A Cleansing Of Sorts
The Grand Junction Daily Sentinel reports from Colorado. “Investors who plowed money into Valley Investments are hearing a deafening silence from the Grand Junction firm, which has been closed by a Denver court. The silence for those on the other side of the investments, 100 or more families who purchased homes in the Sunburst Terrace neighborhood outside Vernal, has been resounding for much longer. It’s the first home for Melissa Bishop and her husband, Kyle. The home is buckling as the ground shifts and settles because of the water from the leaks. The exterior fascia is separating, and the walls are pulling away from Melissa Bishop’s kitchen cabinets. The doors hang crookedly, and there’s a hump in her living-room floor.”
“When the Bishops bought their home, they got with it a 15-month warranty, and Bishop said she immediately began telling Valley Investments representatives about problems that cropped up. It will cost the Bishops more than $30,000 to fix all the problems that an inspector found with the home they bought for $149,000, Melissa Bishop said. ‘They did nothing until the warranty was up,’ she said, and when work was done, ‘They kind of half-assed it.’”
“Bishop, who decorated the interior of her house with a designer’s flair, said the reality of dealing with Valley Investments has fallen far short of her dreams. ‘It’s kind of a nightmare,’ Bishop said.”
The Casa Grande Dispatch from Arizona. “Recent reports show that in Casa Grande and western Pinal County, as in much of the state and nation, home sales are rising, but prices continue to fall. The number of foreclosed properties on the market now, and expected on the market soon, seems to be the driving force. ‘We’ve been told [by Fannie Mae and Freddie Mac] that there are thousands and thousands of foreclosures in the pipeline,’ said Darrah Dremler, an agent who specializes in foreclosure sales. ‘Banks are starting to price things a lot lower to clean out their inventory before this big rush hits.’”
“And that’s just the first wave, she said. Another wave is likely by early next year. ‘There were a lot of adjustable-rate mortgages sold,’ Dremler said of the period from 2003 to 2005. ‘They’ve hit the three years [before the interest rate could be raised]. They think it will start again when the five years [many ARMs had five-year terms] is up, and that starts this year. It takes about six to eight months of not being able to make payments before they get foreclosed on.’”
“Federal and state programs to stimulate sales are helping, but only to a point. ‘They’re definitely making it very enticing for people, it’s just difficult to actually qualify for that loan,’ Dremler explained. ‘We see a lot of multiple offers, but we see a lot of fallout because buyers can’t qualify.’”
“Still looking for a silver lining? It sounds as if we have to look further into the future, but there is hope. ‘It will definitely be a cleansing of sorts,’ Dremler said of what the market is going through now. Not just in getting rid of a lot of bad loans, but also weeding out some lenders and others ‘who weren’t doing the right thing.’”
The Las Vegas Business Press from Nevada. “Dropping home prices and rising unemployment are wreaking havoc on Southern Nevada’s apartment market. Local vacancy rates climbed to 8.7 percent in the first quarter, up 1.4 percentage points from last year, while asking rents dipped to $868 per month, a $22 decrease from 2008, reports Applied Analysis. A worsening economy is responsible for the market slide. Nevada’s unemployment rate climbed to a record 10.6 percent in April, 1.7 percentage points higher than the national average, reports the state Department of Employment, Training and Rehabilitation. At the end of the first quarter, there was an annual net loss of 47,900 jobs.”
“‘Even the recession of the early 1980s is beginning to look relatively mild as the current recession deepens,’ said Bill Anderson, the department’s chief economist. ‘In 1982, Nevada lost 2.4 percent of all jobs. Through the first four months of 2009, Nevada has already lost 5.7 percent of all jobs, with more losses expected as the year unfolds.’”
“‘With bank-owned properties accounting for at least three out of every four sales in Southern Nevada, foreclosures are still forcing home prices to fall,’ said Sue Naumann, president of the Greater Las Vegas Association of Realtors.”
“Back in 2000…Rosemary Murphy used her financial good standing to pay for a house the old-fashioned way. Safely employed by the Clark County School District, she secured a traditional, 30-year, fixed-rate mortgage. She’s now in trouble. And she’s a face of the next wave of foreclosures: homeowners who thought they were doing everything right but have still been overrun by the recession.”
“Murphy left her job in 2004 and, profiting from the real estate boom, refinanced her home with another conventional loan after its value skyrocketed to $800,000. She used the newfound money to launch her own mortgage brokerage business in Texas, where she and her husband owned land.”
“Murphy’s mortgage business collapsed last summer, and she has fallen behind on her $3,960 monthly payments. The bank is warning her that, come August, the foreclosure wheels will start turning. Last week it turned down her attempts to modify her loan.”
“‘I am so willing to scratch and give them every penny I have to stay in my home, but they won’t work with me,’ she said.”
“Debbie Kohl, housing coordinator for the Henderson office of Auriton Solutions, said the credit counseling agency is increasingly getting calls from homeowners like Murphy. ‘For a while every call was: ‘I have an adjustable-rate mortgage that will reset soon,’ Kohl said. ‘We’re not hearing that as often now.’”
“Many are struggling with payments that were once reasonable for their income but are a hardship now because they’re no longer getting overtime hours, are working 30 hours instead of 40 or have had some sort of furlough imposed, Kohl said. ‘We’re hearing this from all walks of life: plumbers, electricians, dentists,’ she said. ‘I talked with a dentist recently who said nobody’s coming in anymore unless it’s an emergency.’”
“In a healthy economy, a homeowner who suffered a significant loss of income would sell the house and become a renter, but in the current market there aren’t buyers at the prices owners need to get to pay off their loans. So, many are seeking loan modifications. Some, though, are finding it’s hard to get the bank to budge because any modification is predicated on income.”
“‘You have to be employed with a certain amount of cash flow. Otherwise you’re dead in the water,’ said Jaime Lopez of Neighborhood Housing Services of Southern Nevada.”
“Some holders of conventional mortgages are so underwater that they are walking away. ‘Banks make business decisions, and so do individuals. They’re coming to the conclusion that it’s worth the hit to their credit to give the house back,’ said Ian Hirsh of Fortress Credit Services in Las Vegas.”
“That’s the problem confronting Murphy. She has a limited income working as a substitute teacher but expects to be hired full time in the fall. The banks told her that’s not good enough, she said. ‘They said I don’t earn enough money to get a modification. That’s the stupidest thing I ever heard. That’s why you need a loan modification,’ she said.”
“Michael Joe of the Legal Aid Center of Southern Nevada said last week he talked with a homeowner who said he could rent a house across the street exactly like the one he owns for $1,000 a month less than his mortgage payments — leading him to wonder whether it’s worth hanging onto the house.”
“A foreclosure will affect your credit for seven years, but Hirsch said as people feel trapped in their houses they are becoming less and less concerned with credit ratings. A foreclosure hit on a credit report in 2008 or 2009 ‘won’t be all that uncommon and certainly not the end of the world for their credit,’ he said. ‘In a couple of years it will almost be something that is a satisfactory explanation in and of itself: What happened to their credit? Oh, they owned a house in Las Vegas.’”
