We had high hopes back then, because I was assigned 20 REO listings in the first month. We thought if that continued, and moved up the price ladder, we’d have some really good blog material!
I’ve been assigned about 30 REO listings since, and while I am very grateful for the business, it is a struggle trying to figure if there will be more REOs coming to justify the workload and staff required. The latest assignment takes us back to where it all began, right around the corner from the first REO in Oceanside:
Lenders are canceling more foreclosure sales in California than ever before, and new financial and political demand for short sales could be the culprit.
Lenders canceled nearly 22,000 California foreclosure sales in June, driven mostly by JPMorgan Chase. It’s a 27% increase from May, a 153% growth from a year ago, and an all-time high, according to ForeclosureRadar.com, which tracks foreclosures in the state.
Foreclosure sales can be canceled for successful loan modifications, short sales, a legal requirement, or even a filing error. In terms of strategy, a spokesperson for JPMorgan Chase said the bank has not made any policy shifts to cancel more foreclosure sales.
According to ForeclosureRadar, a certain number of the cancellations can be attributed to pending modifications and short sales, but homeowners and real estate agents have complained to the company of sales that were canceled without either. “We have seen a shift over the last couple of months where homeowners want this process to be over and they want to start to rebuild,” said a spokesperson for ForeclosureRadar.
Researchers at the company received varying answers as to why the cancellations are up. The best answer came from one unnamed REO professional. According to the source, the Home Affordable Foreclosure Alternatives (HAFA) program had the most to do with the cancellations. The Treasury Department launched HAFA in April to provide incentives to servicers for conducting short sales and deeds-in-lieu of foreclosure to homeowners who fail the Treasury’s Home Affordable Modification Program (HAMP).
“Now that servicers have systems in place to administer the program they are removing delinquent loans from the foreclosure pipeline to allow a reasonable short sale time period,” the source told ForeclosureRadar. “Predictably (also my opinion) the period would be expiring just after the November elections so there would be less political blowback as those properties that don’t conclude with a successful short sale are taken to foreclosure and ultimately, REO.”
After foreclosure activity dropped across the board in May, new foreclosure notices increased 6.7% in June, and notices of trustee sale jumped 21%. In fact, notices of trustee sales have outnumbered preliminary notices of default for the past four months. The gap really widened in June, when there were almost 9,000 more notices of trustee sale.
But this trend could become the norm as banks have to restart more foreclosures than they initiate.
“Historically it is very unusual to have more Notice of Trustee Sale filings than Notices of Default” says Sean O’Toole, founder and CEO of ForeclosureRadar. “But with skyrocketing cancellations and the possibility of failing loan modifications, this will be increasingly common, as lenders are only required to file a Notice of Trustee Sale to restart the foreclosure process.”
Lenders pushed 23% fewer properties into REO status in June and 46% less than a year ago. The amount of properties that have received a notice of default but have not yet been scheduled for sale increased 8.8% in June, but further along the foreclosure pipline, inventory remains constricted. The amount properties scheduled for sale dropped 1%, and REO inventory declined 4.8% in June.
This first house below was going to be the wrap-up of the previous video, showing another lower-end Encinitas REO coming to market – but then it veered off into a rant about the current market.
Those who predicted that we’d be seeing more of the same for the rest of the year – few foreclosures, lots of OPTs, and relatively low sales – are feeling pretty good these days:
I’m really struggling to find decent houses to video from the foreclosure list, and wouldn’t mind including more variety. Have any other topics you’d like to see covered here on video?
Fortuno, a company that bills itself as the “Costco of real estate,” has been sued by investors in Los Angeles Superior Court for allegedly duping them into buying what were essentially worthless REO properties.
The unrelated plaintiffs claim they were mislead into investing in an REO property flipping scheme that left them with virtually worthless properties, while Lodi, Calif.-based Fortuno made money off the deals, according to the suit, filed by the Law Offices of Andrew M. Wyatt of Los Angeles.
The suit claims Fortuno and four executives — CEO William Yotty, CFO Harry Martin, Senior Vice President of Operations Barbara Thomas and President of Customer Service and Sales Bruce Grogg — misrepresented to plaintiffs that it would sell the investors homes at low-price mark-ups and that it could then help them re-sell the houses to third parties at substantially higher prices. The 24 plaintiffs in the suit bought a combined 41 REO properties in Ohio and Michigan for prices ranging from $25,000 to $31,995 each.
“Through the use of other independent real estate marketing sources, the Fortuno Enterprise sells dilapidated condemnable homes for $10,000 to $20,000 more than they paid for and were not ‘fixer uppers,’ ” the suit claims. “After relying on these representations, Plaintiffs purchased the homes to find that they were not inhabitable and required extensive repairs.”
“The Fortuno Enterprise also promised to find a buyer for the properties at a substantial profit to plaintiffs. The so-called buyers were unqualified and often failed to make payments thereby creating a hold-over tenant requiring eviction,” the allegations continue. “For other plaintiffs, no purchasers could be found and the houses were unmarketable in their current conditions.”
The plaintiffs claim they were told Fortuno would “do everything for them” to facilitate the sale, and once the investor took ownership, the company could help the investor either make repairs necessary to sell it as a nondistressed home or ready it as a rental property, at substantial profit to the investor.
Instead, the suit claims Fortuno sold the plaintiffs homes in poor, unmarketable condition with high-price mark-ups, while also failing to find qualified buyers. After the purchase, the plaintiffs allegedly unforeseeably encountered significant “fix-up” costs; threats of condemnation by local government officials for safety violations; an inability to sell the houses due to their dilapidated condition and lack of qualified buyers; negative cash-flow; high property taxes; and eviction legal costs when the buyers defaulted on payments.
And we’re not just talking about D-Fish signing for another three years!
The City of Los Angeles Department of Consumer Affairs has advised us that on Thursday, July 8, 2010, a new law went into effect in the City of Los Angeles that makes mortgage lenders responsible for maintaining their foreclosed properties. Here are the top seven things you should know about this “City of LA Foreclosure Registry Program:”
Effective Thursday, July 8, 2010.
Makes mortgage lenders responsible for cleaning up their foreclosed properties to prevent further blight and nuisance.
Makes mortgage lenders responsible for maintaining the property as soon as they issue a Notice of Default.
Allows the City to fine mortgage lenders $1,000 per dayper violaton, up to $100,000.
Requires mortgage lenders toregister their inventory of homes in default with LA City to help building inspectors identify who owns foreclosed and abandoned homes.
Applies to foreclosed homes in the LA City only.
Consumers can report problem properties to LA City’s 311 hotline.
Here is a link to the the ordinance, which is in the Article 4 to Chapter XVI of the Los Angeles Municipal Code: http://clkrep.lacity.org/onlinedocs/2009/09-0365_ord_181185.pdf. For questions about the new ordinance, please contact the City of Los Angeles Department of Consumer Affairs:
Inside LA County: (800) 593-8222
Outside the County: (213) 974-1452
For the Hearing Impaired (TTY): (213) 626-0913
Website: http://www.lacountydca.info/
Here’s a youtuve tour of a few properties of interest – the lower-priced market seems firm, and the higher you go, the squishier it gets. The REO that backs to Village Park in Encinitas did hit the MLS today, here are the remarks below (I like the idea of the electronic bidding process):
HUD Home Sold AS-IS. Owner-occupant exclusive bidding from 07/09/2010 until 07/18/2010 @ 23:59:59 pm PST. Investor & open bidding begins 07/19/2010. Sold by electronic bidding only. Brokers use HUD NAID # to bid. Bids accepted daily after initial owner-occupant exclusive bidding period. PEMCO makes no warranty as to the existence of mold and is not liable for potential harmful effects. This property is described as a detached PUD. FHA case # is 044-433073. Buyer to verify all.
For those potential home buyers who keep hearing about the short-sale negotiator, here is a copy of a contract that was required to be signed in order to make an offer on a short-sale listing:
The contract attempts to justify why the buyer has to pay 1% of the sales price to the SS negotiator. These have become so common that they are like the booties – agents don’t think for a minute how this agreement might impact the sale, they just do it because everyone else is too. It is a way for the listing agents to sluff off some of the workload, and make the buyers pay for it.
Here are a couple of lowlights from the contract:
Because of Processor’s negotiation with Seller’s mortgage company(s), Buyer has opportunity to purchase Property at or below market value and the terms of the Buyer’s offer, including sales price, would not be possible without Processor’s administrative work and negotiation on behalf of Seller(s) and Buyer(s).
Buyer(s) involved agrees to hold Processor, Seller(s) and any and all real estate agent(s)in the purchase of the property harmless and keep them exonerated from all loss, damage, liability or expense occasioned or claimed by reason of acts or neglects of the Processor or mortgage, employees paid by Processor for the purpose of negotiating a short sale or discounted mortgage payoff on the subject Property.
Regardless how you might feel about such an agreement, if you want to make an offer, you gotta sign on the dotted line.
For those who want to have better open-house performance, do some fine-tuning on your signage – especially if you are in a neighborhood full of competing open houses:
The former hunting retreat that Southern California Edison’s first president, John Barnes Miller, built around 1918 is for sale in unincorporated Claremont, listed for$3.5 million.
Three miles up Webb Canyon Road, Trails End Ranch offers a rare glimpse of early California from its nearly 51 wilderness acres, which include live oak, scrub oak, redwood, olive, peach and pepper trees, to name a few.
Although the single-level U-shaped, hacienda-style home was built before Los Angeles County started tracking building permits, a 1918 announcement by Southern California Edison said the company would construct a number of rustic redwood residences. “It is highly likely that Miller’s retreat was one of these houses,” said Tim Gregory of Pasadena-based Building Biographer.
Trails End caught the eye of plein-air artist John Gamble, whose oil-on-canvas depiction in 1929 is on exhibit at Laguna Beach’s Redfern Gallery.
For more than a decade, current owners Laura and Tom Miller (no relation to the ranch’s original owner) have made extensive improvements to the main house, the two guesthouses and the property’s infrastructure.
Hat tip to Blue Streak for sending this along, though the MSM should figure out that the banks aren’t “choked”. There are plenty of homes ready to be foreclosed that are deliberately being postponed for months and years. Is anyone surprised that the national average is 449 days of free-rent!
