April 18, 2008 - Why Are Short Sales So Troublesome?

Short sales seem like a win-win for everyone involved, but as real estate professionals know, short sales can be hard to pull off. It can take months for the mortgage company to respond to an offer, and the lender or lenders often balk at the price.

Why doesn’t the process go more smoothly when it seems like a much better deal for everyone than foreclosure?

• Paperwork. Gathering all the information needed to evaluate a short-sale offer can take time, says Patrick Carey, an executive vice president with Wells Fargo. The loan servicer must first determine whether the homeowner really can't continue meeting the loan payments, then get an appraisal or broker's opinion of the home's value.

• Many steps, approvals. Mortgage servicers also try to ensure that the proposed sale is an "arm's length" transaction between two parties rather than something like a sale to a relative on sweet terms. They must also determine whether the buyer has sufficient funds or the ability to get a loan. If all those hurdles are cleared, the servicer may still need to get approval from the investor that owns the loan and provide an analysis showing that the investor will be better off with a short sale than with another solution.

• Complications often arise. There are additional complications if the borrower has a mortgage and a home-equity loan. In that case, both parties must approve the deal – which is a challenge when the sales price may not even be enough to cover the mortgage balance.

• Minimize delays. Carey suggests that home owners contemplating a short sale immediately call the loan servicer to get the approval process started, rather than wait for an offer.

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April 17, 2008 - Bargain Home Prices Boost Sales

In cities where housing prices have fallen dramatically, bargain hunters are swooping in and pushing sales upward.

Boston, Cleveland, Detroit, Sacramento, and San Diego have all seen sales increases recently after a period of price declines, according to a March report by Radar Logic, a real estate data and analytics firm. In Detroit, sales of homes and condos rose 12.8 percent in February compared with a year ago, according to Realcomp.

The most aggressive shoppers include investors, particularly nationally based ones who are cherry-picking single-family homes in good neighborhoods all over the country.

International buyers also see U.S. home prices as a bargain. With the dollar down against the Euro, European buyers get particularly good deals, but buyers from Asia and Canada also are active, according to international real estate practitioners.

First-time homebuyers are finding this a good time to dip toes in the water. In November 2007, 39 percent of purchasers were first-time homebuyers, according to the NATIONAL ASSOCIATION OF REALTORS®.

Source: USA Today, Stephanie Armour (04/17/2008)

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The government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender.

Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.

Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.

Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven.

Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.

Source: Washington Post Writers Group, Kenneth R. Harney (04/12/2008)

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March 11, 2008 - The article, Fed announces further steps to ease credit crunch, from MSNBC.com, reports that the Federal Reserve announced today that it is ramping up efforts to provide more relief in the spreading credit crisis by making up to $200 billion in cash available to cash-strapped financial institutions.

The Fed said it will lend the money to financial institutions for a term of 28 days, rather than overnight. The new lending initiative “is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally,” the Fed said.

The new program is called the Term Securities Lending Facility. The Fed has been working to pump billions of dollars into the banking system to aid an economy rocked by the subprime mortgage crisis and the severe tightening of credit.

Full Article

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March 9, 2008 - The article, New task for Valley agents: Consoling panicked sellers, from the Arizona Republic, reports that in today's swollen, stressed-out housing slump, about 57,000 Arizona houses are sitting on the market while sellers sit biting their nails. And real-estate agents, who once lorded over dinner companions flush with commissions, now have their hands full talking sapped sellers off the ledge.

"People call me four to five times a day - that's standard right now," says Neil Brooks, an agent with Century 21 Arizona Foothills. "I console them and I counsel them and I tell them we've got a game plan. It's the unknown - the unknown that just drives people bananas." Already, selling a house is an instrument of torture ranked with death and divorce as one of life's most stressful moments. And it's not just selling a house. It's selling the nest - a big pile of nerves, memories and money - and the nest egg, too, as a house is often a family's biggest investment.

"I still think that, deep in their souls, when (sellers) put a house on the market they expect that they're going to have people come and look at it and get offers. And you know what? That's just not happening right now. It can be 30 days or more before you even have a showing," Bryant says. "I like to think I'm an empathetic person, but it's not like I end e-mails with smiley faces right now."

Full Article

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March 7, 2008 - The article, Surprise looking for ways to reduce foreclosures, from the Arizona Republic, reports that Surprise City Councilmen John Williams and Richard Alton have brought a proposal to the City Council last week to form a citizens committee to address the foreclosure issue.

“We want to see what we can do to prevent future foreclosures,” Williams said. “And we want to answer the question, how do we deal with the current empty homes?” The Surprise City Council hopes that meeting with residents to discuss the city’s foreclosure issues will generate fresh ideas to combat the problems.

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March 6, 2008 - The article, Home equity below 50% level, from the USA TODAY, reports that home equity for the average American has dropped below 50% for the first time since World War II. The average homeowners’ equity fell to 47.9% at the end of 2007, the Federal Reserve reported last Thursday.

The drop below 50% is partly symbolic as average home equity was declining even as the housing boom approached its peak in 2005. But the new number underscores the problems for millions of Americans struggling to hang onto their homes as their mortgage rates adjust upward and their property values decline.

“Consumers are growing more cautious, first, because they are now worth less, and they know it,” said Mark Zandi, chief economist at Moody’s Economy.com. “And secondly, because they can’t borrow against their homes as aggressively as they did.” Economy.com estimates that by the end of March, 8.8 million homeowners, about 10% of homes, will have mortgage balances that equal or exceed the value of the property. The situation “is only going to get worse,” Zandi says.

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March 6, 2008 - The article, Home sales stay weak in Realtors’ report, from CNNMoney.com, reports that the number of homes under contract for sale was unchanged in January, leaving that measure of the battered real estate market just barely above the record low, according to the latest reading from the National Association of Realtors.

The Realtors' Pending Home Sales Index came in at 85.9 in the month, the same as in December, which was the second-lowest reading on record. The Pending Home Sales Index is considered a more forward-looking indicator of home sales than the same group's more closely followed existing home sales report, which tracks sales at the time of closing, typically a month or two after a sales contract is signed.

The Realtors also released an updated economic and sales outlook that now sees the sales pace and prices for existing homes during the first half of this year slightly worse than in its February estimate. But it is still sticking with a forecast of a modest turnaround in the second half of the year.

For the full year it sees a 1.2% decline in median home prices, unchanged from its earlier estimate and nearly matching the 1.4% decline posted in 2007, the first year on record that the group has seen a full-year drop in the value of existing homes sold.

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March 6, 2008 -The article, Limp housing market looks even weaker, from the Arizona Republic, reports that last Thursday saw three reports on the slumping housing market. The Fed announced that homeowner equity fell below 50 percent in the second quarter of 2007.

The Mortgage Bankers Association reported that foreclosures hit an all time high in the final quarter of last year. Also reported Thursday was that pending U.S. home sales came in below analysts expectations for January and remained at the second-lowest reading on record. The trifecta of reports illustrates a housing market caught up in a “very negative, reinforcing downward spiral,” said Mark Zandi, chief economist at Moody’s Economy.com.

Economists worry that the prolonged housing downturn has put the economy on the brink of a recession. The economy grew at an anemic 0.6 percent in the fourth quarter of 2007.

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