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…

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

California Lawmakers Pass Historic Foreclosure Protections

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California lawmakers recently have passed legislation that would provide homeowners with some of the nation’s strongest protections from foreclosure and practices such as seizing a home while the owner is negotiating to lower mortgage payments.

The legislation would make California the first state to prohibit lenders from “dual tracking,” the practice of negotiating with clients to modify a mortgage so that payments become more affordable while simultaneously pursuing foreclosure. In such cases, homeowners can wind up being evicted even though they had been working with the bank to modify their loans.

Here are key provisions in California’s homeowner protection bill, which writes into state law the national mortgage settlement reached with five top lenders, and expands it to all mortgages:

  •  Lets homeowners sue mortgage providers if they violate state law, but only if there is a significant violation. Homeowners could ask judges to halt pending foreclosures but could collect monetary damages only if the foreclosure took place.
  • Requires lenders to provide a single point of contact for borrowers who want to discuss foreclosures or refinancing, with an exemption for lenders that process fewer than 175 foreclosures per year.
  • Bans what are known as “dual-track foreclosures” by barring lenders from filing notices of default, notices of sale, or conducting trustees’ sales while they are also considering alternatives to foreclosures like loan modifications or short sales.
  • Increases penalties for banks that sign off on foreclosures without properly reviewing the documentation, a process known as robo-signing.

The new California could have national implications.  It is expected to become a catalyst not only for a recovery of California’s real estate market, but a catalyst across the nation as borrowers everywhere begin to demand the same protections given to California borrowers.

Shadow Inventory Drops to 3 Year Low

Nationally, shadow inventory fell to it’s lowest level in 3 years in April, according to a report from real estate data aggregator CoreLogic.

Shadow inventory was down 14.8 percent year over year in April to 1.5 million units. That’s a four-month supply, down from six months in April 2011 and about the same level as in October 2008.

“Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent. The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices,” said Mark Fleming, CoreLogic’s chief economist, in a statement.

“This is one of the reasons why some markets that were formerly identified as distressed, are now experiencing price increases.”

CoreLogic defines shadow inventory as properties seriously delinquent by 90 days or more, in the foreclosure process, and those that have finished the foreclosure process and become REO (real estate owned) but have not yet been listed for sale.

The dollar volume of shadow inventory fell about 9 percent in April, to $246 billion — a three-year low. Of the 1.5 million units comprising the nation’s shadow inventory, 720,000 are seriously delinquent, 410,000 are in some stage of foreclosure, and 390,000 are unlisted REOs, CoreLogic said.

Delinquencies fell most in Arizona (-37 percent), California (-28 percent), Nevada (-27.4 percent), Michigan (-23.7 percent) and Minnesota (-18.1 percent), CoreLogic said.

National Foreclosure Settlement Update

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After more than a year of wrangling the nation’s five largest banks have reached an agreement to settle charges of abusive and negligent foreclosure practices. The initial complaint was brought forth by a group of state’s attorney generals who claimed banks lost important paperwork and enlisted robo-signers to attest to facts on hundreds of documents a day. The unprecedented joint agreement is the largest federal-state civil settlement ever obtained.

The settlement provides up to $25 billion in relief to distressed borrowers who may have been affected and directs payments to states and the federal government. The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments.  Unfortunately, not included in the deal are mortgages owned or backed by Fannie Mae and Freddie Mac.

Key components of the settlement are listed below and no doubt will have an impact on the supply of foreclosure inventory in the future.

• The settlement also prohibits robo-signing, improper documentation and lost paperwork. Banks must review foreclosure documents individually as the law requires. Financial institutions must communicate with mortgage holders, reducing delays in the loan-modification process.

• The agreement makes foreclosure the last resort by requiring servicers to evaluate homeowners for other loss mitigation.

• Banks will be restricted from foreclosing while the homeowner is being considered for a loan modification.

The entire settlement document is now available online for review and can be accessed by clicking here. Feel free to forward our post to anyone you think may benefit from the settlement.