TRID: A Business Opportunity?

On October 3rd the new closing process and documents known as Know Before You Owe or “TRID” was implemented. These changes could make it harder for lenders to complete closings on time. But they might also present an opportunity for REALTORS® to add value from a Lenders’ perspective and to cement relationships. Read More…

Foreclosure Starts Have Biggest Rise In Four Years

Foreclosure starts were up 12% from the previous month in October 2015, according to real estate information company RealtyTrac’s U.S. Foreclosure Market Report. RealtyTrac says the October increase in foreclosure starts is not a surprise this year since it has also happened the last five Octobers. What is a surprise is how much of a rise there was this October, which was more than twice the average rate of 5%. Read More…

Underwater Homeowners Could Face Extra Tax Burden in 2014

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Struggling homeowners could be hit with an unexpected tax bill in the new year.

A law that spared people who owe more than their homes are worth from being saddled with extra taxes when their banks provide mortgage relief is expiring this week. Congress hasn’t extended it.

Underwater homeowners often try to negotiate with their bank so that they can sell their homes for less than they owe in a short sale or have their mortgage balance reduced. But the difference between what the homeowner owes and the lower sales price approved by the bank is considered income for the homeowner and subject to tax by the Internal Revenue Service.

For example, someone with a $100,000 mortgage who is allowed to sell their house for $80,000 is supposed to pay taxes on the remaining $20,000.

But a law known as the Mortgage Forgiveness Debt Relief Act saved such homeowners from the tax burden. Last year, Congress rushed to extend the law during negotiations about the fiscal cliff but only through the end of 2013. Now it’s down to the wire again.

Lawmakers and housing advocates argue that the rule hurts those who are already financially strapped. Since 2009, more than 220,000 homeowners have sold their houses for less than they were worth through a short sale with help from a government program. There are more than 6 million homes still underwater across the country, according to a third-quarter report from research company CoreLogic.

That is down from more than 11 million homes during the peak of the housing crisis in 2009, but it shows that despite the sector’s strong recovery, many homeowners aren’t out of the woods.

Click here to read the rest of the story

Michigan Auctioning Tax-Foreclosed Land, Houses

The state of Michigan is planning to auction nearly 700 tax-foreclosed properties in 12 counties next week.

The parcels might be vacant residential or commercial lots or might have occupied or abandoned structures on them.

Nearly 350 parcels in northern Michigan will be auctioned off on Tuesday, Aug. 13 at the Ramada Inn in Grayling. The parcels are in Dickinson, Iosco, Iron, Kalkaska, Keweenaw, Luce and Mecosta counties.

More than 330 mid-Michigan properties in Branch, Clinton, Eaton, Livingston and Shiawassee counties will go to auction on Wednesday, Aug. 14th at the Ramada Lansing Hotel & Conference Center.

Properties being auctioned have been foreclosed due to delinquent property taxes. For more information,

visit www.michigan.gov/propertyforeclosures

Proposed Changes to Michigan’s Redemption Period

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Michigan lawmakers are considering changes to the state’s foreclosure law which would significantly shorten the period homeowners have to either sell or save their foreclosed property.

Legislation currently under consideration includes a provision that would shorten the foreclosure redemption period from six months to 60 days. The redemption period is the period of time when homeowners can challenge a foreclosure’s legality, sell their home or reclaim the title and possession of property by paying the debt it secured.

Current the six-month redemption window allows people who are unemployed to get a new job and begin making payments again or, if that fails, sell their home on a short sale.

Supporters of the change say that a longer redemption period often leads to abandoned homes and blight.  According to Patricia Herndon, advocacy director for the Michigan Bankers Association, only about 20% to 30% of delinquent borrowers currently use the state’s process to avoid foreclosure.  That means during the redemption period homes are often abandoned and exposed to criminal elements and stripped of fixtures.

Opponents of the bill maintain the changes will be devastating for Michigan homeowners struggling to save their propertyIn the short term, changes to the redemption period  could prevent some Michigan residents from benefiting from a short sale as closing on a short sale typically takes the better part of the 6-month Redemption Period.  While a short sale doesn’t save the home for the homeowner, it does have financial implications for the homeowner . The neighborhood could also be spared another vacant property.

Certainly both sides have merits in their arguments; the difficulty will be striking a balance between preventing blight and giving homeowners every opportunity to redeem their homes.  Stay tuned for details!

Judicial Foreclosure States Contain More Distressed Homes

New data from CoreLogic reaffirms a long-held belief that real estate markets in judicial foreclosure states are healing at a much slower pace than those in non-judicial foreclosure states.

The three states with the highest foreclosure inventory rates in April were classified as judicial foreclosure jurisdictions – namely Florida, New Jersey and New York

In judicial states, lenders must give nonpayment evidence to the courts to move borrowers into foreclosure, rather than issuing default notices directly to borrowers without involving the courts.

According to CoreLogic, in April, the foreclosure-inventory rate was 9.5% in Florida, 7.4% in New Jersey and 5.1% in New York, compared with a U.S. rate of 2.8%. Among non-judicial states, the highest foreclosure-inventory rate was in Nevada, which was hit particularly hard when the housing bubble burst.

Shadow Inventory Shrinking

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CoreLogic®  recently reported that the current residential shadow inventory as of October 2012 fell to 2.3 million units*, representing a supply of seven months. The October inventory level represents a 12.3 percent drop from October 2011, when shadow inventory stood at 2.6 million units.

“The size of the shadow inventory continues to shrink from peak levels in terms of numbers of units and the dollars they represent,” said Anand Nallathambi, president and CEO of CoreLogic. “We expect a gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold.”

“Almost half of the properties in the shadow are delinquent and not yet foreclosed,” said Mark Fleming, chief economist for CoreLogic. “Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply. Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013.”

Data Highlights as of October 2012:

  • As of October 2012, shadow inventory fell to 2.3 million units, or seven months’ supply, and represented 85 percent of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO.
  • Of the 2.3 million properties currently in the shadow inventory (Figures 1 and 2), 1.04 million units are seriously delinquent (3.3 months’ supply), 903,000 are in some stage of foreclosure (2.8 months’ supply) and 354,000 are already in REO (1.1 months’ supply).
  • As of October 2012, the dollar volume of shadow inventory was $376 billion, down from $399 billion a year ago.
  • Over the three months ending in October 2012, serious delinquencies, which are the main driver of the shadow inventory, declined the most in Arizona (13.3 percent), California (9.7 percent), Michigan (6.8 percent), Colorado (6.8 percent) and Wyoming (5.9 percent).
  • As of October 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of the 2.7 million properties that are seriously delinquent, in foreclosure or in REO. In October 2011, these same states made up 51.3 percent of all the distressed mortgages that were at least 90 days delinquent, in foreclosure or REO.

The full October 2012 Shadow Inventory Report with additional charts and roll rate information is available here.

When A Foreclosure Takes Three Years

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Dealing with foreclosures remains a long and arduous process in some states. Just ask residents in New York, where according to data cited by CBS MarketWatch, a foreclosure can take up to three years.  Processing times are generally longest in states with judicial foreclosure processes, where the courts are involved in finalizing the foreclosure.

The outcome of this slow-moving process is ongoing stress for troubled homeowners and the potential to create more risk for future home buyers in certain states, MarketWatch suggested. Those risks, according to MarketWatch, come from a potential fee hike that could increase lending costs in certain states and lackluster home prices caused by a constant overhang of distressed properties.

Click here to read more in MarketWatch

Click here to see how long a foreclosure takes in your state

Significant Reduction in Shadow Inventory for the First Half of 2012

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JPMorgan Chase analysts recently reported a significant reduction in shadow inventory in the first half of 2012.  Shadow inventory is harmful and is known for creating uncertainty in the housing market. In calculating the shadow inventory, Chase researchers included troubled mortgages that haven’t been paid in at least 60 days.

In summary (for the first six-months of 2012):

  • 335,000 short sales were completed
  • 420,000 loan modifications done
  • 470,000 REO properties sold (these three combining for a 1.225 million inventory reduction)

By year end, Chase analysts stated that for the entire year of 2012:

  • REO sales would reach 950,000 foreclosed properties
  • 670,000 short sales would occur
  • 800,000 loan modifications (with short sales and loan mods being driven somewhat by the $25 billion settlement with the five largest mortgage servicers earlier this year)

Chase economists note that a 10 percent price rise in housing would reduce the current 10.8 million homes underwater to 9 million—an almost 17 percent reduction. Their analysts did acknowledge that loan modification re-defaults and new delinquencies will increase future distressed issues, though current rising prices may impact that.

What does all this data point to?  It points to a housing market that continues to improve and is on an upward tick. Are we back to peak levels?  No, but markets are improving!

Source:  Housing Wire

New Study Finds Property Condition Matters Most!

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Results from a recent study conducted by the Federal Reserve Bank of Atlanta suggest that the condition of a distressed property progressing through the foreclosure process weighs most heavily on home prices in the area, not the finality of foreclosure itself.   The negative effect on nearby home prices actually peaks before the distressed property even completes the foreclosure process.

After foreclosure, when a lender-owned property is in below-average condition, nearby houses will sell at lower prices; when it’s above average condition, nearby homes will sell at higher prices.

The study found that a property in serious delinquency for less than a year or a property foreclosed on and now owned by the bank reduces values of homes within a tenth of a mile by about 0.5% to 1%, “an amount that would most likely go unnoticed by the typical seller who does not have many distressed homeowners living nearby,” according to the report. Researchers analyzed housing information, including public records in 15 metropolitan areas, with a focus on single-family homes.

It’s assumed that the owners of the distressed properties aren’t making as much investment in their properties or are doing as much general upkeep as foreclosure looms. And that’s what’s impacting nearby prices.

“The most important take-away is the effect [on nearby home prices] starts when the property is delinquent. It’s not the foreclosure itself that is the problem,” said Paul S. Willen, an economist at the Federal Reserve Bank of Boston and co-author of the report, in an interview.

In order to minimize the effects that foreclosures have on the surrounding area, it’s best to minimize the time that a property spends in serious delinquency and in bank-owned status, the authors concluded. To do that means accelerating the foreclosure process and putting pressure on lenders to sell bank-owned properties more quickly.

To read the full report click here

Source:  Federal Reserve Bank of Atlanta