Real Estate Information Archive

As the GSEs and other federal agencies involved in housing finance sell their collective inventory of repossessed homes, they will generate significant pressure on prices, according to a new report from the real estate analytics firm Radar Logic. And with an even larger share of government-backed loans in the delinquency pipeline, their influence over home prices could last for years, the New York-based company says.

Based on Radar Logic’s analysis, the federal government’s REO inventory — including homes owned by Fannie Mae, Freddie Mac, HUD, and the Department of Veterans Affairs (VA) — has increased steadily for over 24 months and now accounts for approximately 46 percent of the nation’s total REO supply.

Looking at information from the GSEs and HUD, Radar Logic says the government currently owns 209,500 homes as a result of foreclosure, and the company estimates there could be an additional 9,560 homes held by the VA, for a total of 219,060 government-owned foreclosed homes.

In addition to the glut of homes already tagged as REOs, there is a growing number of non-performing loans soon heading for foreclosure that will raise the government’s stake in distressed property ownership significantly.

According to estimates by Zillow and Lender Processing Services, 2.3 million U.S. homeowners are 30 to 90 days delinquent on their mortgages. Based on data from the

U.S. Treasury Department, Radar Logic estimates that 69 percent of these mortgages are owned or guaranteed by the GSEs, the FHA, or the VA.

In its calculations, Radar Logic assumes that 35 percent of these mortgages will be cured or end in short sales rather than becoming REO, which means 1 million of these homes will enter the federal government’s REO inventory.

Another 5 million homeowners are more than 90 days delinquent or already in the process of foreclosure. Data from the Treasury indicates that 56 percent of these loans are owned or guaranteed by federal agencies. Assuming again that 35 percent will result in delinquency cures or short sales, Radar Logic projects 1.8 million of these homes to be added to the government’s REO holdings.

Taken together, there are currently 3.1 million homes in the federal government’s REO inventory or headed toward it, Radar Logic concludes.

“For over a year now we have been saying that the GSEs and other Federal agencies will play a critical role in the success or failure of the housing recovery due to their huge holdings of foreclosed homes,” said Michael Feder, Radar Logic’s president and CEO. “Now their role is more critical than ever before. The potential cost to taxpayers resulting from the government’s current policies is enormous. We can’t help but wonder if there isn’t a better approach.”

Assuming an average mortgage balance of $200,000, the book value of these homes could ultimately reach $614 billion, according to Radar Logic’s report. In most cases, the government will have to sell its REO inventory at a significant discount, on average 40 percent less than book value, which Radar Logic says means taxpayers stand to lose $246 billion.

In addition, assuming a similar discount relative to loan value in short sales, if 25 percent of the government’s foreclosure pipeline is liquidated as a pre-foreclosure sale, taxpayers will lose another $88 billion, based on Radar Logic’s calculations.

Taking both short sales and REO sales into account, that puts total losses from the government’s holdings of distressed properties in the neighborhood of $333 billion

Mortgage companies are beginning to step up and offer some relief to homeowners whose livelihood has been impacted by the BP oil spill off the coast of the Gulf of Mexico.

On Wednesday, Fannie Mae issued an announcement suggesting its servicers immediately suspend or reduce mortgage payments for borrowers whose properties or income are negatively impacted by the Gulf oil spill.

“We want to give homeowners every opportunity to weather this unprecedented disaster, including relief from their mortgage payment if that will help them get back on their feet and stay in their homes,” said Michael J. Williams, the GSE’s president and CEO. “Our policy is in place to support those who are experiencing a disaster-related hardship through no fault of their own and are acting in good faith to meet their mortgage obligation.”

Under Fannie Mae’s “Special Relief Measures” policy, servicers may suspend or reduce a borrower’s payments for up to 90 days while the servicer determines the extent of the impact the disaster is having on the condition of the property or on the borrower’s financial condition.

At the conclusion of that assessment, servicers have the flexibility to evaluate the appropriate loss mitigation action on a case-by-case basis, including an additional three months of forbearance, a loan modification, or another customized solution.

Also on Wednesday, Citigroup announced a foreclosure suspension program for CitiMortgage-owned first mortgages in coastal areas of the Gulf. In addition, the company says evictions on its REO properties will cease during this time.

Citi said in a statement, “While CitiMortgage does not own all of the loans it services, the company hopes to help as many borrowers as possible with this initiative” and “allow distressed homeowners to remain in their homes during these uncertain times as the Gulf communities respond to the oil spill and its economic repercussions.”

The company’s foreclosure moratorium for oil spill victims takes effect June 17 and goes through September 17. CitiMortgage borrowers occupying residences in ZIP codes within approximately 25 miles of affected coastal areas will be eligible for the program.

The company has a dedicated team of representatives assisting with the Gulf foreclosure suspension program, as well as an on-the-ground presence throughout the coastal region, with staff available to work with customers individually.

Vikram Pandit, CEO of Citi said, “By putting CitiMortgage foreclosures on hold, we aim to ease the burden on residents of the Gulf states so they can concentrate on the most urgent matters facing them. In the midst of this crisis, we will continue to explore ways to help people avoid foreclosure so they and their families can remain in their homes and have one less thing to worry about.

“The Primeaux Team brings over 7 years of experience to the local real estate market of Houston, Spring, Tomball, The Woodlands, Magnolia, Montgomery, Lake Conroe, Conroe, Humble, Kingwood, Galveston, Bay Area, Missouri City, Katy, Cypress, and all the other small towns in between  that make up this great metropolitan area. The Primeaux Team has consistently out produced and outperformed other agencies for the past 7 years and will continue to aggressively market our client’s properties to ensure they receive the highest net price with the lowest DOM.  Whether you are looking for free foreclosure listings in any of these areas, first time buyer programs, short sale and foreclosure options as a seller, commercial real estate, REO Services, or Luxury Homes, our team of specialized and highly motivated agents will always bring you primo results. “

The most recent Home Affordable Modification Program (HAMP) report released by the U.S. Treasury shows “extremely low conversion rates” from trial to permanent modifications, with success just a 50/50 gamble, according to commentary from Moody’s Investors Service.

As of the end of April, servicers participating in HAMP had converted almost 300,000 permanent modifications. However, they had also canceled 277,640 trial modifications. Moody’s says this represents approximately a 50 percent success rate. The report also shows 3,744 permanent modifications have been canceled.

According to Moody’s, the biggest culprits keeping conversions low are insufficient paperwork and negative equity.

“We believe the low conversion rate is a combination of two issues: borrowers failed to provide the documents they promised, and the rate reduction and principal forbearance used under HAMP were not enough to motivate severely underwater borrowers to start paying again,” Moody’s analysts wrote in their report.

The ratings agency says it expects recently announced program changes to produce higher conversion rates by allowing principal forgiveness. However this piece of the new HAMP directives are not expected to be ready for implementation before fall.

Moody’s notes that the lion’s share of HAMP modifications, 56 percent, has been on GSE-held loans, as expected. However, more than a third, 35 percent, occurred in the non-GSE or “private-label” sector.

“If servicers can increase modifications in the private-label sector and extend principal forgiveness under HAMP 2.0, default rates for mortgage loans backing private-label securities can be reduced significantly,” the analysts at Moody’s said.

“So far we assume that modifications will lower losses on pools backing private-label securities by approximately 5 percent,” they wrote in the report.

“The Primeaux Team brings over 7 years of experience to the local real estate market of Houston, Spring, Tomball, The Woodlands, Magnolia, Montgomery, Lake Conroe, Conroe, Humble, Kingwood, Galveston, Bay Area, Missouri City, Katy, Cypress, and all the other small towns in between  that make up this great metropolitan area. The Primeaux Team has consistently out produced and outperformed other agencies for the past 7 years and will continue to aggressively market our client’s properties to ensure they receive the highest net price with the lowest DOM.  Whether you are looking for free foreclosure listings in any of these areas, first time buyer programs, short sale and foreclosure options as a seller, commercial real estate, REO Services, or Luxury Homes, our team of specialized and highly motivated agents will always bring you primo results. “

A survey released Thursday by Trulia.com and RealtyTrac shows that only 1 percent of homeowners with a mortgage say walking away would be their first choice if they were unable to make their payments.If their mortgage were to go underwater – meaning the property value drops below the amount still owed on the loan – 41 percent would at least consider a strategic default, while 59 percent would not consider walking away no matter how much their mortgage was underwater.

The latest data from CoreLogic reveals that nearly one in every five borrowers with a mortgage owes more than their home is currently worth, and as Pete Flint, Trulia’s co-founder and CEO, stressed on a call with reporters, the greater the negative equity, the higher the chances of strategic default.

But Flint says the new survey results show that “While it may not make the most sense to keep paying for this undervalued asset, many homeowners, at least for now, are holding on.”

With walking away from their mortgage obligation off the table for most homeowners, Flint broke down for reporters the avenues borrowers are leaning toward to prevent a foreclosure should they find themselves in that situation. He says only 5 percent of those surveyed say they would opt for a short sale as their first choice, while 69 percent would pursue a loan modification to save their home.

The study conducted by the two California-based companies also found that while the stigma around owning a foreclosure has subsided, interest in purchasing a foreclosure is significantly down compared to a year ago.

Currently, 45 percent of U.S. adults age 18 and above are at least somewhat likely to consider purchasing a foreclosed home in the future, compared to 55 percent this time last year, the survey results showed.

“For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes,” said Flint. “It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble,” leading to a larger number of foreclosed homes on the market, he explained.

“Combined with decreased consumer interest around purchasing a foreclosure and it may take even longer than anticipated to see true health return to the real estate market,” Flint said.

While fewer may be in the market for a foreclosed home, Flint says people are becoming more realistic about the discounts they can expect on a distressed property. Eighteen percent expect bank-owned homes to come with a discount of less than 25 percent off the value of a similar home that was not in foreclosure – an expectation Flint called “realistic.” However, not all consumers are in line with market nuances, with 36 percent citing that they expect to receive a discount of 50 percent or more when purchasing a bank-owned property.

“Although fewer consumers expressed interest in buying a foreclosed home than a year ago, the actual sales of bank-owned properties (REOs), along with sales of properties in the foreclosure process, continue to increase — accounting for more than 30 percent of total sales in the first quarter of 2010 according to our data,” said Rick Sharga, SVP for RealtyTrac. “We anticipate that there will be an increased number of both REO purchases and short sales throughout the rest of the year as the most active buying segments – first-time homebuyers and investors – continue to look for bargains.”

“The Primeaux Team brings over 7 years of experience to the local real estate market of Houston, Spring, Tomball, The Woodlands, Magnolia, Montgomery, Lake Conroe, Conroe, Humble, Kingwood, Galveston, Bay Area, Missouri City, Katy, Cypress, and all the other small towns in between  that make up this great metropolitan area. The Primeaux Team has consistently out produced and outperformed other agencies for the past 7 years and will continue to aggressively market our client’s properties to ensure they receive the highest net price with the lowest DOM.  Whether you are looking for free foreclosure listings in any of these areas, first time buyer programs, short sale and foreclosure options as a seller, commercial real estate, REO Services, or Luxury Homes, our team of specialized and highly motivated agents will always bring you primo results. “

The future of U.S. home prices is acutely tied to the speed and the manner in which distressed sales work through the system, Moody’s Economy.com stressed in a report issued this week.

“We expect that house prices will continue to decline because the pipeline of distressed mortgages is substantial and because the price discounts for distress sales weaken all house prices,” the forecasting and credit risk unit of Moody’s Analytics wrote.

While the overall housing market has largely bottomed, Moody’s Economy.com says home prices aren’t there just yet. The company projects home sales and new construction to rise slowly this year, but “[n]onetheless, we foresee a 5 percent additional house price decline nationally. Regions with increasing foreclosure volumes will suffer more,” Moody’s said in its report.

During the course of this housing correction, home price trends have been closely tied to distressed transactions, including foreclosure sales and short sales.

The greater the number of foreclosures in a market relative to total home sales, the greater the downward pressure on prices, Moody’s says. The agency points specifically to home price declines as measured by the Case-Shiller national house price index, which deepened drastically in 2008 and early 2009, when the share of foreclosures increased the most.

Banks discount the price of foreclosed properties in order to dispose of them quickly, and Moody’s says the typical markdown has doubled since the beginning of the housing bust. Looking at average home price data from First American CoreLogic, Moody’s says the discount for foreclosed homes is now close to 40 percent of a “normal” existing home price.

The report noted that short sales have a more muted impact on the downward pace of home prices since the discount is far smaller than price cuts associated with a foreclosure sale.

In 2009, Moody’s says price reductions for short sales averaged only 5 percent. Servicers appeared to be more willing to pursue a short sale and lower the price further as the year progressed, Moody’s said, with the average short sale discount increasing by year-end to nearly 12 percent.

While the industry has seen a notable increase in short sales recently, Moody’s says the volume is not sufficient enough to temper the impact of foreclosure sales and curb further price declines.

The administration’s Home Affordable Foreclosure Alternatives (HAFA) program is expected to drive up the number of short sales this year as compared to last year, but Moody’s analysts project that the vast majority – at least 80 percent – of distress sales will continue to be value-draining foreclosure sales.

“To the extent that foreclosures [are taking] longer than expected, our house price outlook may be overly negative,” Moody’s wrote in its report. “A lengthier foreclosure process would keep discounted properties off the market for a longer period of time. In this case, house prices would likely tread sideways through to the next 18 months rather than decline, but in such a scenario prices would miss the rebound that we currently expect in 2012.”

“The Primeaux Team brings over 7 years of experience to the local real estate market of Houston, Spring, Tomball, The Woodlands, Magnolia, Montgomery, Lake Conroe, Conroe, Humble, Kingwood, Galveston, Bay Area, Missouri City, Katy, Cypress, and all the other small towns in between  that make up this great metropolitan area. The Primeaux Team has consistently out produced and outperformed other agencies for the past 7 years and will continue to aggressively market our client’s properties to ensure they receive the highest net price with the lowest DOM.  Whether you are looking for free foreclosure listings in any of these areas, first time buyer programs, short sale and foreclosure options as a seller, commercial real estate, REO Services, or Luxury Homes, our team of specialized and highly motivated agents will always bring you primo results. “

Effective immediately, HUD is classifying any property that is at least 60 days behind on the mortgage or the property owner is 90 days or more delinquent on tax payments as a “foreclosed” home.

In addition, HUD is expanding the definition of an “abandoned” property to include homes where no mortgage or tax payments have been made by the property owner for at least 90 days or a code enforcement inspection has determined that the property is not habitable and the owner has taken no corrective actions within 90 days of notification of the deficiencies.

HUD officials say the new wordsmith-ing will help communities acquire, rehabilitate, and re-sell foreclosed and abandoned properties more quickly under the Neighborhood Stabilization Program (NSP) and help prevent further decline in hard-hit neighborhoods.

The changes come just as reports are surfacing that states and local municipalities have spent less than half of the $4 billion available through the NSP initiative to buy up distressed properties in their communities.

According to the Associated Press, as of March 16, only 38 percent of the grant money had been “obligated,” meaning a municipality has a formal contract at a specific address

in place to purchase a foreclosed or abandoned home. The state and local governments must commit the money to projects by September or the funding is lost, the news agency explained.

HUD says its new expanded definitions will increase the reach of NSP by allowing more properties to qualify and will remove existing barriers caused by market conditions.

“The original NSP rules…limited the impact of the Neighborhood Stabilization Program and we’ve heard that clearly from our partners on the ground,” said HUD Secretary Shaun Donovan. “The rules needed to be more flexible so our local partners can put taxpayer dollars to work quickly to stabilize neighborhoods hard-hit by foreclosure.”

HUD previously defined the term foreclosed to apply only to properties where the foreclosure process was completed. Local communities suggested this narrow definition was not a good fit for market conditions since many properties were lingering in the foreclosure process and beyond the reach of NSP.

Properties will now be eligible for NSP assistance if: the mortgage on the property is 60 or more days delinquent and the owner has been notified; the property owner is 90 days or more behind on the taxes; or foreclosure proceedings have been initiated or completed under state or local law.

The word abandoned was previously defined as a property that had been foreclosed upon and was vacant for at least 90 days. This definition effectively excluded properties abandoned by owners but where tenants were still in place, precluding local communities from assisting the properties with NSP funding or protecting the tenants’ occupancy. HUD determined this limitation was a substantial barrier to the preservation of existing affordable housing.

To address this limitation, HUD is now also classifying “abandoned” as a home where mortgage or tax payments are overdue by at least 90 days, or a home that has received a code violation that makes the property uninhabitable and no remedial action has been taken to bring it up to code for 90 days.

“The Primeaux Team brings over 7 years of experience to the local real estate market of Houston, Spring, Tomball, The Woodlands, Magnolia, Montgomery, Lake Conroe, Conroe, Humble, Kingwood, Galveston, Bay Area, Missouri City, Katy, Cypress, and all the other small towns in between  that make up this great metropolitan area. The Primeaux Team has consistently out produced and outperformed other agencies for the past 7 years and will continue to aggressively market our client’s properties to ensure they receive the highest net price with the lowest DOM.  Whether you are looking for free foreclosure listings in any of these areas, first time buyer programs, short sale and foreclosure options as a seller, commercial real estate, REO Services, or Luxury Homes, our team of specialized and highly motivated agents will always bring you primo results. “

Texas claimed the biggest increase in foreclosures during the month of February with a rise of 35.3 percent, according to new data published this week by ForeclosureListings.com.

Posting the second largest increase on the company’s list was Michigan, where foreclosures jumped 17.54 percent during the month. California came in at No. 3, with a gain of 11.93 percent, followed by Florida, which saw an increase of just 4.71 percent.

ForeclosureListings.com reported that Georgia actually showed a decrease in foreclosure numbers of 5.55 percent, and Arkansas recorded the largest monthly drop of 28.6 percent.

The nation is struggling with a lack of jobs and continued pressure on home values. The report noted that several of the hardest-hit states – California, Florida, Arizona, Nevada, Michigan – are creating emergency funds to help the temporarily unemployed from being foreclosed upon, but said “the numbers continue to paint a bleak picture.”

Las Vegas continues to hold the title of the nation’s top foreclosure hotspot. There, 3,154 homes were foreclosed during the month of February, ForeclosureListings.com reported, up 29.42 percent from the month before.

While their overall numbers were lower than the Sin City, in Phoenix, Arizona, foreclosures jumped 34.61 percent last month, and in Houston, Texas, they surged 37.80 percent. San Antonio, Texas also saw a substantial increase of 30.82 percent, while foreclosures in Dallas, Texas rose 29.5 percent.

The numbers so far may seem daunting, but there were some signs of improvement. Little Rock, Arkansas showed a monthly drop of 35.34 percent from the previous month with only 75 foreclosures. Riverdale, Georgia posted a decrease of 25 percent with only 956 homes foreclosed.

Likewise, two large cities of note, Washington, D.C. reported 169 foreclosures – a difference of 19.9 percent less than January. And Atlanta, Georgia reported 1,039 foreclosures, a drop of 6.98 percent in the same time period.

Today one in every 418 homes in the United States has been hit with a foreclosure filing, topping over 300,000 filings for the 12th straight month and bringing the nationwide total to almost 1.4 million. According to ForeclosureListing.com’s estimates, a staggering 4 million homeowners are at risk of foreclosure.

Nevada, the state that just a few years ago couldn’t keep up with the demand for new home building is now the leader in foreclosures at four times the national average, with Arizona, California, and Florida close behind.

“The Primeaux Team brings over 7 years of experience to the local real estate market of Houston, Spring, Tomball, The Woodlands, Magnolia, Montgomery, Lake Conroe, Conroe, Humble, Kingwood, Galveston, Bay Area, Missouri City, Katy, Cypress, and all the other small towns in between  that make up this great metropolitan area. The Primeaux Team has consistently out produced and outperformed other agencies for the past 7 years and will continue to aggressively market our client’s properties to ensure they receive the highest net price with the lowest DOM.  Whether you are looking for free foreclosure listings in any of these areas, first time buyer programs, short sale and foreclosure options as a seller, commercial real estate, REO Services, or Luxury Homes, our team of specialized and highly motivated agents will always bring you primo results. “