Bargain Foreclosure Homes

Last month, foreclosure filings were initiated by lenders on 576 households in Manatee County Circuit Court. The figures represented an increase from 497 filings for foreclose houses recorded in the county in June.

The development ended a three-month trend of dropping foreclosure filings in Manatee and dashed the hopes of industry experts who were looking forward for the easing of the foreclosure crisis.

The July totals were the second highest monthly figures reported in the county. Meanwhile, industry experts are hoping the spike in July filings was just a flash in the pan.

According to market data, local foreclosure filings started rising steadily in the latter months of 2006 and reached their peak last March with 608. The following month saw a decline in foreclosure filings through June.

But industry experts said that despite the drop in foreclosure filings from April to June, the numbers remained 20 percent higher than the previous year’s record pace. Overall, lenders initiated 3,769 repossession actions until the end of July.

Industry analysts blamed several factors for the increase in July’s foreclosure filings, including the rising unemployment rate, falling home values, resetting of adjustable rate mortgages and expiration of foreclosure moratoriums.

Meanwhile, industry analysts have observed a growing number of distressed homeowners who seek to refinance their loans on properties with values less than the total amount they owed for their mortgages. They said that many homeowners who could not find refinancing opted to walk away from their distressed properties and let their lenders foreclosed on them.

Analysts said that many homeowners do not want to spend more money on properties that have lost their value, thus adding to the growing foreclosure rate in the county. They conceded that property values are so low that many homeowners would find it difficult to recover their investments, preferring to give them up.

Additionally, analysts cited pay reductions and high unemployment rate as factors that further fuel the foreclosure crisis. Moreover, the unwillingness of lenders to work with troubled borrowers and the lackluster performance of the foreclosure prevention program of the federal government added to the reasons why foreclosure continues to spread not just in the county but in many parts of the country.

And while the foreclosure problem started with low-income borrowers of subprime loans, it has now grown to include creditworthy and affluent homeowners.

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Thousands of homeowners are taking advantage of the Obama Administration’s Making Home Affordable program. Under the foreclosed home prevention program, participating mortgage lenders are required to modify loans for all eligible homeowners to help them avoid foreclosures. All borrowers except those with loan contracts that prohibit modifications.

According to industry experts, one out of eight homeowners has a loan that is part of a package of mortgage-backed security. Experts explained that many loans are bundled together and then sold to investors.

They claimed that complex rules covering mortgage-backed securities created lack of accountability which leaves many homeowners in a very disadvantageous position. This means that homeowners who have securitized mortgage loans have no other recourse once investors refused to allow a modification.

A report stated that mortgage companies participating in the foreclosure prevention program are lagging behind in their modifications. Federal Housing Finance Agency director James Lockhart specifically pointed out securitized mortgages as the most challenging aspect of the program.

According to industry analysts, mortgage servicers have blamed agreements with investors for preventing loan modifications. They added that borrowers whose loans were part of mortgage-backed securities have five times greater risk of missing on their payments compared with other homeowners.

Subprime mortgage loans are a part of the securitized mortgage market. According to market data, almost 50 percent of subprime loan borrowers were actually eligible for prime loans. When subprime loan borrowers decided to refinance, most of them were not informed that their mortgage would be sold by the first lender to a second lender who will then bundle the loans into mortgage-backed securities.

The identities of investors who purchase mortgage-backed securities are not publicly disclosed. But industry analysts said that many of these investors are foreign governments, college endowments, pension funds and 401(k).

They added that one mortgage-backed security could have one or more institutional investors who in turn represent thousands of individual investors and pensioners.

Mortgage servicers such as Wells Fargo rely on their agreements with investors for loan modification guidance. According to analysts, the pooling and servicing agreements (PSA) between mortgage servicers and investors are the common reason why a lender cannot modify a troubled loan.

Furthermore, mortgage servicers are concerned that if they overmodified mortgage loans, they could be sued by investors. The federal government has tried to eliminate some legal barriers to loan modification, but so far, challenges in changing securitized mortgages persist.

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The cities of San Francisco and Portland are among U.S. cities improving in home price levels, based on real estate sales data in June.

In San Francisco, the median home sales price for a single-family house increased in June by 3.3 percent compared to the previous month of May. This marked the third straight month that the median sales price increased and also marked a 28.6-percent rise over the first 6 months of the year.

However, according to real estate analysts in the area including Rosen Consulting Group, San Francisco remains sluggish in its overall home sales performance. Major reasons were the continued rise in unemployment and the difficulty in obtaining home loans.

But there are improvements in sales of single-family homes in June, as home buyers were able to reduce the inventory of single-family houses from 847 units last October to 710 units in June.

The number of contracts to purchase single-family houses increased in June to 255 units, an increase of more than twofold from the 104 contracts in December 2008.

Ilse Cordoni said real estate professionals in San Francisco expect house prices to keep on improving as the volume of distressed properties decline and as affordability levels improve.

In the meantime, median sales price in Portland also increased in May despite the lack of improvement in home sales in the city in 15 years.

The median home sales price in Portland increased in June to $247,960, an increase of 2.1 percent from May and an almost 13-percent drop from the median price level in June last year.

Sales of new and pre-owned houses and condos increased in June to 3,088 units, a substantial increase of 25.3 percent from May but a 5.8-percent drop from June 2008.

The year-over-year decline in June marked the 40th straight month that home sales declined, but sales of single-family houses rose slightly by 0.5 percent compared to June 2008, marking the first time that single-family sales increased based on year-over-year comparison since February 2006.

Sales of new homes, meanwhile, declined by 32 percent compared to June last year, posting only 424 units of new homes sold.

In addition, the percentage of foreclosed homes for sale in Portland in June decreased, with foreclosures comprising only 16.4 percent of all home resales. The rate of foreclosure sales dropped from the 17.2-percent share in May.

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