Bank Foreclosures Blog

It is expected that the new administration of Barack Obama will commit nearly $1 trillion over an economic recovery program that is expected to abate the flood of foreclosure properties in the country.

Economic experts are greatly concerned over the speed and extent of the country’s economic and financial problems, particularly the increasing number of distressed properties.

They have encouraged Obama to aggressively pursue solutions that could bring an end to the economic crisis currently facing the country and provide relief to homeowners threatened by foreclosure.

Obama and lawmakers have already started discussing publicly outlines of issues they want to be included in an economic recovery bill.

Harvard economist Kenneth Rogoff believes that an economic recovery bill is the only solution if U.S. lawmakers want to put an end to what he described as the worst economic recession the country has ever experienced from getting out of control.

Meanwhile, Douglas Holtz-Eakin, an economic adviser during Senator John McCain’s presidential campaign, hopes that funds from the economic recovery program would not be misused.
Some issues under consideration for the economic stimulus package are energy and infrastructure, state aid, tax cut, health care, education and prevention of foreclosures.

Brookings Institution economic studies director William Gale pointed out that the complexity of issues being considered for the economic recovery program indicated that 2009 will see more than one economic program.

He expected that one package may focus on issues that can be enacted immediately, such as state aid to help Medicaid payment, infrastructure spending, unemployment benefits and food stamp increases.

On his part, Holz-Eakin believes that spending should be focused on abating the increasing number of foreclosed homes.

He proposes buying and writing down mortgages owned by troubled homeowners, revising unemployment benefits to better support those who lost their jobs and providing a payroll tax break for at least one year to American taxpayers.

Seeking the help of a real estate agent can be of great help if you have plans of buying repo homes. They can help you determine the local real estate situation in your area, as well as your financial capacity - two vital details that you must know before purchasing a property.

To further help you in your search, here are some tips:

• Do not purchase a property with outstanding debts. Doing so will give you the same problems as those encountered by the previous owner – mortgage payment, tax liabilities, outstanding loans, etc. It is advisable to choose a bank-owned property or one that has gone through auction. Buying such properties will spare you from shouldering the obligations of former homeowners.
• Be informed about market rates. The US is in recession right now and the real estate market is adversely affected. Home prices have been dropping – take this into consideration when making offers on homes.
• Whether you are planning to lease the property or resell it for profit, make sure to anticipate all possible costs. Allot funds for vacancy, losses, commissions, tax liabilities, insurance payments, and other costs that come with managing a property. Being unprepared for these possible expenditures might lead to another foreclosure.
• Take advantage of the market situation. Banks have plenty of repossessed properties in their care and they are offering big discounts in order to attract potential home buyers. If you have reputable credit history, you might be lucky to find a loan with below-market interest rate.
• Choosing a good neighborhood is half of the search. Avoid areas with high foreclosure rate as they pose more risk. Choose a neighborhood that suits your lifestyle.
• If you are purchasing an investment home, be prepared for higher interest rates. Secure a loan before purchasing the property.

Now is a great time to invest on foreclosure homes. With intelligent decision-making and motivation, you can turn these bargain homes to a profitable source of income.

Tucson is to receive $7.2 million as federal aid to help fight the existing foreclosure crisis. Meanwhile, a large number of bank foreclosures are up for sale right now. More home owners continue being at risk of losing their homes to foreclosure. While the federal relief might not help these home owners much, relief in the housing sector in general is expected.

Since property prices are low, and some respite is in sight, people are once again looking at buying homes. The discounts that are associated with foreclosure homes make them an interesting choice.

A home is foreclosed upon by a bank/lender when the home owner is incapable of making the mortgage payments. A certain amount of time is given to the home owner to sure the default. During this period, the home owner can either fix the default or sell the house to clear the debt. After being foreclosed upon, an attempt to sell the house is first made at a public auction, and if it does not sell at the auction, it is reassigned to the lender.

During pre foreclosure, a home owner can choose to sell the house, because in doing so, funds to pay the lender back can be gathered. If the home owner manages to clear the debt in question while in pre foreclosure, foreclosure can be avoided. Instances of home owners accepting seemingly low offers in pre foreclosure sales are not unheard of. This would happen mainly because these home owners cannot bide for time.

Upon foreclosure, the house is first out up for sale at a publicly notified auction. Buying at foreclosure auctions can be risky and this stage should ideally be left for the experienced home buyers. However, if you do wish to partake in an auction, make sure you do our home work before you go.

Homes that do not find buyers at the auction are transferred to lenders who hold the respective mortgages. A considerable amount of time and money goes into the up keep of these foreclosed homes and this is why banks are known to be in a rush to sell these homes. Since banks generally clear past arrears on the property, buying through banks is considered to be a safe option.

The internet is a very good place to start looking for bank foreclosures in different stages. News papers and newsletters are also good sources and realtors can be excellent sources of area specific searches.

With the large variety of Tucson foreclosures, do make sure you walk down different streets before deciding which one you want to be part of.

The $700 billion Troubled Asset Relief Program was originally intended to purchase troubled mortgages and securities to stem the flow on foreclosures.

However, in a U.S. Congressional committee hearing, Secretary Henry Paulson of the Treasury Department has announced that the fund would be more beneficial to the nation by investing it in banks and financial institutions than purchasing mortgage loans in danger of foreclosures.

With the approval of President Bush, the Treasury Department would pull out TARP funds off the troubled mortgage loans market.

With this development, John Paulson, a hedge-fund manager who owns Paulson & Co. in New York, plans to start buying loans from mortgages in danger of foreclosures. With $36 billion in assets, Paulson is seeing a big opportunity in this market, where ABX indexes have fallen 35 percent. Other investors are saying that this is perfect timing for Paulson, with the TARP program already pulled out from the market. With Paulson buying in, many investors might join in this bandwagon of purchasing foreclosure properties.

John Paulson have profited last year by purchasing credit instruments against subprime mortgages. These credit default swaps on mortgage assets rise in value when the risk of foreclosures increases, which is more evident with subprime lending. Subprime lending has been a significant factor in the case of several foreclosures in California and other states.

While other fund managers are suffering a bad year in 2008, Paulson’s firm has gained 29 percent, after profiting six-fold from last year. He is expected to gain more with this new venture.

While Democrats have criticized Henry Paulson for delaying efforts in stopping the flow of foreclosures with the way the TARP money is being handled, John Paulson has defended his namesake. Paulson has lauded the efforts put forth by the Treasury Secretary and his willingness to change his views depending on the situation.

With the mortgage crisis caused by the mortgage blowup that has been brought about by increasing number of foreclosure properties, lenders and government agencies have found out that loan modifications are a mixed benefit for them, and it is the best possible solution for the banks and the consumers.

Loan modifications require a lot of effort. Though it has few requirements, its guidelines are kind of vague. Also, training bank agents on how to deal with modifications is hard since every case is different from the other. The entire process of loan modifications is time consuming, giving headaches to the mortgage industry.

The up side of the loan modifications for the lenders is that, their records will not show bad debts but show active and paying loans. Since investors prefer banks with less to no pending foreclosures and bad debts, banks make an effort to show profits instead of loan failures on their records to get customers.

Sometimes, the process of loan modifications is prolonged by consumers trying to negotiate on their own since they are not knowledgeable enough about it. Without financial counseling, a loan modification might be useless after a few months, making the homeowner ineligible to loan modification. This makes it better for lenders to negotiate with a professional negotiator because it streamlines business, it gives most of the consumers the best possible loans, plus it makes the entire process easier. Also, what makes it good to deal with professional negotiators is that they are open about the feasibility of the modification of the borrower.

What upsets the entire loan modification process and the industry as well is actually those negotiators who do it themselves and does not understand RESPA, TILA, and banking regulations governing the modifications of home loans.

Consumers facing foreclosures must be careful and diligent as they attempt to negotiate for possible loan modification.

The median price of U.S. home resale plunged to an unprecedented 11.3 percent to 183,300 from 2007, and is expected to continue decreasing over the next few months due to worsening credit conditions and foreclosure properties. This is the biggest decrease on a year-over-year basis since records in 1968 began. According to The National Association of Realtors, resale fell 3.1 percent in October to a yearly rate of 4.98 million units.

The Midwest has been leading falling home prices with a 6 percent drop. This is followed by a 3.2 percent fall in the South, a 1.6 percent drop in the West, and 1.2 percent decrease in the Northeast. In total, resales have plunged at a rate of 4.96 million this year. Experts predict a resale decrease to a national annual rate of 4.5 million to 5.2 million.

Meanwhile, the resale of single-family homes dropped 3.3 percent to a 4.43 million annual rate, while condominium and co-op resale decreased 1.8 percent to a rate of 550,000.

The problem has not been helped by increasing number of repossessed houses. According to foreclosure tracking firm RealTrac Inc., falling home prices have increased foreclosure filings to 25 percent last October compared to 2007.

U.S. homebuilders have also been affected greatly by increasing foreclosures. Figures show a 65 percent drop in home construction in October from a high in January 2006. Building permits have also fallen to its lowest since records began in 1960.

Stuart Miller, chief executive of the second largest U.S. construction firm, Lennar Corp. declared that foreclosures are dominating the homebuilding world and are more intense than in the past.

With the worsening housing scenario, it is unlikely that home resale will increase. Chief U.S. economist Maxwell Clarke from the New York-based IDEAglobal says that even more homes are expected to foreclose. Couple this with the already large number of homes on the market, and the possibility for improving housing market conditions seems nil.

With 12,681 homes in various stages of the foreclosure process, Illinois foreclosures soared by 31 percent in October this year from the same month in 2007, as reported by online foreclosure tracking firm RealtyTrac. The homes are either in default, in bank repossession or already in the auction block.

Compared to the nationwide rate of 25 percent from October 2007, the Illinois foreclosure rate is six percent higher.

Among Illinois counties, Cook County has the highest foreclosure rate, with 6,885 homes receiving foreclosure notices and a ratio of one unit in every 313 properties foreclosed. It accounts for more than 50 percent of the state’s total of foreclosed properties. Will County is next, with 990 homes in foreclosure and a ratio of one unit in every 226 properties foreclosed. Lake County has 815 foreclosure homes and a ratio of one unit in every 307 properties foreclosed. DuPage County has 807 foreclosed homes and a ratio of one unit in every 441 properties foreclosed.

Nationwide, foreclosures increased in October this year by five percent from September to 279,561 homes, a ratio of one unit in every 452 properties foreclosed. The monthly national rate improved due largely to legislative efforts in some states, such as California, to impose moratoriums on foreclosures.

RealtyTrac’s chief executive officer James J. Saccacio cited the efforts of several states to delay foreclosure proceedings and help decrease the number of home foreclosures, but asserted that these efforts should be accompanied by an integrated approach that features significant loan modifications.

As reported by RealtyTrac, the states with the highest foreclosure rates as of October are Nevada, Arizona and Florida. Nevada has one unit in every 74 houses foreclosed, over six times more than the nationwide ratio of one unit in every 452. Arizona has one unit in every 149 houses foreclosed and Florida has one unit in every 157 houses foreclosed.

The suspension in foreclosure properties announced by Fannie Mae and Freddie Mac last week received very positive feedback from the public.

Tiffany Edwards, a mother in Tampa, has been troubled by foreclosure until she heard about the suspension last week. At the moment, her husband is the only income earner in the family. She has just found a new job a few weeks ago, not in time for the scheduled foreclosure of their home. Thanks to the suspension, she and her husband can work out some plans so they can stay in their home for the time being.

This is the same scenario for the other sixteen thousand families in the country. They will be relieved of stress brought by foreclosure for the entire duration of the holidays.

Aside from the suspension, the two companies also offer a new loan modification program where mortgage payments would not exceed 38% (inclusive of taxes and insurance) of the pre-tax monthly income of a household.

Experts say, however, that while the measures might be helpful to some homeowners, its effects are not for the long run. The moratorium ends on January 9, 2009. After that date, families could be evicted all the same.

Also, the number of properties qualified for reprieve represents but a small part of the total number of homes to be lost to foreclosure.

The suspension covers only the loans under Fannie Mae and Freddie Mac which are only one-fifth of the total loans in the country. Furthermore, not the entire twenty percent satisfies the conditions for eligibility – the mortgaged home must be occupied by its owner, and delay in payments must be three months at the least.

Distressed homeowners might have been given a moment to breathe, but if the foreclosure crisis is to be fully addressed, long-term measures must be adapted.

Treasury Secretary Henry Paulson was questioned at a House Financial Services Committee hearing on Tuesday about why he did not use the first half of the $700 bailout money approved by Congress in September to buy back delinquent loans from banks and avert further foreclosures, which were among the original objectives of the plan when it was approved.

In the Treasury’s original proposal, it was explained to the legislators that buying back bad loans would infuse fresh capital into banks to enable them to offer new loans and eventually stimulate the housing market and the economy. Instead, Paulson spent the money to buy shares in financial institutions.

Paulson insisted that the bailout plan was not intended as a cure-all solution for the country’s economic difficulties, adding that the money would be more maximized if it is invested in financial institutions to stabilize the financial system.

Representative Barney Frank, head of the committee, rebuked Paulson, telling him that the foreclosure option was included in the bailout program approved by Congress.

In response, Paulson explained he had not totally rejected using bailout money to help homeowners avoid foreclosure, but related he had doubts about the scheme proposed by the Federal Deposit Insurance Corp.

The FDIC’s plan requires the Treasury to provide credit and loan guarantees and to bear a portion of the cost of bad loans so that mortgage lenders could offer loan restructuring options to troubled homeowners.

With the FDIC plan, about one-and-a-half million foreclosures would be prevented, according to FDIC Chairman Sheila Bair. Bair warned that about four to five million units would become foreclosure homes over the next couple of years if the federal government does not directly help the homeowners.

Federal Reserve Chairman Ben Bernanke also had reservations about the FDIC foreclosure plan, mainly because of the cost, but nevertheless, endorsed the plan because it would be run by mortgage banks rather than government units.

From December 2 to 7, hundreds of homebuyers are expected to turn up in Hudson and Marshall’s foreclosure auctions in several cities in Florida.

Florida is one of the states with a high foreclosure rate that resulted to a crisis in its housing market.

According to RealtyTrac, a firm that monitors the housing market, the number of homeowners in Florida who were in some form of foreclosure process in October 2008 reached nearly 54,324, up by 80 percent from last year.

The October rate ranked Florida the third among states with highest foreclosures, with one filing per 157 homes.

Hudson and Marshall has decided to increase its 2 percent buyer agent commission to 3 percent to entice qualified buyers to its bank-owned property auctions in Florida.

The real estate auction company will retain the listing agents of banks to effectively market foreclosed properties to homebuyers.

Listing agents’ familiarity and knowledge of foreclosures can help prospective homebuyers understand a home’s market value to help them make a successful bid.

Prospective homebuyers need not pre-register for the auction. However, they would be required to provide a $5,000 deposit for each successful bid they made.

Because houses are sold on as-is basis, it is advisable for homebuyers to inspect the properties first prior to auction. An open house will be held on November 22 and December 2 to allow homebuyers to view properties for auction.

The number of foreclosure homes in several cities in Florida where Hudson and Marshall auctions will be held are:

• 68 homes in Fort Myers
• 9 homes in Fort Pierce
• 10 homes in Pensacola
• 67 homes in Tampa
• 16 homes in Port Charlotte
• 34 homes in Jacksonville
• 20 homes in Titusville
• 3 homes in Tallahassee
• 114 homes in Orlando
• 6 homes in Gainesville; and
• 325 homes in Miami / homes in Fort Lauderdale