 in October, 25 percent lower than its July 2006 peak, according to the National Association of Realtors. Prices fell 7.1 percent from a year earlier, the slowest pace of the year.

More Declines Expected

“The reason the low end stopped falling is because the government stepped in with affordable loans,” said Scott Simon, managing director at Pacific Investment Management Co., a Newport Beach-based investment firm that runs the world’s largest bond fund. “There is no political will to bail out a million-dollar house.”

Luxury home prices probably will drop another 5 percent before reaching a bottom in September 2010, according to Sam Khater, senior economist at First American.

Those declines may lead to losses on jumbo mortgages that dwarf the “haircut,” or discount to full value, that banks take on short sales or foreclosures of moderately priced homes, said Rodriguez, the agent with JM Group in Miami.

“When the bank takes a loss on a $3 million property it’s a lot bigger than the loss on a home with a $150,000 mortgage,” Rodriquez said.

To contact the reporters on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net; Dan Levy in San Francisco at dlevy13@bloomberg.net

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4 Tips to Improve Your Odds for Short Sale Success

December 7th, 2009

RISMEDIA, December 7, 2009—Last month, we discussed some of the problems associated with short sales: too many properties for lenders to handle; too much uncertainty about valuation; too many second loans; and accounting mechanisms that encourage financial institutions to delay sales in order to defer losses.

While those challenges make the outlook for short sales cloudy, most observers still believe that short sales will grow significantly over the next year, and will become an extremely important part of the path to recovery in the housing market.

This is due, in part, to the looming tsunami of option ARM and ALT-A loans due to begin resetting—and defaulting—in large numbers in the second quarter of 2010 and the growing number of unemployment-related foreclosures. In both cases, current loan modification programs will have virtually no effect on slowing foreclosure activity—in the former case because most of these loans will be outside the 125% loan-to-value ratio limit in HAMP, and in the latter case, because the homeowner will have no source of income.

So the government is motivated to promote short sales as a better alternative to even higher levels of foreclosures, distressed housing stock and vacant properties across the country.

By the time you read this article, HUD will likely have released new short sale guidelines. These guidelines will be intended to streamline the process by creating standard paperwork for more efficient processing and developing a more universal set of protocol for short sales activity. The guidelines will also very likely include cash payments—both for the servicer and for the borrower—to incent the parties to move forward with short sale transactions.

This will help somewhat, but what can you do today to improve your odds for short sale success?

Here are a few ideas gleaned from conversations with agents who are successfully executing short sales today:

-Be selective: Not all borrowers—or loans—are good short sales candidates. If your prospective seller has a second mortgage, a home equity line, multiple liens or other financial complications, steer clear. While it’s possible to satisfy all parties in these types of deals, it’s not likely, and you’ll wind up wasting a lot of time and energy.

-Be thorough: When you submit an offer, or are delivering the materials the lender requires, include everything. Nothing is more frustrating for a loss mitigation manager than reviewing incomplete documentation and having to start over again. You and your client will be equally frustrated by the ensuing delays.

-Be persuasive: Make the hardship letter compelling. Why should the borrower qualify for a short sale? Job loss? An exploding ARM? And why isn’t the home worth as much as what’s owed on the mortgage? Include all the relevant information—comps, foreclosure activity, days on market, current listings, property condition, etc. Is the offer realistic? Prove it. And make sure that you have a qualified, preapproved buyer in tow.

-Be persistent: While there’s a fine line between being persistent and being annoying, call and/or e-mail regularly—but respectfully—and ask if there’s anything you can do to help expedite the process.

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Treasury sets guidance to simplify short sales

December 1st, 2009

You can read the entire Directive here – https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf. Below is a summary of what is contained in the directive.

By Al Yoon

NEW YORK (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed “short sales” of homes and other loan modification alternatives to stem a rising tide of foreclosures.

The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury’s website.

Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders.

The incentives, first announced in May, expand on the government’s Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 trial modifications they have started.

“While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve” or offer a modification, the Treasury said in its announcement.

Financial incentives for completing short sales or similar deed-in-lieu transactions — in which the deed is simply transferred to the lender — include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would receive $1,500 in relocation expenses.

Short sales are favored by real estate agents and community groups over foreclosure because they can preserve the borrower’s credit rating and leave the property in better condition than when a homeowner is evicted. While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure.

But short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.

Among requirements, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt.

It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

In one of the most contentious issues gumming up negotiations between lenders, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000.

Second lien holders in recent months have begun demanding more money from the first lender, seller, buyer or agent in exchange for releasing their claim, agents have said. Because primary lenders would face larger losses in a foreclosure, some subordinate lenders have felt empowered, the agents said.

The largest second-lien holders are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc.

Second lien holders may proceed with a short sale outside of the Treasury program, if they felt the cap was too low, a Treasury official said in October.

“If there was a short sale program that didn’t recognize the second lien holder position, it could have pretty damaging consequences for the industry,” Sanjiv Das, chief executive officer of CitiMortgage, said in an interview last week.

(Editing by Leslie Adler)

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With encouragement from government, mortgage firms speeding up short sales

December 1st, 2009

by Catherine Reagor – Dec. 1, 2009 12:00 AM
The Arizona Republic

Short sales may be a new best option for Valley homeowners struggling to avoid foreclosure.

Home-loan modifications, endorsed by the federal government, are most borrowers’ first choice when they fall behind on their mortgage payments because of a drop in their income. But short sales are also part of the federal housing plan to slow foreclosures. Unlike their slower-than-expected actions on loan modifications, lenders are now moving quickly on many short-sale requests in the Phoenix area.

New figures for the Valley show a record number of short-sale deals in various stages of completion. Pending short sales, including all of the deals under contract, reached 9,343 in October, compared with 1,448 in January, according to real-estate analyst Mike Orr. Almost 40 percent of the homes currently for sale in the Phoenix area are properties homeowners are trying to sell to avoid foreclosure.

Short sales, which require lender approval, allow homeowners to sell their homes for less than they owe their lenders. Borrowers still lose their homes, but the deals are better for their credit records and often their morale because they are not evicted.

Short sales are also better for neighborhoods because the houses are not abandoned as is often the case when a lender forecloses and tries to resell. Buyers are finding great deals on short-sale homes and in many cases opting for those homes over foreclosure properties because they are in better shape.

“The demand for short-sale properties from buyers is clearly strong,” said Orr, who publishes the “Cromford Report,” a local daily online real-estate update. “We anticipate that lender-owned properties (homes taken back through foreclosure to be resold) will continue to decline. We expect to see short sales increase.”

Market watchers are advising more borrowers falling behind on their mortgages to consider short sales in order to slow the potential next wave of foreclosures.

“Short sales have a net result of everybody winning when compared to a foreclosure,” said Randy Kutz, a Phoenix-area expert on the deals who

house for sale from Crestock Stock Photo

recently worked with Arizona Treasurer Dean Martin to hold a series of seminars on why short sales are important to the economy’s recovery.

“Even if you avoid foreclosure with a loan modification, many homes in Arizona will not recover value fast enough to allow struggling homeowners to sell for many years,” Kutz said. “At some point, the same homeowners who are getting modifications now will likely need a short sale in the future.”

Streamlined process

Short sales have been around for decades, but until recently, the deals were slow and difficult to do. Most homeowners, real-estate agents and lenders tried to avoid short sales because of all the paperwork and time they involved.

A year ago, borrowers often waited at least three months to hear back from lenders on potential short sales. The deals would fall through as buyers, who didn’t want to wait, walked away.

Now, lenders are being encouraged and paid by the federal government to expedite short sales for homeowners who qualify for help from the federal housing plan but aren’t candidates for loan modifications. Some Phoenix homeowners are now receiving approval in days.

“We are starting to see short-sale approvals come in much quicker from some lenders,” said Bob Hertzog, a broker with Phoenix-based Summit Home Consultants. “I received an approval in less than 24 hours last week.”

Selena Riviere recently was able to sell her Phoenix home in less than a month through a short sale.

“I had heard they were difficult, but when I got divorced, I couldn’t afford my $2,000 mortgage payment anymore,” said Riviere, who tried to obtain a loan modification for six months before settling for a short sale. “What helped me was having someone who knew the process and made it pretty easy for me.”

Many homeowners who apply for loan modifications are still waiting three months to hear back from their lenders and can fall farther behind in their mortgages as they wait.

Hertzog said each lender handles short sales differently. He said it’s important to find out what a lender requires from a short sale before even starting to look for a buyer or listing the home for sale.

Homeowners can contact their lender about a short sale. However, to close the deal, a homeowner has to have a buyer willing to purchase the house for its current appraised value.

Part of the seminars Kutz and Martin hosted educated Valley real-estate agents on changes in short-sale methods so such deals can be expedited and more foreclosures avoided.

“Navigating a short sale is much easier than it was a year ago,” said Diane Watson of the Scottsdale office of Realty Executives. “More real-estate agents are prequalifying sellers for short sales before they list their homes.”

She recently received approval for a client’s short sale within a week of submitting the paperwork.

Lenders have begun to preapprove prices for homes eligible for short sales, which cuts weeks out of the process. The preapproved prices are based on current appraisals of the home. Also, lenders have added staff in their short-sale divisions and begun paying slightly higher real-estate commissions on shorts sales to entice more agents to put in the extra work it takes to close the deals. Some banks have launched online systems for short-sale applicants.

Jay Luber, a mortgage broker with Phoenix-based Galaxy Lending, said banks are also doing a lot more now to make short sales work.

“In most cases, banks will pay for some closing expenses,” he said. “When an appraisal comes in lower than expected, I have found lenders meeting the lower appraised value on short sales to make the deals work.”

Better than foreclosure

Foreclosing on a home is a costly process for lenders and an emotionally and financially draining event for homeowners.

It costs a lender more than $10,000 to foreclose on a home in Arizona. If no one purchases the house at the legally required foreclosure auction, then the lender typically has to spend more than $30,000 to fix it up and resell it.

Short sales still result in a loss for the lender. Most short-sale prices now are at least 30 percent below what is owed on the home, due to the Valley’s drop in home values during the past two years.

The average price of homes sold through short sales in October was $87.55 a square foot, according to the “Cromford Report.” The average price of homes taken back through foreclosure resold by lenders was $69.45 a square foot. The average price per square foot of regular home sales was $114.18.

Short sales cost thousands of dollars less in legal costs to process than a foreclosure. Also, through the federal housing plan, lenders can receive at least $1,000 for every short sale they complete to keep a home out of foreclosure. Homeowners who go through with short sales to avoid foreclosure can receive up to $1,500 from the government through the federal housing program.

Riviere, who is a nurse at a senior living center, would like to try to buy another home in a few years.

“I never would have bought such a large home if I knew I was going to be on my own,” she said. “I want to buy a small condominium close to my job next. We’ll see if the short sale was really better for my credit then.”

Borrowers also benefit more from short sales because mortgage giant Fannie Mae requires them to wait only two years to buy another home, or even less than that if they were not late on their payments. People who lose homes to foreclosure have to wait five years to buy again.

More homeowners are now trying to sell before they fall behind on their mortgages. Almost half of the Valley homes listed for sale through short sales are owned by people who haven’t yet received notice their lender has started foreclosure proceedings.

“The huge increase in short sales is because many homeowners are recognizing that they either do not qualify for a modification, or even with a modification they still cannot afford their mortgage,” said Travis Hamel Oslon of Loan Resolution Corp. “A growing number of people are starting to understand that a short sale is their best option.”

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U.S. Mortgage Delinquencies Reach a Record High

November 20th, 2009

By DAVID STREITFELD

Published: November 19, 2009

The economy and the stock market may be recovering from their swoon, but more homeowners than ever are having trouble making their monthly mortgage payments, according to figures released Thursday.

Nearly one in 10 homeowners with mortgages was at least one payment behind in the third quarter, the Mortgage Bankers Association said in its survey. That translates into about five million households.

The delinquency figure, and a corresponding rise in the number of those losing their homes to foreclosure, was expected to be bad. Nevertheless, the figures underlined the level of stress on a large segment of the country, a situation that could snuff out the modest recovery in home prices over the last few months and impede any economic rebound.

Unless foreclosure modification efforts begin succeeding on a permanent basis — which many analysts say they think is unlikely — millions more foreclosed homes will come to market.

“I’ve been pretty bearish on this big ugly pig stuck in the python and this cements my view that home prices are going back down,” said the housing consultant Ivy Zelman.

The overall third-quarter delinquency rate is the highest since the association began keeping records in 1972. It is up from about one in 14 mortgage holders in the third quarter of 2008.

The combined percentage of those in foreclosure as well as delinquent homeowners is 14.41 percent, or about one in seven mortgage holders. Mortgages with problems are concentrated in four states: California, Florida, Arizona and Nevada. One in four people with mortgages in Florida is behind in payments.

Some of the delinquent homeowners are scrambling and will eventually catch up on their payments. But many others will slide into foreclosure. The percentage of loans in foreclosure on Sept. 30 was 4.47 percent, up from 2.97 percent last year.

In the first stage of the housing collapse, defaults and foreclosures were driven by subprime loans. These loans had low introductory rates that quickly moved to a level that was beyond the borrower’s ability to pay, even if the homeowner was still employed.

As the subprime tide recedes, high-quality prime loans with fixed rates make up the largest share of new foreclosures. A third of the new foreclosures begun in the third quarter were this type of loan, traditionally considered the safest. But without jobs, borrowers usually cannot pay their mortgages.

“Clearly the results are being driven by changes in employment,” Jay Brinkmann, the association’s chief economist, said in a conference call with reporters.

In previous recessions, homeowners who lost their jobs could sell the house and move somewhere with better prospects, or at least a cheaper cost of living. This time around, many of the unemployed are finding that the value of their property is less than they owe. They are stuck.

“There will be a lot more distressed supply entering the market, and it will move up the food chain to middle- and higher-price homes,” said Joshua Shapiro, chief United States economist for MFR Inc.

Many analysts say they believe that foreclosures, instead of peaking with the unemployment rate as they traditionally do, will most likely be a lagging indicator in this recession. The mortgage bankers expect foreclosures to peak in 2011, well after unemployment is expected to have begun falling.

There was one sliver of good news in the survey: the percentage of loans in the very first stage of default — no more than 30 days past due — was down slightly from the second quarter. If that number continues to decline, at least the ranks of the defaulted will have peaked.

“It’s arguably a positive, but it doesn’t undermine the fact that there are still five or six million foreclosures in process,” Ms. Zelman said.

The number of loans insured by the Federal Housing Administration that are at least one month past due rose to 14.4 percent in the third quarter, from 12.9 percent last year. An additional 3.3 percent of F.H.A. loans are in foreclosure.

The mortgage group’s survey noted, however, that the F.H.A. was issuing so many loans — about a million in the last year — that it had the effect of masking the percentage of problem loans at the agency. Most loans enter default when they are older than a year.

When the association removed the new loans from its calculations, the percentage of F.H.A. mortgages entering foreclosure was 30 percent higher.

The association’s survey is based on a sample of more than 44 million mortgage loans serviced by mortgage companies, commercial and savings banks, credit unions and others. About 52 million homes have mortgages. There are 124 million year-round housing units in the country, according to the Census Bureau.

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Posted in Housing Crisis, loan modification, real estate short sales

Second Lein Holders Gaining Ground in Short Sales

November 19th, 2009

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A new report from Zillow.com says that banks are facing more obstacles to making short sales, Diana Olick of CNBC reported. While the percentage of borrowers who are underwater on their mortgages declined in the third quarter, to 21 percent from 23 percent, the abundance of negative home equity, coupled with the growing number of homeowners who have taken on second mortgages, has made it harder for banks to complete short sales, the report says. Tim Wilson, president of Long & Foster Companies real estate group, the largest real estate company in the mid-Atlantic, said that the short sale situation has grown so complicated that his firm has designated a specific team just to handle short sales.

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Posted in Housing Crisis, Short Sale News, real estate short sales

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