bubbleinfo.com

From HW:

A new Senate bill aims to speed up the short-sale process by requiring mortgage lenders or servicers to respond within a mandated timeline or face potential fines.

The bill, introduced late last week by Sen. Lisa Murkowski, R-Alaska, gives the servicer 75 days to reply to a homeowner’s written request, which must include a copy of a contract with a prospective buyer.

The servicer would have to answer with an approval, denial or request to extend the response period up to 21 days. The companies could also approve the short sale subject to certain changes.

Homeowners would receive $1,000 each time the lender or servicer fails to respond, along with other “appropriate relief,” according to the requirements of the bill.

“What we have here is a failure to communicate,” Murkowski said in a statement. “Why don’t we make it easier for Americans trying to participate in the housing market, regardless of whether the answer is ‘yes,’ ‘no’ or ‘maybe?’”

Moe Veissi, president of the National Association of Realtors, said real estate agents support “any effort to improve the process for approving short sales.”

The bill, co-sponsored by Sens. Scott Brown, R-Mass., and Sherrod Brown, D-Ohio, was referred to the Senate Banking Committee. Legislators introduced at least six bills related to short sales in 2011. None made it beyond the committee level.

One introduced by Rep. Thomas Rooney, R-Fla., would automatically approve a short sale, unless a lender or servicer responds within a 45-day window. The bill, H.R. 1498, holds limited bipartisian support in the House.

From CoreLogic:

Completed foreclosures for all of 2011 totaled 830,000 compared with 1.1 million in 2010. In December 2011 there was a month-over-month decrease in completed foreclosures to 55,000 from 57,000 in November 2011. The December 2011 completed foreclosures figure was also down from one year ago when it stood at 67,000. From the start of the financial crisis in September 2008, there have been approximately 3.2 million completed foreclosures.

Highlights as of December 2011

• The percent of homeowners nationally who were more than 90 days late on their mortgage payment, including homes in foreclosure and REO, was 7.3 percent for December 2011 compared to 7.8 percent for December 2010, and 7.2 percent in November 2011.
• The five states with the highest foreclosure inventory were: Florida (11.9 percent), New Jersey (6.4 percent), Illinois (5.4 percent), Nevada (5.3 percent) and New York (4.6 percent).
• The five states with the lowest foreclosure inventory were: Wyoming (0.7 percent), Alaska (0.8 percent), North Dakota (0.8 percent), Nebraska (1.0 percent) and Washington (1.3 percent).
• Of the top 100 markets, measured by Core Based Statistical Areas (CBSAs) population, 34 are showing an increase in the foreclosure inventory in December 2011 compared to a year ago, an improvement from November 2011 when 46* of the top CBSAs were showing an increase in the foreclosure inventory compared to a year ago.

“The inventory of foreclosed properties has begun to shrink, and the pace at which properties are entering foreclosure is slowing. While foreclosure filings are being curtailed by a variety of judicial and regulatory constraints, mortgage servicers are completing REO sales faster than they are completing foreclosures,” said Mark Fleming, chief economist with CoreLogic. “This is the first time in a year that REO sales have outpaced completed foreclosures, and part of the reason for the decrease in the foreclosure inventory.”

NSDCC detached REO sales: 2010 = 199 @ $316/sf, and in 2011 = 190 @ $293/sf

NSDCC detached Short sales: 2010 = 216 @ $318/sf, and in 2011 = 278 @ $292/sf

NSDCC detached Regular sales: 2010 = 2,045 @ $393/sf, and in 2011 = 2,094 @ $393/sf

Yesterday CR showed the breakdown of distressed sales year-over-year for different cities here.

Let’s look at our last six months, the period during which short-sale approvals have sped up, and compare to the previous year.

A comparison of NSDCC detached listings sold between August 15th and February 13th:

Here are the currently active detached listings in North SD County Coastal:

The conversion of REOs to short-sales appears to be underway, though the distressed properties are continuing to make up only about 20% of the sales. How many of the currently non-distressed listings will end up sliding into the other two categories? Probably 25% or so?

Don’t be surprised if REO listings dry up, and short-sales surge the rest of the year as we bear down on the expiration of the debt-tax-relief on 12/31/12.  Will Congress extend?  Could it end up being a political football in this election year? It should, so sellers know where they stand.

Excerpts from the latimes.com:

California walked away with the biggest chunk of this week’s landmark foreclosure settlement partly because of the state’s size but also because of Bank of America’s desire to escape the legacy of its Countrywide problems.

The nation’s three largest mortgage servicers — Bank of America, JPMorgan Chase and Wells Fargo & Co. — committed to provide California $12 billion in principal write-downs, including through short sales, over the next three years, the single largest such commitment to come out of the negotiations. About 250,000 Californians are covered under that part of the deal, struck between five big mortgage lenders, states and the federal government.

Taking into account a complex series of credits designed to encourage the banks — which also included Ally Financial and Citibank — to make payments to homeowners, California’s share of the settlement could climb to as much as $18 billion. That aid would go to an estimated 460,000-plus borrowers, many in areas of the state hit hardest by the housing bust, according to the state attorney general’s office.

“This outcome is the result of an insistence that California receive a fair deal commensurate with the harm done here,” Atty. Gen. Kamala D. Harris said Thursday in announcing the settlement.

“California gets an extraordinary amount of it,” said Iowa Atty. Gen. Tom Miller, who led the negotiations for the state attorneys general. “That’s one of the things that amazed us as we went through this — how much problem there was in California.”

California’s participation in the settlement, a prospect that was in jeopardy until the last minute, also helped increase the size of the deal, including for other states.

“They are by far the most important mortgage lending state in the country, and as a result are the most important foreclosure state,” said Guy Cecala, publisher of Inside Mortgage Finance. “It is crucial to have them as part of a settlement.

“These banks badly need to get back in the business of processing foreclosures,” Cecala said, “and it is a huge deal if you don’t have the California attorney general breathing down your throat.”

Key to Harris was getting a significant amount of principal reduction for borrowers. Under the terms of the deal, banks can write principal down to the current value of the loan, or so the monthly mortgage payments make up only 31% of a borrower’s income, according to the person familiar with the deal.

If the banks don’t fulfill the $12-billion guarantee, they will have to make cash payments of up to $800 million directly to the state, a provision that is enforceable in California court, instead of federal court in Washington, where the rest of the deal is covered.

Incentives will direct aid to areas hardest hit by the foreclosure crisis, a “Stockton provision” that Harris sought after a visit this year to that foreclosure-ravaged city, negotiators said. Those areas are to receive relief within the first year.

Hat tip to SM for sending this in from the ocregister.com:

It was a $2 million Laguna Beach dream house six years in the dreaming, building and litigating, but it was taken from Mark Zigner in less than a minute on Thursday, in an auction on the courthouse sidewalk.

I wrote last fall about the battle between Zigner and Pacific Mercantile Bank over the home on Ledroit Street. Zigner, a jewelry broker by trade, had started to build the house in 2006 and sunk his life into it.

He borrowed $2.2 million from PMB, with whom he’d done business for years. When real estate went south, PMB let Zigner slide on some payments and had given him every indication it would continue to do so until he could finish building the house and sell it. But one day in 2009, an executive who had worked at PMB 15 days decided to call the loan due, essentially wiping out Zigner’s assets and ruining his credit overnight.

Zigner sued. My column chronicled how a jury believed PMB wronged Zigner and awarded him $2.1 million – $1.87 million as punitive damages. That didn’t end it, and much has happened of late.

First, Judge Francisco Firmat on Wednesday reduced the punitive award to $950,000, making the overall judgment $1.2 million. “Disappointing but not surprising,” is how Zigner’s attorney Frank Battaile characterized the decision. A U.S. Supreme Court benchmark is that punitive damages be no more than four times the actual damages, which in this case were $250,000.

More critical to Zigner, however, was that Firmat denied PMB’s motions to toss out the verdict altogether. This means PMB’s next option is the state Court of Appeal. PMB said last fall it would challenge the verdict but on Thursday told me it would have no further comment on any aspect of the dispute.

While Zigner won the lawsuit, it is important to remember he hasn’t collected (because of the possible appeal) and by PMB’s estimate is still $2.8 million in arrears on the house. The house, however, isn’t worth that in today’s market. His real estate agent had buyers interested at about $1.8 million, which would require a short sale.

The agent, Barbara A. Amstadter of Prudential California, wrote to directly to PMB’s board and said she had three potential buyers. Amstadter, a distressed-property expert, wrote that PMB “will lose even more money foreclosing on this property than it would in doing a short sale … based on the industry-accepted knowledge that a foreclosure produces less return than a short sale.”

PMB’s lawyers, however, replied in a one-paragraph letter stating PMB wasn’t interested and would be foreclosing. Why? PMB isn’t saying. Amstader and Battaile are mystified.

“I’ve never had bank refusing to even let me present short sale offers,” Amstader said. Battaile told me: “I always thought they would come to the table, but they won’t give us the time of day.” Zigner, whose credit would be even further damaged by a foreclosure, thinks PMB is being vindictive. “I won this case. They want to bury me.” It’s also possible, he said, PMB has a buyer lined up.

In recent weeks, as Zigner saw foreclosure looming, he produced a YouTube video (“Support Mark Zigner”) telling his version of the fight. PMB attorneys fired off a cease-and-desist letter, calling the video “highly disparaging, incomplete and inaccurate” and contending that circulating it “constitutes legal defamation.”

Battaile responded that Zigner would not be removing the video – that, in fact, it is far less damaging to PMB than the court’s actual Statement of Decision of the case. “Judgments and verdicts have consequences and your client will have to live with them,” Battaile wrote back.

While Zigner may ultimately collect $1.2 million from PMB, he couldn’t hang onto his dream house. I went to the sale, held in the shade of the courthouse entryway on Civic Center Drive. Dozens of properties were on the block, and more than 35 potential buyers milled. A Mission Viejo house with an opening bid of $435,000 was the subject of an excruciating 15-minute-long bidding war in which the parties went up in $100 increments to the eventual price of $456,200.

Zigner’s house was next but there was no such fight. The preestablished opening bid by PMB was $2,046,938. “Going once … Going twice …” cried the auctioneer. Nobody spoke. In a matter of seconds, it was gone. The bank had taken it.

Does the previous sales price impact how much people pay today?

Do buyers in Carmel Valley figure that if they are getting 20% to 30% off what the last guy paid, they did good enough?

How are short sales affecting the market?

This chart divides Actives by Pendings (A/P, our gauge of the relative ‘health’ of each market). We’ve seen in the past that a 2.00 reading seemed healthy, and 3.00 was tolerable. I included contingents in the Pending counts because now they are much more likely to stick, and if a buyer does cancel, it’ll be because they found a better one and replaced it.

The two columns on the right side of the chart show the number of short sales in each Pending count, and the total number of short sales closed last year in each town:

Oceanside and Vista are smoking red hot with 1.05 reading – they literally have almost as many pendings as actives. Why? Because sellers AND buyers AND agents have embraced short sales. Comparing the pending short-sale counts of current vs. last year, it looks like Oceanside and Vista will probably set new records this year – and received a lot of experience in 2011.

But in NSDCC (the last six categories), it appears that short sales are a relatively new concept – but coming on strong. The difference is capitulation – Oceanside and Vista sellers have conceded on price, and buyers are responding. As a result, the market is working.

We need some old fashioned market clearing in NSDCC, where it is stale and stagnant.

In the last six towns on the list, there are 1,086 detached homes for sale. Even with the dozens of “refreshed” re-lists in the new year, the average market time is 121 days – with 21% of them having been on the market for more than six months!

How many sellers are in the ‘pre-distressed’ stage, and are just testing the market today at higher pricing to see if they can get out with at least enough for a steak dinner?

There must be quite a few – what will be the effect when they finally cave?

Specifically, would it hurt the market if they lowered their price and entered short-sale status?

Based on areas that have already seen capitulation, it doesn’t look like it (capitulation = lenders and listing agents getting sellers off the fence, price-wise).

Oh but wait JtR, Oceanside and Vista is a whole different socioeconomic class; there aren’t that many rich people. OK, we’ll see, but when there are 18 offers submitted on a funky older house on a busy street in La Jolla, I’ll stick to my guns that there are plenty of buyers….waiting.

Short sales are the device being used to ensure a softer landing, and the lenders/servicers will control the pace as needed. But they would be smart to recognize that market clearing is working great where implemented!