Not looking so good for the US housing market, there are still a ton of foreclosures coming in the next few months..

It’s a bit like guessing how many pennies are in a gallon jug at the state fair, but housing analysts keep trying to count how many foreclosed homes banks and mortgage investors own.

Why should we care? Unlike at the state fair, there is no prize for guessing right. Still, if we can track the number of these REO (“real estate owned”) homes, we can get some sense of how banks and others are doing in their efforts to dispose of the properties and how much longer they will be weighing on the housing market.

The good news is that two of the leading contenders in this guesstimating game–Tom Lawler, an independent housing economist and gentleman farmer in Leesburg, Va., and Robert Tayon, an analyst at Barclays Capital in New York–have been comparing their methods recently and learning from each other. Both are in the same ballpark and both say the REO count is on the rise.

Mr. Lawler estimates there were 574,000 one- to four-family REO homes at the end of the first quarter, up from 518,000 at the end of 2009 but well below a peak of 668,000 in the third quarter of 2008. More modest (honest?) than most economists, Mr. Lawler describes his estimates as “crude” and “a work in progress.” He figures his tally is too low–he can’t find good data on all of the thousands of REO owners– but still “indicative” of the trend.

Mr. Tayon of Barclays estimates that REOs totaled 522,000 in March, up from 479,000 at the end of 2009 but below the peak of 688,000 in September 2008.

After soaring in 2008, the REO total shrank for most of 2009 as foreclosure-prevention efforts slowed the flow of defaulted loans toward resolution and investors rushed to buy what they saw as bargains in hard-hit areas such as Phoenix and Las Vegas. Now, as banks and other loan servicers work their way through the backlog of loan-modification applicants and reject many of them, the REO count is rising again. Mr. Tayon expects it to peak at 538,000 in August 2011 before starting to decline gradually.

Fannie Mae and Freddie Mac, two of the biggest holders of REO, both expect their REO inventories to increase in the next few quarters, Mr. Lawler says.

The expected rise in REO supply will “challenge” housing markets in areas with high concentrations of foreclosures, Mr. Lawler adds. But he doesn’t think the effect on prices will be as severe as it was in late 2008 and early 2009, when loan servicers dumped huge amounts of property on the market.

There are still plenty of struggling borrowers at risk of losing their homes. The Mortgage Bankers Association, a trade group, last week reported that 14% of mortgage loans on one-to-four-unit homes were 30 days or more delinquent or in the foreclosure process as of March 31. That represents about 7.3 million households. The rate was 12% a year earlier. At the same time, fewer people have fallen behind in recent months as the economy has improved.

Those who want to guess how many REOs will be in the jug two years from now will have to take a view on whether the economy is going to produce enough jobs to create demand for all those houses.

via More Bank-Owned Homes Likely to Hit the Market – Developments – WSJ.

Great information, I have been looking for actual numbers on how your credit is affected.

NEW YORK (CNNMoney.com) — If you’re delinquent on your mortgage, your credit score will suffer. Everyone knows that. The question is, by how much?

Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.

Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.

Here are the average hit your credit will take:

30 days late: 40 – 110 points

90 days late: 70 – 135 points

Foreclosure, short sale or deed-in-lieu: 85 – 160

Bankruptcy: 130 – 240

To come to these figures, Fair Isaac created two hypothetical consumers, one who starts out with a fair-to-middling score of 680 and the other with a very good one of 780. (FICO scores range from 300 to 850.)

The hypothetical person with the 780 FICO has 10 credit accounts versus six for the 580, plus a longer credit history, lower utilization of total credit limit and no missed payments on any account. The other consumer has two slightly damaged accounts. Neither have any accounts in collection or adverse public records.

See the chart above to see how each scenario affected each borrower.

Notice that for both borrowers a single one-time black mark results in steep drops, but it is when they fall further behind that things get really harsh, according to Craig Watts, a spokesman for Fair Isaac.

“The lending industry tends to regard an account differently when it has become 90 or more days late,” he said, “The likelihood that consumers will resume paying their overdue obligations drops off significantly after the delinquencies have reached 90 days.”

One reason credit companies were so closed-mouthed is that they often can’t definitively state how much each delinquencies will affect scores because there are too many variables.

Some borrowers will fall much more steeply than others for the same payment problem, according to Maxine Sweet, vice president for public education at Experian, one of the nation’s main credit bureaus.

“If you picture someone who has just one mortgage and one other credit account versus a mature credit user like me with 15 accounts, if they miss one payment that would impact their scores a lot more,” she said. “For me, one missed payment would just be a blip.”

The point loss also depends on the borrower’s starting point: People with very high credit scores have more to lose than low-score borrowers; the impact of a single blemish on an 800 score is more than on a 500.

Of course, it just gets worse when you face foreclosure.

Mortgage borrowers can lose their homes three basic ways: a foreclosure; a short sale, where the home is sold for less than than is owed and the bank (generally) forgives the difference; or a deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.

Sweet said credit bureaus generally slash scores equally for those three resolutions to someone losing their home. The important factor, she said, is that “it’s reported that you paid less on a settled account.”

Some borrowers may think that because they never missed a payment, they can “walk away” from their homes with relatively little impact on scores. Not true. “When a deed-in-lieu or short sale is reported as a partial payment, it’s treated as a serious delinquency,” Watts said, “just like a foreclosure.”

Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 for the 780 score.

Mortgage debt, combined with other financial problems, can send borrowers into bankruptcy, the worst thing that can happen to your credit score.

The effects are long-lasting, according to Sweet. In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.
It’s gonna cost you
Absorbing a big credit-score hit can make many transactions more costly. It’s not just paying more for credit card debt and auto loans, insurance can cost more as well.

The average savings for someone with a good versus mediocre credit score is about $115 a year for auto insurance and $60 for home, according to Loretta Sorters, of the Insurance Information Institute.

A low credit score can even make it harder to rent a home because landlords often use credit scores to weed out prospective renters.

Despite the problems a poor credit score can cause, Experian’s Sweet recommends that people who are in financial dead ends, like totally unaffordable mortgages, it’s better to recognize that and cut your losses quickly; don’t prolong the problem.

“You need to do what you need to do to get your finances back in order,” she said. “Don’t worry about your credit score.

How foreclosure impacts your credit score – Apr. 22, 2010.

We met last night and discussed some of the issues that are affecting our industry. HUD is constantly at war with us it appears, and it is a little give, then get. Apparently last Friday they removed the ability to get two appraisals to skip over the 20% profit rule. For those not familiar with this, you are able to make over 20% profit on a home (this is the purchase price to the sales price) if you

1. Can provide all the receipts for the repairs (actual invoices not fake stuff) or
2. You can have two separate FHA appraisals if they both come in OK for value

The lastest we have heard from our mortgage officer is the receipts no longer count towards this. Even if you provide receipts, you cannot make more than 20% on the home. This does not include the re-habs costs any longer and the two appraisals do not skip over that rule.

Basically this now means we have to go back to the 90 day rule, they have lifted the ban but in effect have removed the ability for the fix/flip community to do any fixing in any short amount of time. There are few cases where you can purchase a home and sell it for less than 20% without re-hab.Those of us who use hard money loans (private financing) to finance the deals must now count on either a four to six month sales cycle, or find some other type of loan product such as conventional financing or VA.

Please tell me if this isn’t the case or lets figure out a way around it..

-Vince

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While foreclosures in the U.S. were down 2 percent in February from January, Arizona posted a drop of nearly 21 percent.

Still, Irvine, Calif.-based RealtyTrac puts the state in the No. 2 spot national behind only Nevada for homes in the foreclosure process. That includes default notices, scheduled auctions and bank repossessions.

Arizona had 16,718 homes in foreclosure last month, or one out of every 163 residences, according to RealtyTrac. Nevada had a total of 11,035, representing one in 102 properties.

In addition to showing a decline from January, the Arizona number represents a 7.7 drop from February of 2009. Nationally the year-over-year rate was up 6.2 percent.

“The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac. “This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity — albeit at a historically high level that will likely continue for an extended period,” he said. “In addition, severe winter weather appears to have temporarily slowed the processing of foreclosure records in some Northeastern and Mid-Atlantic states.”

AZ forecloses drop 21% Jan. to Feb. – Phoenix Business Journal:.

People are going to keep losing homes throughout 2009 and into 2010.

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NEW YORK � The rate at which people are falling behind on their mortgage payments went up for the ninth straight quarter in the first three months of 2009, and is expected to keep rising through the end of the year, according to credit reporting agency TransUnion.

Borrowers who were 60 days or more behind on their mortgage payments rose to 5.22 percent for the first three months of the year, TransUnion said. That’s 62 percent higher than the 3.23 percent delinquency rate for the first quarter of 2008.

The TransUnion numbers show a smaller percentage of people behind on their payments than recently released data from the Mortgage Bankers Association, which said 12 percent of mortgage holders were past due in the first quarter.

TransUnion tracks delinquencies based on two skipped payments because that’s a strong predictor of foreclosure, said Keith Carson, a senior consultant in TransUnion’s financial services group.

“The reality is if you send in your mortgage payment and it’s four days late, that’s past due,” he said. “The 60-day number we feel is more significant.

“Coming up with two house payments at once is pretty difficult for most families,” Carson said.

Nevada, Florida, Arizona and California continue to be the hardest-hit states, while North Dakota and South Dakota, Alaska and Wyoming remain the states with the lowest delinquency rates.

If there is any positive news coming out of TransUnion data for the first quarter, Carson said it’s that the rate of increase for mortgage delinquencies is slowing. Combined with a big jump in consumer confidence last month, there are some signs things are improving.

However, he said if unemployment continues to rise, another wave of mortgage problems could follow.

TransUnion currently predicts that about 7 percent of mortgages will be at least two months behind payments by the end of the year.

While delinquencies rose in the first quarter, so did the average amount of mortgage debt per borrower, Trans-

Union data showed. The average reached $195,500, up about 2 percent from $191,917 last year. That may reflect people taking advantage of the depressed market to upgrade to larger homes, he said, along with seasonal shifts.

TransUnion delinquency data is culled from its database of 27 million consumer records.

Real Estate | Mortgage delinquencies expected to keep rising | Seattle Times Newspaper.

They are trying to find a better way, they are going to pay companies that accept short sales. The catch is that is has to be listed with a realtor, but it doesn’t say if the realtor has to do the short sale, so a 3rd party can..

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WASHINGTON – The Obama administration unveiled new programs Thursday designed to make it easier for homeowners who owe far more than their houses are now worth to sell those homes at a loss and have their remaining debt forgiven.

The programs, announced by Treasury Secretary Timothy Geithner, are the latest additions to Making Home Affordable, an evolving $75 billion plan that tries to break the national housing crisis into separate pieces, attacking the problem on several fronts.

The first two legs of the program sought to help borrowers refinance into today’s low mortgage rates, or if they’re behind on payments, to seek loan modifications to avoid foreclosure.

President Barack Obama described these steps at a town-hall meeting in Albuquerque on Thursday: “The bank has to lose a little bit of money on what they were expecting on principal and interest. On the other hand, the homeowner, if they make this agreement with the bank, they’ve got to agree that when prices start going up again, they give up a little bit of equity to repay the bank. But either way, everybody is better off, including the community, if people stay in their homes.”

Thursday’s announcements address situations in which borrowers can’t qualify for either of those programs and are at risk of losing their homes. The administration will now provide additional financial incentives to lenders willing to help homeowners unload their properties at a loss when they owe much more than the present-day value of their homes.

The incentives apply to lenders who agree to allow homeowners to conduct short sales or deed-in-lieu transactions instead of going into foreclosure and dragging down prices for neighbors and adding to the already large national inventory of empty homes.

In a short sale, borrowers sell their home at current market value and all proceeds go to the lender. The homeowner is then no longer responsible for the difference between what is owed and the home’s sale price. There’s still a hit to a borrower’s credit rating but not as damaging as it would be in a foreclosure.

When there are no buyers, lenders sometimes accept a deal in which the borrower transfers ownership of the property to the loan servicer, who acts as a bill collector for investors who own pools of U.S. mortgages. This sort of deal is shorthanded as a deed-in-lieu of foreclosure, or deed-in-lieu.

Under the new plan, servicers will receive compensation of up to $1,000 per short sale or deed-in-lieu transfer accepted. As an incentive to avoid foreclosure, borrowers could be paid up to $1,500 in relocation expenses. Because many homes have second mortgages, the Treasury will pay lenders up to $1,000 to accept the deals instead of going to foreclosure.

Borrowers will get 90 days to achieve a short sale and must list it with a licensed real-estate agent. Borrowers in areas of severe market downturn – such as Arizona, California, Nevada and Florida – will get up to a year to reach a short sale. After that, deed-in-lieu transfers occur.

To discourage borrowers from simply unloading their homes, they must first be deemed unable to get a loan modification. The program is voluntary for most lenders but mandatory for banks that received taxpayer-bailout money.

For homeowners in states where home prices have fallen sharply, the administration also rolled out Thursday a complex insurance program that will protect lenders from further home-price declines when they are willing to modify loans. That program is capped at $10 billion.

The cost of all these new programs will be paid from a $50 billion pool of taxpayer bailout money set aside to address the housing crisis.

Experts welcomed Thursday’s initiative.

“We have heard from Realtors that the extensive delay in the short-sale process had caused many buyers to go elsewhere and have left many would-be sellers with no option but foreclosure,” Charles McMillan, a Dallas Realtor and president of the National Association of Realtors, said in a statement. “We are all pleased that the government has stepped in to help homeowners and those wishing to buy a home.”

Rick Sharga, senior vice president of RealtyTrac, a foreclosure-research firm in Irvine, Calif., said the effort will face hurdles, however.

“A lot of the investor-owned loans have (private mortgage) insurance. From the investors’ perspective, they’re going to be better off foreclosing, collecting the insurance, then disposing of the property,” he said. “Short sales, unfortunately, are a 20th-century solution to a 21st-century problem.”

RealtyTrac publishes widely cited foreclosure statistics. Its latest findings, as of April, showed more than 1 million property owners currently in foreclosure proceedings.

“It’s actually a fraction of what’s out there, and that doesn’t even get to the seriously delinquent loans that aren’t in foreclosure,” Sharga said.

The deed-in-lieu may prove more successful, he said, because some areas with severe home-price drops have many homeowners who owe significantly more than their homes are worth.

Relief expanded for struggling homeowners.

On March 4, 2009, guidelines were released under President Barack Obama’s Making Home Affordable initiative, which is designed to help up to 9 million homeowners stay in their homes through refinanced mortgages or loan modifications.

To qualify, you must:

• Owe between 80-105% of your mortgage. An analysis of Zillow Q4 Real Estate Market Reports shows that 26% of mortgage holders, or 14.8 million homeowners, currently qualify to refinance under these specifications. One quarter (24.6%) of homeowners with mortgages (14 million) do not qualify because they are underwater and owe more than 105% of their home’s value. This is especially true in hard-hit areas of California or Florida, where home values have fallen 40% or more since the peak.
• Have a loan backed by Fannie Mae or Freddie Mac. Approximately 60% of single-family loans are backed by Fannie or Freddie, but a homeowner may not know this about their own loan. If you don’t know, call Fannie at 1-800-7FANNIE and Freddie at 1-800-FREDDIE or submit online forms with Fannie and Freddie.
• Have a conforming loan. That means a loan under $417,000 in many areas or up to $625,500 in high-cost areas like San Francisco, Boston or Washington, DC. Even still, the Zillow Home Value Index (median home value) for the city of San Francisco is $724,244, which says that lots of people have loans higher than the conforming limit. (Note: the conforming loan limit for certain high-cost areas of the U.S. for 2009 mortgage originations is now $729,500.)

Refinance, Home Loan Refinance – Zillow.

Phoenix takes biggest hit in home price index – Phoenix Business Journal:.

Resolved, That it is the sense of the House of Representatives that–

• (1) the President of the United States should declare a national residential mortgage foreclosure emergency and, through such declaration, encourage the States, by use of their police power, to enact a moratorium on residential mortgage foreclosures similar to the moratorium enacted by the State of Minnesota in 1933 and upheld by the Supreme Court of the United States in Home Building & Loan Association v. Blaisdell (290 U.S. 398 (1934)); and

• (2) the States should exercise such power and enact such a moratorium.

http://thomas.loc.gov/cgi-bin/query/z?c111:H.RES.181:

Phoenix ZIP codes tell the story of 2008.