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Sacramento Foreclosure Specialist Reports:

Foreclosures Will Continue

I was Researching Sacramento area HAMP loan mod success rates this nmorning and came across this startling article in DSNews. It looks as if all the good news the Obama powered media has been pumping out is a little off center.  Kinda Scary!

Home loan delinquency rates in the United States have now surpassed 10 percent, Lender Processing Services (LPS) reported this week.When you factor in homes already in the foreclosure process, the total rate of noncurrent mortgages sits at 13.3 percent, according to the data in the Florida-based company’s national loan-level database.This rate indicates that more than 7.2 million mortgage loans are now behind on payments, LPS explained, with another one million properties already taken back by banks and in REO status.LPS’ January 2010 Mortgage Monitor report, shows that within the population of loans that were current at the end of 2008, the percent of “new” serious delinquencies is 4.64 percent – higher than any other year analyzed. Of loans that were current as of December 31, 2008, by December 2009 there were 2.3 million new loans that were considered seriously delinquent.

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Seemingly less-risky, prime mortgages continue to loom large as the industry’s big, pink elephant. Prime loans, including agency, non-agency, and jumbo, have experienced deterioration at a worse pace than subprime, Federal Housing Administration (FHA) insured mortgages, and all loans as a whole, LPS said. The company’s analysis shows that within the prime loans category, those with unpaid principal balances between $417,000 and $600,000 have performed the worst. The Mortgage Monitor report also indicates that 2009 vintage loans are performing better than loans from any of the prior five years and have been steadily improving as pools of loans grow larger. This improvement is attributed to more restrictive underwriting guidelines, but that also means “liquidity is still not available where it is needed most,” LPS said.The company’s analysis shows that states with most noncurrent loans are: Florida, Nevada, Mississippi, Arizona, Georgia, California, Indiana, Michigan, Illinois, and Ohio.Those with the fewest include: North Dakota, South Dakota, Alaska, Wyoming, Montana, Nebraska, Vermont, Colorado, Oregon, and Washington.

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Tags: Sacramento+area+HAMP+loan+mod+success, National+Mortgage+Delinquency+Rate, foreclosure+process, noncurrent+mortgages

Weak Underwriting Standards To Blame for Financial Crisis!

Ya don’t say… you mean not checking to see if people really make as much as they claim and giving loans to people with terrible credit isn’t a good idea? 

By now it is common knowledge that the global financial meltdown, fuelled by the housing crash and now propelled by a smashed economy and unemployment was the direct result of a huge bubble in housing and real estate values that was caused by easy credit. Leave it to the U.S. government to spend untold millions of dollars to have several days of hearings two years after the sub-prime meltdown to sit around and talk about it…

I guess documenting testimony from experts will give the powers that be something to stand on as they re-build, over regulate and totally screw up our mortgage industry.

It will be interesting to see the changes ahead in the way mortgages are sold, under written and securitized. I’ll bet we don’t like the end result.

According to DSNews on the 14th:

Thursday was day two of the Financial Crisis Inquiry Commission hearings, aimed at uncovering the root causes of the worst economic recession since the Great Depression.

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The witness list included financial regulators at both the federal and state level, who confessed that supervision and oversight was lacking and failed to head off the financial system’s near-meltdown.

FDIC Chairman Sheila Bair took top billing at the hearing. “Not only did market discipline fail to prevent the excesses of the last few years, but the regulatory system also failed in its responsibilities,” Bair said.

Bair told the commission that record profitability at Wall Street firms worked to shield them from regulatory second-guessing about how the money was coming in.

She also said that at the onset of the crisis, “It’s been estimated that half of all financial services were conducted in institutions that were not subject to prudential regulation and supervision. Products and practices that originated within the shadow banking system have proven particularly troublesome.”

Mary Shapiro, chairman of the Securities and Exchange Commission (SEC), told the inquiry committee that there were many interconnected causes of the financial crisis. At the top of her list was “the rise of mortgage securitization and its unintended facilitation of weaker underwriting standards by originators and excessive reliance on credit ratings by investors.”

Shapiro said her organization is currently evaluating investment firms’ practices related to subprime mortgage-backed securities and collateralized debt obligations in the real estate bubble.

“We are seeking to determine whether investors were provided accurate, relevant and necessary information, or misled in some manner,” Schapiro said.

According to state regulators’ testimony, it was the supervision at the federal level in Washington that obstructed their efforts to avert financial catastrophe, but they too echoed Shapiro’s sentiments that it all began with the mortgage industry.

Illinois Attorney General Lisa Madigan said the mortgage lending industry had “careened out of control” in the years preceding the financial crisis. “The housing bubble may have officially burst in late 2007, but those of us on the frontlines of consumer protection have seen predatory lending practices since the late 1990s,” Madigan said.

Phil Angelides, chairman of the congressionally-appointed commission and a former California treasurer said he will also be asking former Federal Reserve chairman Alan Greenspan, current Fed chairman Ben Bernanke, and former chairmen of the SEC, including Christopher Cox to testify before the panel.

“We’ll be asking them to come before us because they were the watchers, and I will assure you, we will be as probing of the regulators who were on the scene at the time as we will be of people in the private sector,” Angelides said.

Angelides’ committee is modeled after the Pecora Commission, which probed Wall Street’s 1929 crash and led to the creation of the SEC and other financial reforms of the time.

On Wednesday, Angelides and his fellow panel members heard testimony from the heads of four of the nation’s largest financial firms on their business practices leading up to the crisis and their miscalculations of the severity of the meltdown.

Courtesy DSNews

Tags: Financial+Crisis+Inquiry, financial+system+meltdown

Sacramento Real Estate Market Reports

Its easy to understand why; in most cases, you cannot come close to buying a new home for what you could buy a re-sale for here in the Sacramento area.

I have said for a long time that our entry level price range must eventually “bounce” here in our Sacramento housing market in and get back in line with replacement costs. When the supply of repos and short sales slow, the prices must recover to be closer with new construction. I mean it’s almost ridiculous: In some neighborhoods, if someone gave you the lot, paid for the permits and gave you a truckload of lumber, you still couldn’t build a new house as cheap as you could just buy a re-sale home!

Michael Shaw of the Sac Bee wrote a great little piece the other day and I am including it here:

November new-home sales in Sacramento were 32 percent lower than the same month in 2008, according to figures released by California Building Industry Association on Wednesday.

A total of 141 new homes of all types were sold in the four-county region, compared with 181 sales the year before. The average price paid for those homes, however, inched 2.8 percent higher to $329,300.

The association reports home sales figures compiled by analyst Hanley Wood Market Intelligence, which tracks new home communities with more than 10 units.

In the state, the November sales rate at California new-home communities was 4 percent lower than 2008

Foreclosure Rates May Soar

Foreclosure Notice in Sacramento

Courtesy Chris Mcglaughlin

One in every 7.5 homeowners either fell into delinquency or foreclosure as of November 30, 2009, according to the December mortgage monitor report from Lender Processing Services.  The total number of delinquencies reached a record high of 9.97%, a 5.46% increase from the previous month and a 21.29% increase from November 2008. Loans falling into more severe delinquent categories reached 5.01% through November, compared to 1.52% of loans improved toward a current status.  That’s compared to November’s mortgage monitor report, when 4.02% of current mortgages through December 2008 fell into delinquency by October 2009.  More than 4% of the loans that were current in December 2008, fell behind by 60 days or more, including foreclosure, by the end of November 2009. 

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It’s the highest rate for that part of the year since LPS began reporting the data.  The foreclosure rate in November reached 3.19%, a 1.46% increase from the previous month and an 81.41% increase from November 2008. This doesn’t include the amount of homes falling into the shadow inventory of foreclosure. Some data providers like First American CoreLogic speculate that number could be as high as 1.7 million as the roadblocks of the government incentive programs and moratoriums clog the foreclosure pipeline.  “Foreclosure starts continued to decline as a result of loss mitigation efforts like the federal government’s Home Affordable Modification Program (HAMP) and elevated delinquent loan volumes,” according to the report. “The reduction in foreclosure starts, combined with the steady increase in the number of seriously delinquent loans, has resulted in an ever-growing ‘shadow’ inventory of troubled properties.”  The states with the most non-current loans were Florida, Nevada and Mississippi. Those with the fewest were North Dakota, South Dakota and Alaska.

This just in from Chris McLaughin:

Treasury officials, in the first comprehensive tally of permanent modifications made, say that loan servicers have converted 31,382 people from trial adjustments to long-term assistance as of Nov. 30, but 30,650 people in trial modifications have been denied.  That means that only about 4% of troubled borrowers have received long-term help under the Obama administration’s foreclosure prevention program.  A nearly equal number of trial modifications have been denied permanent assistance, the report showed. The reasons include not making monthly payments on time, not submitting all the necessary paperwork and not qualifying for reasons such as insufficient income. 

Homeowners claim that banks keep losing paperwork, but banks claim they often don’t get it in the first place.  Around 375,000 people should be eligible to receive long-term relief by year’s end, but only one-third of homeowners who have made at least three trial payments have submitted all the needed forms, Treasury officials say, and some 20% have not submitted any paperwork at all. Banks and government agencies have hired outside companies to knock on borrowers’ doors to assist them with completing the paperwork.  None of this addresses the real problems, of course:  a lot of people are underwater and don’t see the point of making payments, and quite a few know they won’t qualify once their real income comes to light.

Along the same lines is This Article From DSNews:

 FHA Foreclosures Surge

Did you read that?

FHA foreclosures? Holy cow; that means nearly one in five FHA loans are more than 30 days behind! Most of those FHA borrowers would have bought since the mortgage crash of 2007, since FHA loans were almost extinct before that…

The Mortgage Bankers Association also found recently that 14 percent of all homeowners with any type of mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.

As they say; even a dead cat will bounce– The media had it all wrong this summer; calling for a bottom and raising hopes of a housing turn-around… There are still many, many more homes coming through the fore closure pipeline…

Loan modification starts are way up, nearly 700,000 homeowners nationally (about 20% of those who qualify) have started the modification process. However, over 75% of those will default again, recent history shows us.  And of the 25% that don’t default, how many of them will re-consider when they finally realize that only 10% of loan modifications have any type of principle reduction… it may take 20 years in some areas to get back to ‘ground zero’ or where folks can sell without going short or bringing money to the closing table.

I am really not a pessimistic person, in fact I am too optimistic usually and it has cost me a lot of money and pain by seeing through “rose colored glasses” in the past.  I just really see too many signs of more problems to come and think we are a long way from the bottom

 According to Centralvalleybusinesstimes.com:

Sacramento:

Foreclosure rates in Sacramento-Arden-Arcade-Roseville-Woodland metropolitan area increased for the month of September over the same period last year, according to First American CoreLogic.

The rate of foreclosures among outstanding mortgage loans was 3.61 percent for the month of September, an increase of 1.58 percentage points compared to September 2008 when the rate was 2.03 percent.

Foreclosure activity in Sacramento-Arden-Arcade-Roseville-Woodland was higher than the national foreclosure rate, which was 2.93 percent for September 2009, representing a 0.68 percentage point difference.

Also in Sacramento-Arden-Arcade-Roseville-Woodland, the mortgage delinquency rate has increased. According to First American CoreLogic data for September 2009, 10.29 percent of mortgage loans were 90 days or more delinquent compared to 6.35 percent for the same period last year, representing an increase of 3.94 percentage points.

Courtesy of Real Estate News & Commentary by Chris McLaughlin, November 17, 2009

3Q09 – Delinquencies up, rate slows

According to credit reporting agency TransUnion, delinquent mortgages were up 58% from 3.96% a year ago, and as of Sept. 30, 6.25% of U.S. mortgage loans were 60 or more days past due.  Two months delinquency is considered a first step toward foreclosure because it’s hard for homeowners to catch up with payments at that point.  The rate of delinquency is slowing, however.  The rate was up 7.6% from the second quarter — a much smaller jump than the 11.3% rise in the second quarter and a 14% rise seen in the quarter before that.  F.J. Guarrera, vice president of TransUnion’s financial services division, says that while the slower rate is encouraging, the co9ntinual increase shows there are still a lot of problematic mortgages out there. 

Mortgage delinquencies remain highest in the four states where the crisis has hit the worst: in Nevada, the rate reached 14.5%, up from 7.7% a year ago; in Florida, the rate was 13.3%, up from 7.8% last year; in Arizona, the rate hit 10.4%, up from 5.5% in 2008; and in California, the rate jumped to 10.2%, from 5.8% last year.  Two things have to get better before mortgage delinquency rates start reversing themselves: home values and unemployment. “Until we see improvement in both of those areas, it’s possible that it will take longer for delinquency to improve,” Guarrera said.

California Foreclosures are up but still being postponed

According to data released by ForeclosureRadar.com, foreclosures in California increased 22.24% from September to October.  Last month’s foreclosures increased 20.95% from October 2008, which were 42.56% below California’s peak month of July 2008.  But since then, the inventory of real estate owned (REO) properties has grown 131.36% in California.  “While we continue to see a steady stream of properties entering foreclosure, relatively few are completing the process and being sold at auction despite the increase this month,” said Foreclosureradar.com CEO Sean O’Toole.  “The bigger picture is that more and more homeowners are finding themselves upside down in foreclosure limbo,” O’Toole added, “some hoping for a loan modification or short sale, while others are just waiting for a knock on the door.”  The number of foreclosures initiated in October remained level with September levels but this is due in large part to recent legislation enacted in California

Courtesy Real Estate News & Commentary by Chris McLaughlin, November 16, 2009

Sacramento real estate market called Less Favorable in think tank report…

Urban Land Institute, a Washington D.C. think tank reported yesterday in its “Emerging Trends in Real Estate 2010” report that there may be problems ahead for Sacramento real estate market. 

Jonathan Miller, a consultant for PricewaterhouseCoopers who wrote the report,said ”On balance here, I guess it’s a sober year for 2010 and maybe not much better in 2011,” in a telephone news conference from the convention. “It all depends on how the economy behaves and if the consumer comes back. We don’t expect much of a resurgence.”

In the report, Sacramento was described as less favorable because of “concerns about government gridlock, rising taxes and an inhospitable business climate”.