fbpx

FHFA Extends Moratoriums

It’s costing the taxpayers more than $7 billion, but nobody in government wants to be the one who foreclosed or evicted people during a pandemic. I’d guess that a Covid loan-modification program is coming next:

Today, to help borrowers at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will extend the moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least January 31, 2021. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on December 31, 2020.

“Extending Fannie Mae and Freddie Mac’s foreclosure and eviction moratoriums through January 2021 keeps borrowers safe during the pandemic,” said Director Mark Calabria. “This extension gives peace of mind to the more than 28 million homeowners with an Enterprise-backed mortgage.”

Currently, FHFA projects additional expenses of $1.1 to $1.7 billion will be borne by the Enterprises due to the existing COVID-19 foreclosure moratorium and its extension. This is in addition to the $6 billion in costs already incurred by the Enterprises. FHFA will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed. To understand the protections and assistance offered by the government to those having trouble paying their mortgage, please visit the joint Department of Housing and Urban Development, FHFA, and the Consumer Financial Protection Bureau website at cfpb.gov/housing.

Forbearances Being Extended

Lenders learned their lesson last time – instead of foreclosing on non-payers and risk losing money, it’s better to extend and pretend. There won’t be a time coming where we are flooded with REOs….ever again:

Mortgage forbearances for homeowners affected financially by the pandemic declined slightly over the past week. Black Knight said that there were 200,000 plans scheduled to expire at the end of November, probably accounting for the majority of the 39,000-loan downturn in the various forbearance programs. Another 1 million plans are due to expire at the end of this month.

As of December 1, there were a total of 2.76 million loans remaining in plans, 5.2 percent of the 53 million active mortgages in servicer portfolios and representing $561 billion in unpaid principal. Eighty-one percent of those loans have had their terms extended at some point since March.

The number of GSE (Fannie Mae and Freddie Mac) loans in forbearance dropped by 25,000 during the week, leaving a total of 967,000 homeowners remaining in plans. This is 3.5 percent of the companies’ combined portfolios. FHA and VA loans decreased by 14,000 units to a total of 1.118 million or 9.2 percent of those loans. Loans serviced for bank portfolios or private label securities held steady at 677,000 loans or 5.2 percent of the total. There are 91,000 fewer loans in forbearance plans than one month ago, a 3.2 percent decline.

http://www.mortgagenewsdaily.com/12042020_covid_19_forbearance.asp

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

SB 1079

Hat tip to Susie who sent in this article about a law recently passed in California:

The new rules apply to one- to four-unit properties sold at foreclosure auctions. If an investor wins one of those homes at auction, then people who want to live in it, as well as nonprofit organizations and government entities, get 45 days to submit competing offers.

If the home is a rental, the tenants living there could win by matching the investor’s offer. Other would-be buyers must offer more than the investor.

Known as SB 1079, the law takes effect Jan. 1, 2021.

State Sen. Nancy Skinner (D-Berkeley), the bill’s author, said her goal was to make it easier for individuals and affordable-housing groups to compete with investors.

“Homeownership is the primary way people have to build up generational wealth,” she said. “When we have rules that give advantage to a corporation, then that dream is just not available.”

The manager of the foreclosure auction is required to maintain a website that details the highest bid at the auction and how to submit competing offers.

Link to LAT article

I don’t know how many amateurs will be paying more than investors for homes sight unseen, and without proper title searches for additional liens.  But there will be a few!

It was the last paragraph that was the most intriguing.

The State of California has institutionalized transparency!

Making the highest bid known to the public could revolutionize our business. Can you imagine if Zillow ran a website that openly tracked the offers on their homes for sale – buyers would love the transparency!  Then every brokerage would be pressured into doing the same, and boom – no more agent shenanigans!

Are you thinking of selling?

Transparency can help ignite a bidding war, and get buyers to bid up the price because it becomes more about winning, then getting a deal.  It’s how I handle my listings – let’s talk about how I can help you!

Here’s the classic courthouse-steps example of how auctions help to drive up the price:

Underprivileged Get Foreclosure Privilege

Another story demonstrating how free enterprise is being squeezed:

California is taking steps to avoid a repeat of the conversion of thousands of single-family homes from ownership to rental properties as occurred during the Great Recession. In late September, the state’s governor Gavin Newson signed a bill that will give tenants, affordable housing groups and local governments the first crack at buying foreclosed homes.

As homes were foreclosed by the millions following the housing crisis, Wall Street stepped in and investors, according to Zillow, gobbled up over 5 million homes, turning them into rental properties. They were bought as individual homes, via bulk sales of lender real estate owned (REO), or as distressed loans upon which the investors later foreclosed.

It was expected that these houses would return to owner-occupied status once home prices recovered and the investors, largely big hedge funds, could realize a profit. Instead they have found ways to manage the geographically dispersed properties and continue to hold hundreds of thousands of them.

This has been problematic. While the investor purchases helped put a floor under home prices at a time when there was little appetite for buying distressed properties, it has continued to reduce the inventory of available homes for sale. There have also been many complaints of tenant abuses and deferred maintenance. Many of these were spotlighted last March in a New York Times Magazine article, “A $60 Billion Housing Grab by Wall Street” by Francesco Mari. We summarized her work here.

The California legislation, SB1079, was the brainchild of an activist Oakland group, Moms 4 Housing. It bars sellers of foreclosed homes from bundling them at auction for sale to a single buyer. In addition, it will allow tenants, families, local governments, affordable housing nonprofits and community land trusts 45 days to beat the best auction bid to buy the property. It also creates fines of as much as $2,000 per day for failure to properly maintain properties.

So far, the COVID-19 pandemic has not resulted in massive foreclosures due both to mortgage forbearance programs and a foreclosure moratorium put in place by the U.S. Congress’s Cares Act. Still mortgage delinquencies are rising, and weekly first-time unemployment claims have remained above 800,000 since March. Most forbearance plans are due to expire by next March lacking further government action.

SB1079 goes into effect on January 1, 2021.

http://www.mortgagenewsdaily.com/10132020_wall_street_landlords.asp

Rancho Mold REO

This house has a history – it was once the family compound for Alaska Airlines! It was foreclosed in 1994 when the lender received no bids and took it back for the balance owed of $6,372,931 – and they sold it for $3,350,000 six months later. It was then resold for $4,000,000 in 2001.

At the height of the market in 2007, the former owners of this property took out a mortgage for $8,500,000, but the lender foreclosed in 2014. They finally sold it for $2,437,500 a year ago, and those new owners just flipped it for $2,995,000 or $3,750,000 depending on the data source. This time it was marketed and sold as a vacant lot with approved plans.

This is what it looked like in 2017:

Foreclosure Story

Readers have wondered about the story of the billion-dollar property being bought for $100,000. It was the lender (who was the previous owner) who got the property back, and who is now in position to make a tidy profit on their original $45 million mortgage:

On Tuesday, it sold for a mere $100,000 at a foreclosure auction, a fraction of the $200-million loan outstanding on the property.

A markdown of 99.99%, of course, comes with some fine print. Any other buyer would have been on the hook to repay that loan — and this buyer has to eat that loss.

That’s because the buyer is the estate of late Herbalife founder Mark Hughes, which previously owned the property. The estate set this current saga into motion by selling it to Atlanta investor Chip Dickens in 2004.

Dickens borrowed around $45 million from the Hughes estate to buy the property, and that debt has since ballooned to roughly $200 million with interest and fees. Three years ago, Dickens transferred ownership to a limited liability company controlled by his partner on the project, Victor Franco Noval.

Noval is the son of convicted felon Victorino Noval, who pleaded guilty to mail fraud and tax evasion in 1997 and was sentenced to federal prison in 2003.

Unable to pay the debts, their limited liability company, Secured Capital Partners, tried — and failed — to declare Chapter 11 bankruptcy last month, which led the Hughes estate to force a foreclosure auction to either sell the property in hopes of recouping its losses or buy it back, likely losing the $200 million they were owed in the process.

They chose the latter.

(more…)

Carmel Valley REO Auction

Here’s an interesting case in 2019.

Wells Fargo foreclosed on this Carmel Valley home in November.  It had been listed on the MLS for the previous 12 months, and it looked like the agent had been trying to process a short sale (it was marked ‘contingent’).

She had it listed for $1,500,000.

Her clients paid $1,650,000 in 2007, and financed $1,137,500 with World Savings.  Times were tough for many, and these folks got their notice of default filed in August, 2010.  It doesn’t look like they made any payments since.

Wells Fargo’s amount at the trustee’s sale was $1,365,016, which is typically the amount owed.  So the former owners got a couple of hundred thousand dollars in relief, but waved bye-bye to their down payment of $512,500.

Wells Fargo then listed the house for sale in January for $1,499,000, and has now sent it to an online auction.  The bidding started yesterday, and will remain open until Tuesday:

Link to Auction Website

The interesting twist is that the house is occupied – probably by the former owners – and no one is allowed to see the house.  They also have only one photo of the exterior.

I’ll help them out by providing a link to the previous listing with photos here:

Link to Previous Listing

The auction website also notes that it needs to be a cash purchase, though it’s not mentioned in the MLS listing.  The buyer has to pay a 5% buyer’s premium on top of the purchase price, and I assume they want you to close escrow with the occupants inside?

What will somebody pay for the home, under those conditions?

The current bid is $1,199,920, though note sure if that is actually a real offer or just the minimum bid.

Squatting at Tony’s

Hat tip Bode!

Neighbors of the late San Diego Padres great Tony Gwynn noticed something strange happening in their upscale Poway neighborhood about two weeks ago.

Last summer, the Gwynn family lost their home to foreclosure and it’s been vacant ever since. But suddenly in late December, neighbors told the Sheriff’s Department that they had noticed people coming and going frequently from the fenced-off multimillion-dollar residence. One neighbor spotted barrels being loaded into the garage, leading to speculation that a methamphetamine lab might be setting up.

Now, officials with the property management firm responsible for the bank-owned property have confirmed that the man living on the property was squatting illegally in the residence and have begun civil eviction proceedings against him.

Valued at about $2.3 million, the house went into foreclosure in June and is now owned by a New York bank and managed by Ocwen Financial Corp. in Florida. Ocwen spokesman John Lovallo confirmed that it has taken action to evict the man.

(more…)

Pin It on Pinterest