Short Sale Commander Blog

From Wall Street Journal

By: Nick Timiraos

Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market.

Blame the nearly five-year slide of home prices. Those declines, which accelerated over the past two quarters, have left many sellers unable or unwilling to lower their prices. Meanwhile, buyers remain gun shy about agreeing to any purchase without getting a deep discount.

That dynamic has fueled buyers’ appetites for bank-owned foreclosures. Those homes often hit the market at bargain prices, but they are being snapped up by investors who are paying in cash.

At a focus group earlier this month, the mood among buyers was “nasty,” says Glenn Kelman, chief executive of Redfin Corp., a Seattle-based brokerage that operates in nine states. “There’s a shortage of attractive inventory,” he says. “Customers just keep getting outbid on the houses that they want.”

It took Susan Hunter just one month to unload her home in Redondo Beach, Calif., last fall. But she has been outbid on four homes at a lower price point in Eagle Rock, an emerging neighborhood in northeast Los Angeles. Some sold to investors who paid cash. Other listings, she says, are being resold by investors at prices that she says are too high.

“It’s the Wild West out here. It’s a daily, tireless search,” says Ms. Hunter, who works in television production and marketing. Demand is up because “we haven’t been able to find homes here below $500,000 since the 1990s.”

Last year, software engineer Young Hammack gave up looking to buy after being outbid on three properties. This year, he has his eye on a four-bedroom foreclosed house with a pool in Citrus Heights, Calif., that hasn’t yet hit the market. He hopes to pay about half the $492,000 it fetched six years ago.

But the 32-year-old, who is relying on a 3.5% down-payment mortgage backed by the government, is at a disadvantage against buyers who can pay cash. “It’s a false buyer’s market,” he says. “If you think prices are cheap, wait until you start putting offers in.”

Many buyers are looking for discounts because they lack confidence that prices have reached a bottom, and sellers won’t have much pricing power as long as buyers such as Mr. Hammack and Ms. Hunter are in no hurry. “It may take some time, but I’m willing to wait,” Ms. Hunter says.

The Wall Street Journal’s quarterly survey of housing-market conditions in 28 major metro areas shows inventories of unsold homes remain high but fell during the first quarter. Listings were down by nearly 25% from one year ago in Miami and Orlando, and by 12% in Phoenix and Portland, Ore., according to figures compiled by John Burns Real Estate Consulting.

Other markets, including New York’s Long Island and Charlotte, N.C., still face imbalances. At the current sales pace, it would take more than 16 months to sell all homes listed for sale in each market. A balanced market typically has a six-month supply.

Meanwhile, home values fell in every metro area for the second straight quarter, according to data from Zillow Inc. Prices were down by more than 5% in Chicago and Detroit, the largest quarterly drops, to levels not seen in more than a decade.

Values have fallen so far that many sellers with equity aren’t willing to drop their prices. Those without equity can’t cut the prices unless the bank agrees to take a loss in what is known as a short sale. Such sales can take months to complete and fall through at the last minute, deterring some buyers. Still, short sales hit a new high, accounting for 9% of all transactions in January, according to CoreLogic Inc.

“Frankly, until we start building some equity, the market is just going to sit here and do pretty much nothing for the next few years,” says Christopher Thornberg, a housing economist at Beacon Economics in Los Angeles.

Homes that don’t need much repair work and that are located in choice neighborhoods near transit hubs or with good schools are in demand. “What’s selling is the cream of the crop, and they sell fast,” says Steve Capen, a real-estate agent with Keller Williams Realty in St. Petersburg, Fla. “If it’s not cream of the crop, it’s getting hammered.”

Mike Morea and his family have outgrown the 800-square-foot, two-bedroom home he bought eight years ago in Seminole, Fla. He hopes the bank will approve a short sale for about $85,000 for a $50,000 loss. In December, Mr. Morea saw first-hand why buyers are more attracted to foreclosures: he bought one for himself, a $200,000 three-bedroom home in a nicer neighborhood 10 minutes away.

“That’s what every seller is running into,” says the 31-year-old police officer. “Nobody is going to buy your home at retail price if there are 30 foreclosures available.”

While foreclosures are in demand, mortgage companies’ processing problems have sharply curtailed the flow of bank-owned properties onto the market in states such as Florida, New Jersey and New York, where courts must process foreclosures.

To be sure, some of the challenges facing the housing market are easing as the economy adds jobs, boosting demand and easing mortgage delinquencies.Depressed prices coupled with low interest rates have made housing more affordable than at any time since 1975, according to Zillow.

But the legacy of the housing market’s collapse has left two big structural problems. First, the huge erosion in homeowners’ equity has deprived housing markets of the all-important “trade up” buyer. Even those with equity often aren’t willing to sell at current market prices, exacerbating what housing analyst Ivy Zelman calls the “stuck factor.”

Second, foreclosures are still weighing on housing markets. While mortgage delinquencies are down from their 2009 peak, an all-time high of 2.2 million loans were in foreclosure at the end of March, according to LPS Applied Analytics.

Economists say the “shadow inventory” of another 4 million potential foreclosures will keep a lid on prices for years. Even in markets with rising demand and falling inventory, prices won’t go up because “there’s too much on the horizon, so nobody’s in a hurry,” says Ron Leis, a broker in Sacramento, Calif.

Tighter credit standards have also left markets with fewer buyers at a time when more would help. When he needed to move into a bigger home four years ago, Todd Loewenstein sold his Redondo Beach home and began renting. “Now, we want to get back in, but it hasn’t happened,” says the 44-year-old technology entrepreneur.

He fell out of escrow one week before closing on an $850,000, three-bedroom home in October after the lender turned down his loan. Mr. Loewenstein, who was prepared to make a 20% down payment, says he has never missed a payment in his life and has enough savings to last several years.

But he wasn’t able to meet the bank’s tight income-documentation requirements. The home, which sold for $1.25 million in 2005, is still on the market. Mr. Loewenstein says he scans listings every day and is still looking to buy.

From DSNews.com

By: Joy Leopold

Despite new rules for Home Affordable Foreclosure Alternatives (HAFA) short sales that went into effect on February 1, real estate agents responding to a survey said short sale transactions are still taking too long.

A survey published recently by Santa Barbara, California-based property valuations company Equi-Trax reveals the majority of short sales are taking four or more months to complete, and Realtors say lenders are to blame.

Of the survey’s 626 respondents, 53.6 percent said that in their experience, on average, short sale transactions take four to six months.

More than 18 percent said the transactions take seven to nine months, 7.3 percent said the process takes 10 to 12 months, and 2.6 percent said the process takes more than a year to complete.

Only 18.2 percent said it takes three months or less.

An overwhelming 56.8 percent said the greatest challenge in completing a short sale is lenders, while 2.4 percent blamed challenges on the clients. About the same amount of participants (57.6) said lenders need to shorten the time they require to complete short sales.

Around 14 percent of agents also said they feel borrowers need to be better educated about short sales.

But as servicers begin to get used to the new rules and implement them into their company processes, agents may see the length of time short sales take drop dramatically, and the number of short sales being completed rise dramatically.

A recent forecast by specialty servicer AMS Servicing said non-GSE residential short sale activity could increase 50 percent industry-wide over the course of 2011 and beyond, substantially altering the national loan-servicing landscape.

From the Los Angeles Times

By Lew Sichelman

Despite efforts to the contrary, there still is a major gap between homeowners in danger of losing their homes and the resources available to help them avoid foreclosure, according to a report released last month in Nevada.

The study found that more than half the Nevadans facing foreclosure didn’t know about federal and state programs aimed at helping them. Furthermore, almost as many said their lenders were “not willing at all” to work with them.

These troubling findings were revealed in an analysis of the Silver State’s foreclosure crisis undertaken by the Nevada Assn. of Realtors. Actually, considering the herculean efforts being undertaken to reach endangered owners over the last few years, the findings are more than troubling; they are shocking.

But Nevada is the epicenter of the housing crisis. The state has the country’s highest foreclosure rate, according to RealtyTrac. With 1 in every 79 housing units on the receiving end of a default notice, the state’s household foreclosure rate is nearly twice that of any other state.

So if troubled Nevada owners aren’t getting the message that help is available, it’s a safe bet to assume that neither are owners in other states.

With that in mind, here is a quick rundown of the federal programs aimed at keeping people in their homes.

Under the broad Making Home Affordable initiative, Uncle Sam offers several options to owners — but not to investors — including the Home Affordable Refinancing Program (HARP) and the Home Affordable Modification Program (HAMP).

If you are on time with your payments but cannot take advantage of today’s lower interest rates because you owe more than your home is currently worth, HARP can help if either Fannie Mae or Freddie Mac holds your loan; the two mortgage giants touch perhaps half of all loans.

If you are struggling to make your payments because your income has been curtailed or your interest rate has increased, you may be eligible to have the terms of your loan changed under HAMP. The amount you owe must be less than $729,250, your loan must have been taken out before Jan. 1, 2009, and your total monthly housing outlay — principal, interest, taxes, insurance and homeowner-association dues — must be more than 31% of your current gross earnings.

For owners who are having a tough time making their house payments because they have a second mortgage, the Second Lien Modification Program (2MP) offers a way to lower the payments on the junior loan when the primary mortgage is modified under HAMP.

Under 2MP, which is meant to be complementary to HAMP and is somewhat more complicated than the other alternatives, the owner of the second lien and the company administering the loan on the lien owner’s behalf are given monetary incentives to reduce your rate, extend the term or possibly even extinguish the loan altogether.

If you can no longer afford your home but want to exit gracefully and avoid the negative effects of foreclosure, the Home Affordable Foreclosure Alternatives (HAFA) program offers up to a $3,000 cash stipend to help you transition into more affordable housing. To qualify, you cannot be eligible for a trial loan modification, fail to complete a successful trial mod or miss two consecutive payments during the trial-mod period.

HAFA is designed to streamline two popular options to foreclosure, a short sale and a deed-in-lieu. With a short sale, the loan servicer allows you to sell the property for less than what is owed. With a deed in lieu of foreclosure, you voluntarily transfer ownership to the servicer with the understanding that foreclosure proceedings will be dropped.

If you are considering a short sale, work only with a real estate agent who has short-sale experience. These deals are so tricky and time-consuming that only a professional who has done several of them will do. If your agent claims to know what he or she is doing, ask for references from several satisfied customers just to make sure.

Mortgage servicers who participate in the Making Home Affordable program are required to evaluate your eligibility for a loan modification before looking at your other options. If you request a mod and are determined to be mod-worthy, you will enter a trial period.

Modification possibilities include lowering your interest rate, extending the term of your loan, allowing you to skip several payments or even reducing the balance owed.

If you don’t qualify for any of the above options, your servicer will evaluate your situation for possible inclusion in proprietary programs. HOPE Now, a private, voluntary alliance of servicers, investors, insurers and nonprofit counselors, says its members completed twice as many loan modifications under their own programs as under the government’s.

If any of these possibilities seem as if they even remotely apply to your situation, nose around the government’s Making Home Affordable website at http://www.makinghomeaffordable.gov.

It’s also a good idea to consult with a local housing counseling agency that can help you wind your way through the maze you are about to enter. Such an agency usually charges a minimal fee — or nothing at all — so stay away from anyone who wants money from you in advance, pressures you to sign the house over to him or her or tells you to make a payment to anyone other than your lender.

Counselors also will have their fingers on state and local initiatives to help citizens stave off foreclosure. In Nevada, for example, the state operates a foreclosure-mediation program. But according to the Realtors association study, almost half the respondents have never heard of it.

For a list of government-approved agencies, visit the Department of Housing and Urban Development’s website at http://www.hud.gov or call (800) 569-4287 to be connected to HUD’s interactive voice system. A few other good resources are the National Foundation for Credit Counseling at http://www.nfcc.org; NeighborWorks America, http://www.nw.org, a leader in affordable housing and community development; and the Consumer Credit Counseling Service of Greater Atlanta, http://www.credability.org, a nonprofit with a local name but a national footprint.

From Housingwire.com

By: Kerry Curry

Servicers are moving toward a proactive approach in pursuing short sales as an alternative to foreclosure, servicers on a Mortgage Bankers Association panel said Wednesday.

A component and specialty servicer, meanwhile, predicted that short sales could increase 50% industrywide this year. Buffalo, N.Y.-based AMS Servicing told HousingWire that the projected increase is due largely to changes in the Obama administration’s Home Affordable Foreclosure Alternatives, or HAFA, program that opens up eligibility to a larger group of homeowners. AMS has determined through analysis of its 2010 short sale metrics that as many as 91% of previously ineligible borrowers might now be eligible for the HAFA short sale program.

To make short sales a success, outreach is critical, panelists on a short sale and deed in lieu panel at the MBA’s National Servicing Conference & Expo. In the past, servicers were more reactive than proactive when it came to short sales, looking at potential short sales that were brought to them, but not pursuing them ahead of time. But that is changing, said panelists who discussed trends in short sales.

“Power of denial is very sharp for someone losing their home,” said David Sunlin, senior vice president at Bank of America (BAC: 14.089 -0.57%). Borrowers want to do the right thing, Sunlin said, and it’s important for servicers to guide the borrower through to the end, whether it’s a short sale or a deed in lieu.

“We need to get these short sales done in a timely fashion. A short sale today is a lot better than it was six months ago,” said Abel Fregoso, vice president and national field short sale manager for Wells Fargo (WFC: 31.40 -0.32%).

The Treasury Department took action in December eliminating some rules it said have held back short sales through the HAFA program. HAFA no longer asks for income verification, unless the borrower is less than 60 days overdue on the mortgage. This means that borrowers who previously were deemed ineligible because their income was too high, may now qualify for a HAFA short sale, said Jim DePalma, executive vice president, default management at AMS Servicing, in an interview after the panel concluded.

David Sunlin said changes to the program are seen as positive by servicers. It works best, he said, when used pro-actively, by helping the borrower market the property instead of having the borrower come to the servicer with a buyer in hand.

HAFA was launched in April 2010 to provide an incentive to servicers and investors for pursuing short sales and deeds-in-lieu of foreclosure. The program was designed for homeowners who fell out of the Treasury’s Home Affordable Modification Program, or HAMP.

Servicers on the panel said they expect the changes in HAFA to encourage more participation in the program.

But the incentive for borrowers to short sell their home can be challenging when it can take up to two years or more to complete a foreclosure. The ability to stay in the home without paying the mortgage may lessen the incentive to participate, panelists said.

As for deeds in lieu of foreclosure, Fannie Mae has looked at them with some sort of incentive at the end of it, such as a few months with reduced rent or no rent, said Beverly Wilbourn, vice president of preferred loss mitigation strategies for Fannie Mae. The key is to engage the borrower earlier and keep them engaged in order to avoid a foreclosure, she said.

“Offer them a way to transition from a very difficult financial circumstance,” she said. “Get to the homeowner and talk them through to life after this horrific situation.”

But, Wilbourn added, “You don’t want to go out and tell everyone to go do a short sale or do a deed in lieu.” The GSE wants to be sure that it is a viable option and the right alternative to foreclosure.

Short sales that have either second liens or mortgage insurance can be more challenging, said Leo Esposito, first vice president of loss mitigation and asset disposition services at ServiceLink, a unit of Fidelity National Financial (FNF: 13.63 -0.29%). But that’s not to say they can’t be done, he said.

The seller may have to make a contribution or sign a note for a short sale with a second lien or with mortgage insurance for the sale to go through, said Wells’ Fregoso.

John Will, director of component servicing with Fannie Mae, said the GSE is looking at ways that it can do a better job at short sales. The goal, he said, is to speed the process. It is taking all the best practices it can find to further cut the time it takes to get a short sale done.

“We are trying to cut the timeline in half,” he said. The goal is to get to the first offer faster and provide a response because it it goes to a second or third offer, those are generally for less money, he said.

Many borrowers, however, are still in a retention mindset when it comes to their home, Esposito said. If they are not eligible for foreclosure mitigation, then Esposito said its company focuses on a “door-knocking” campaign to encourage a short sale.

RISMEDIA, February 10, 2011—RealtyTrac, a leading online marketplace for foreclosure properties released its U.S. Foreclosure Market Report for January 2011, which shows foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on 261,333 U.S. properties in January, a 1% increase from the previous month, but a 17% decrease from January 2010. The report also shows one in every 497 housing units received a foreclosure filing during the month.

“We’ve now seen three straight months with fewer than 300,000 properties receiving foreclosure filings, following 20 straight months where the total exceeded 300,000,” said James J. Saccacio, chief executive officer of RealtyTrac. “Unfortunately this is less a sign of a robust housing recovery and more a sign that lenders have become bogged down in reviewing procedures, resubmitting paperwork and formulating legal arguments related to accusations of improper foreclosure processing.”

Foreclosure Activity by Type
A total of 75,198 U.S. properties received default notices (NOD, LIS) in January, a 1% decrease from the previous month and a 27% decrease from January 2010—the 12th straight month where default notices decreased on a year-over-year basis. January was also the fourth straight month where default notices decreased on a month-over-month basis, giving it the lowest monthly total for default notices since July 2007.

Default notices in states with a non-judicial foreclosure process (NOD) increased less than 1% from the previous month, but were down 8% from January 2010, while default notices in states with a judicial foreclosure process (LIS) decreased 2% from December and were down 39% from January 2010.

Foreclosure auctions (NTS, NFS) were scheduled for the first time on a total of 108,002 U.S. properties in January, a 4% decrease from the previous month and a 13% decrease from January 2010. It was the lowest monthly total for scheduled foreclosure auctions since February 2009.

Scheduled non-judicial foreclosure auctions (NFS) decreased 1% from December and were down 3% from January 2010, while scheduled judicial foreclosure auctions (NTS) decreased 14% from the previous month and were down 39% from January 2010.

Lenders foreclosed on 78,133 U.S. properties in January, up 12% from the previous month, but still down 11% from January 2010. Bank repossessions (REO) in non-judicial foreclosure states increased 23% from December, but were still down 9% from January 2010, while bank repossessions in judicial foreclosure states decreased 7% from the previous month and were down 16% from January 2010.

Nevada, Arizona, California post top state foreclosure rates
Nevada bank repossessions increased 16% from the previous month, helping the state maintain the nation’s highest state foreclosure rate for the 49th straight month—despite month-over-month decreases in default notices and scheduled auctions. One in every 93 Nevada housing units received a foreclosure filing in January—more than five times the national average.

One in every 175 Arizona housing units received a foreclosure filing in January, the nation’s second highest state foreclosure rate. Arizona foreclosure activity increased 16% from the previous month—driven by a 54% month-over-month increase in REOs—but was still down 25% from January 2010.

California REO activity increased 32% from the previous month, and the state posted the nation’s third highest state foreclosure rate, with one in every 200 housing units receiving a foreclosure filing.

Idaho posted the nation’s fourth highest state foreclosure rate, with one in every 241 housing units receiving a foreclosure filing, while Utah posted the nation’s fifth highest state foreclosure rate, with one in every 265 housing units receiving a foreclosure filing during the month.

Other states with foreclosure rates ranking among the top 10 in January were Michigan, Georgia, Illinois, Florida and Colorado.

Five states account for more than 50 percent of national total
With 67,072 properties receiving a foreclosure filing, California accounted for more than 25% of the national total in January. After hitting a 25-month low in November, California foreclosure activity has increased on a month-over-month basis for two straight months.

Florida foreclosure activity decreased on a month-over-month basis for the fourth straight month, but the state’s 21,671 properties receiving a foreclosure filing in January—a 42-month low—was still the second highest in the nation.

Michigan foreclosure activity increased for the second straight month, and the state posted the nation’s third highest total, with 16,716 properties receiving a foreclosure filing in January.

Arizona posted the nation’s fourth highest total, with 15,757 properties receiving a foreclosure filing, whileTexas posted the nation’s fifth highest total, with 14,897 properties receiving a foreclosure filing during the month.

Other states with foreclosure activity totals among the nation’s 10 highest in January were Illinois (13,164), Georgia (12,772), Nevada (12,263), Ohio (8,924) and New Jersey (5,526).

Top 10 metro rates in Nevada, California and Arizona, while Florida metros drop
With one in every 82 housing units receiving a foreclosure filing in January, the Las Vegas-Paradise, Nev., metro area maintained the nation’s highest foreclosure rate among metropolitan areas with a population of 200,000 or more. Las Vegas foreclosure activity decreased nearly 13% from the previous month and increased less than 1% from January 2010.

The other Nevada metro area in the top 10 was Reno-Sparks, at No. 5 with one in every 132 housing units receiving a foreclosure filing.

Seven California metro areas posted foreclosure rates in the top 10, led by Modesto, at No. 2 with one in every 111 housing units receiving a foreclosure filing; Stockton, at No. 3 with one in every 114 housing units receiving a foreclosure filing; and Riverside-San Bernardino-Ontario, at No. 4 with one in every 120 housing units receiving a foreclosure filing. Other California metro areas with foreclosure rates in the top 10 were Vallejo-Fairfield at No. 6 (one in 135 housing units); Bakersfield at No. 7 (one in 143); Merced at No. 9 (one in 149); and Sacramento-Arden-Arcade-Roseville at No. 10 (one in 151). Sacramento was the only California metro area in the top 10 to report increasing foreclosure activity on a month-over-month and year-over year basis.

With one in every 143 housing units receiving a foreclosure filing in January, the Phoenix-Mesa-Scottsdale metro area posted the nation’s eighth highest metro foreclosure rate.

No Florida cities showed up in the top 20 metro foreclosure rates in January. In contrast, the state accounted for nine of the top 20 metro foreclosure rates in 2010.

For more information, visit www.realtytrac.com.

The reluctance to accomodate short sale negotiations are long past… it’s essential to today’s market, and more and more lenders have become willing to discuss a short payoff to avoid foreclosure. 

By D.L. Bennett, Paul Donsky

The Atlanta Journal-Constitution