People want to think the sky will be falling once Fannie Mae and Freddie Mac close up shop.
On October 1st, both will likely be rolling back their super-conforming loan limit of $697,500 to $546,250 in San Diego. Eventually Fannie/Freddie will be morphed into some quasi-private enterprise, and someday will be phased out altogether. But there are banks ready to lend – besides the Big Four, we have already heard from Union Bank – here’s another.
Mutual of Omaha Bank is open in Carmel Valley, and Susan has a variety of mortgage options:
A new report from Redfinshows new listings of existing homes dropping across the nation compared to a year ago. Seattle listings down 20 percent, Chicago down 17 percent, Boston down 7 percent and Atlanta down 21 percent to name a few.
When you look closer at what type of inventory they’re talking about, it’s the regular, non-distressed inventories that are falling the hardest. Bank-owned new listings are down too, but that’s largely thanks to all the robo-signing delays. It’s simple math. Sellers are afraid of still-falling prices.
“In most of the major markets, at least on the coasts, we’re seeing inventory down 20 to 35 percent, so regular homeowners are not going to list their homes at these prices,” says Redfin CEO Glenn Kelman. “If you had a home to sell, you’d probably wait a year if you could. You’d have to have a hole in your head to list it now because prices are down.”
REO (bank owned) and short-sale inventory is high and will likely get higher in the coming months as banks process more foreclosures and push through short sales more efficiently. But organic, non-distressed sellers are holding off, and that is actually creating a phenomenon we haven’t seen since the housing boom.
“We’ve had bidding wars in Seattle, Portland, San Francisco, Atlanta, Washington DC, across the U.S. We have seen increased demand and limited supply, especially for those pretty homes that are listed by regular owners rather than the distressed inventory that’s listed by the banks,” claims Kelman.
I have to say I believe him, because in my DC neighborhood, where there are very few foreclosures if any, there are also precious few listings. I’ve been watching my local listings for years, from boom to bust, and the current pickings are slim.
Could this inventory issue be the catalyst to home price stability? I’m not talking about the big bad foreclosure markets, but the rest of the country, where demand is rising and the number of listings are falling. I hate to go back to that boring old theory of supply and demand, but might it actually prevail?
The housing market may be on the ropes, but Curt Beck was ready to come out swinging. He offered $385,000 for a three-bedroom house in Acton. The seller was happy with the terms. But it was unclear if the mortgage holders would allow the deal to go through.
Beck, 56, is typical of many would-be home buyers trying to navigate what’s known as a short sale — when a property is sold for less than the outstanding mortgage (or mortgages).
Real estate experts say this can be a particularly challenging process, complicated by lenders trying to squeeze as much money as possible from a transaction, even though a failed deal often results in the property being foreclosed on.
The situation has grown so problematic that the California Assn. of Realtors recently ran ads in newspapers statewide saying more needs to be done to assist homeowners on the verge of foreclosure by expediting the short-sale process.
“Horror stories abound from potential home buyers and Realtors forced to wait 90 or more days for a response to a purchase offer or being required to fax short-sale applications or other paperwork as many as 50 times,” said Beth Peerce, president of the organization.
“These delays discourage potential home buyers from considering a short-sale purchase and undermine the process for those who short sales are intended to benefit — the hundreds of thousands of families facing foreclosure,” she said.
April home sales in Southern California fell 9.2% from a year earlier, according to market researcher DataQuick. The figure was 25.4% below the month’s average since record-keeping began in 1988. The median price paid for a home in the region fell 1.8% from a year earlier to $280,000.
Meanwhile, 21% of homes in the Los Angeles metropolitan area are now underwater, according to the real-estate website Zillow.com. That’s another way of saying their mortgages are greater than what the homes are currently worth.
The trend of borrowers choosing to default on their mortgage when they otherwise might have been able to afford payments is on the decline, JPMorgan Chase analysts said Monday.
Definitions for what qualifies as a strategic default varies. But analysts took a deeper look in the report. One widely held requirement for strategic default is that the borrower stops making payments when the property loses equity, meaning the mortgage is worth more than the underlying home.
JPMorgan analysts used Standard & Poor’s/Case-Shiller indices and tracked prices against original loan amounts on a metro level. Then, analysts collected counts for all defaulted loans since 2007 and tracked those that started missing payments once the loan went underwater.
They found 60% of all defaults were strategic by the middle of 2009, more than double the percentage in January 2008. But analysts wanted to get more specific.
Using data from Equifax, the JPMorgan analysts looked at which borrowers did not experience a monthly payment increase before defaulting. Then, they added in which borrowers were still making payments on other debts after missing their first mortgage payment.
The final definition of strategic default used was the “percentage of defaults from underwater borrowers who started missing payments once underwater, continued paying their other debt, and had no payment increase on their mortgage.”
While the analysts admit they might still be overestimating the amount of strategic defaults when accounting even for all these variables, they noted the trend is going down.
Across the private-label mortgage-backed securities market, the analysts found 10,000 strategic defaults fit their definition, down from nearly 20,000 one year ago.
“Overall, strategic defaults have stabilized as home prices flattened, and initial jobless claims declined,” analysts said. “A trend worth watching, no doubt, but we can comfortably say that strategic defaults are less than 30% of all defaults, and the pipeline of borrowers [delinquent more than 90 days] has even lesser strategic delinquencies.”
But there is still the possibility of the trend heading upward. The latest offer from the 50 state attorneys general in the foreclosure investigation includes provisions that allow for some borrowers to receive principal reduction. In March, at least four of the AGs sent a letter to the others, warning that such requirements may only attract more borrowers into strategic default.
Currently, 42% of underwater borrowers remain current on their mortgage, according to the JPMorgan Chase analysts. And they also warned of the risk these borrowers pose.
“Of course, the moral hazard of potential strategic defaults in the future is still present. Even though these borrowers have not been defaulting in large numbers, the event risk remains that they could,” analysts said.
This attorney is spreading hysteria here – banks don’t have keys to your house. If you don’t want to be in this predicament, then don’t make your house look like it’s vacant! Hat tip to daytrip for sending this:
With Fannie/Freddie’s policy of taking loans from borrowers with “extenuating circumstances” just three years after their short sale, we should start seeing some of those folks getting back into the market soon – as long as they re-establish good credit.
Millions of Americans whose credit scores have declined in recent years because of economic stresses could start rebuilding their scores if their rent, utility, cellphone, insurance and other monthly payments were reported to the national credit bureaus.
But typically they are not, and as a consequence fail to show up as positive factors on credit scoring systems such as FICO or VantageScore. These on-time payments essentially go to waste for consumers, even though monthly rents often can be as large as mortgage bills, and years of utility and other payments are widely recognized as strong indicators of creditworthiness.
Now for the secret: Under federal law, these unreported accounts need not go unused. You as a mortgage applicant are guaranteed the right to bring evidence of your unreported on-time payments to lenders, and they in turn are required to consider those records in making a decision on granting you a home loan — provided that you request it. If a loan officer refuses, he or she could be open to legal penalties.
Although federal financial regulators generally acknowledge the right to present supplementary data that consumers enjoy under the Equal Credit Opportunity Act, only one — the National Credit Union Administration — has published guidance informing lenders that they are required to comply.
Factoring in so-called nontraditional credit accounts not only could provide important help to buyers and owners with recession-scarred scores but could also aid the estimated 35 million to 54 million consumers who don’t — or barely — show up in the files of Equifax, Experian and TransUnion, the three national credit bureaus. Many of these are young people with thin files with just a couple of credit accounts, and many are minorities.
Gayle and Ray Harvie were at Disneyland when they learned a troubled neighbor had stolen, and then crashed, their new $12,000 Yamaha motorcycle.
The 18-year-old thief was fine, but the Harvies, who’d raised three boys themselves, thought he needed to be taught a lesson. They called police and pressed charges.
When his mother, Caroline Pepperell, and Ray Harvie spoke a few days later, Harvie insisted she or her son pay for the damage. Pepperell refused. They hung up.
That was the last conversation between the Harvies and Caroline Pepperell for nearly six years. In that time, their dispute metastasized into a saga involving three separate police investigations, a dead dog, Adolf Hitler’s secretary and allegations of forgery and organized crime. It led to the conviction of a decorated cop, the disbanding of the Sultan Police Department and, in March, a $79,146 judgment after a four-day jury trial.
