A Closet Full Of Wild Cards
Readers suggested a topic on lender owned houses. “What are the dynamics of the bank’s decision to keep a house off market? I’d like to explore the underlying factors that go into a bank’s choice of when to sell a house it owns. Particularly, I’d like to try to quantify these things using parameters and various functional forms to explore possible futures.”
“For example, keeping a loss off its books today might be beneficial even given that depreciation is occurring. However, at some point it could deteriorate to 0 (no upkeep) and eventually the bank will have to realize the loss and then it’s obvious that waiting forever is not the optimal strategy. There is some point in between where it makes the most sense to sell.”
A reply, “If you want to try to fathom insanity, be my guest. The joke’s on us. There are NO logical reasons for any of what’s been taking place. We keep looking for them, but they don’t exist. There used to be, but those days are gone.”
Another said, “They’ll sell when Greece defaults.”
The Wall Street Journal. “Past failures haven’t deterred new attempts to clear the glut of foreclosures weighing heavily on the balance sheets of both banks and the federal government. A Senate subcommittee met in Washington for a hearing to discuss and debate some these new ideas. The hearing was prompted, in part, by the Obama administration asking investors for ideas on how to turn thousands of foreclosed homes owned by the government into rentals.”
“Bob Nielsen, chairman of the National Association of Home Builders urged the GSE’s to avoid a ‘fire sale’ of foreclosed properties so as not to depress prices further. The builders also urged converting foreclosures into rentals in a way that doesn’t concentrate rental properties in to close clusters. The builders also urged a host of modifications to federal programs, including FHA-backed financing, the USDA Rural Development program and the Neighborhood Stabilization Program to be more open to investors. The builders also advocate a lease-to-own scheme.”
The Bay State Banner. “People who have lost their jobs or homes during Obama’s presidency nonetheless say they want him to succeed and, what’s more, they’re working to help re-elect him because of the affinity they feel for him. Democrats acknowledge it could be even worse if not for the high marks Obama gets for who he is compared with the low marks for what he does.”
“‘There are a lot of people out there who like the president, who think he is a good, decent person who is trying hard. They may have issues about the economy. They may have issues about the direction of the country. But there are a lot of voters out there who are giving him the benefit of the doubt,’ said Mo Elleithee, a Democratic strategist in Washington. ‘Heading into the election year being well-liked puts him in a good position as he begins to make the contrast with the other side.’”
“Heather Barr of Phoenix, a 41-year-old real estate agent in Arizona, didn’t volunteer for Obama in 2008. But seeing the housing collapse up close compelled her to get involved this time. She lost her home a month ago and is living in an apartment. She doesn’t blame Obama but rather is giving him the benefit of the doubt. Said Barr: ‘I know things aren’t great. People are concerned, obviously. But what I hear is, people want to give the president more time.’”
The Detroit News. “Greenpath, a nonprofit in Farmington Hills, offers pre-bankruptcy counseling, along with foreclosure prevention and debt counseling. Last year, Michigan had more than 50,000 bankruptcy filings and has already racked up more than 30,000 this year. The rate of foreclosures in the state appears to have improved, but hundreds of thousands of homeowners are still defaulting on their loans.”
“In August 2010, 14 months after the recession technically ended, more than 338,000 homeowners were in some stage of default on their mortgages. If there’s any real slowdown in foreclosures, it’s not showing up at Greenpath. ‘Bankruptcy is down a little bit, and we’re starting to see a little bit of increase in debt counseling,’ said Diane Reichel, who manages financial counseling for Greenpath. ‘But housing counseling has been pretty steady for the last couple of years.’”
The Sun Sentinel. “Q: I own an investment property that I have stopped paying on. I have one mortgage on the property. Recently, the lender filed a lawsuit against me to collect on the note, but it is not trying to take the property back in foreclosure. I have money in the bank and other assets. I called the lender, and it doesn’t really want the property back. I am afraid that the bank will come after my other assets. Can it? – Anonymous.”
“A: Yes. This is getting to be a much more common trend. First mortgage lenders are starting to decide that they really do not want the responsibility of owning the property, especially if it has a low value or is in disrepair. Second mortgage lenders realize that even if they foreclose the property, the first mortgage lender is going to get all of the proceeds from the foreclosure sale, leaving the second mortgage holder with little more than a legal bill.”
“After the lender wins the lawsuit on the promissory note, it will get a judgment that it can execute against your other property, your bank accounts and even your wages. Plus, it still has the mortgage lien against the original property, so it can go back and take that at a later date if it decides to.”
The Bakersfield Californian. “The Central Valley, with its high foreclosure rates, has a massive shadow inventory that homeowners and real estate professionals worry will eventually push down prices, but so far that hasn’t happened. Thus far, banks have been selling off foreclosed properties slowly because they know that dumping them on the market all at once would have a catastrophic impact on prices. But there’s still a ton of inventory to get rid of. In Kern County, more than half of sales are distressed in some way, either sold by a lender that has foreclosed or sold short by the owner.”
“Bakersfield real estate agent Bobby Moreno of Coldwell Banker said the supply of single-family homes in the Bakersfield area is actually down from last year, which is holding prices steady. Moreno said he expects foreclosures to spike again locally as banks try to clear out excessive bad loans. ‘I think supply is expected to go up in the first quarter of 2012, but there should be enough first-time homebuyers to absorb that increase, because that’s the price range we’re looking at,’ he said.”
“Bakersfield’s disproportionate number of lender-owned houses may be helping insulate the local real estate market from price fluctuation. That was the assessment of two California Association of Realtors economists, who on issued the group’s annual California housing market forecast.”
“Banks have been selling off their considerable inventory of foreclosed homes slowly in Kern County and other areas with high foreclosure rates, and that has helped to stabilize prices in regions hardest hit by the real estate crash, said deputy chief economist Robert Kleinhenz. ‘You’re probably going to see more price stability in those areas than some of the other areas with more equity sales,’ he said.”
“‘We have a market that is moving forward very sluggishly, bouncing along the bottom with the understanding that there’s a whole closet full of wild cards that could change things,’ said the association’s chief economist, Leslie Appleton-Young.”
“One of the biggest factors is the unemployment rate, which is holding back the entire state but is especially pronounced in the Central Valley, where so much job growth was tied to real estate and construction. That situation isn’t likely to change any time soon, Appleton-Young said. Kern County’s unemployment rate was 14.4 percent in August, compared with 11.9 percent statewide and 9.1 percent nationally.”
The Visalia Delta. “Realtors said the biggest home sale activity in the county is the sale of homes in foreclosure or short sales, and consumers in the middle-income bracket looking for a home rather than an investment toward accruing wealth. And homes in the $200,000 range in Tulare County are ’selling like hotcakes,’ Lane Fye, community relations director of Century 21 Jordan, Link and Company.”
“Veteran Visalia broker/owner Judi Pirnstill said it’s the equity housing on the local scene that is sluggish. ‘Most, in order to get out of them without going to a short sale or foreclosure, have to offer a price a lot of people aren’t willing to pay.’ Pirnstill said.”
“She said older people who want to downsize in the area want to wait until they get a better price for their house, but really gain nothing.”
The Hi-Desert Star. “Bonnie and Matt Hughes, recently featured in a segment of NBC’s Today Show, are struggling to stay positive in the face of their personal financial meltdown. The family of five is losing the home they purchased in 2009 to foreclosure. Bonnie says she and Matt tried to get their mortgage adjusted, but ended up getting scammed by an illegitimate company for $2,000, with no outcome. When they consulted an attorney, Bonnie said, they spent the rest of their savings to get nowhere. Two agencies told the couple their farm loan could not be modified.”
“Coincidentally, the home’s previous owners were also foreclosed on, which is why the couple decided to purchase the house just two years ago. ‘We were both working. We had one kid and everything was great when we bought our house,’ Bonnie.”
“Bonnie has been unemployed since 2009. Faced with mounting debt, including medical bills, the couple filed for bankruptcy this year. ‘Even not having made our mortgage payment in awhile, we’re still not getting by,’ Bonnie explained.”
