January 7, 2014

Accepting Lower Prices And Ponying Up The Difference

The Fayetteville Observer reports from North Carolina. “After a dismal 2012, home sales in the Fayetteville area improved significantly in 2013, according to people in the real estate business. ‘We’ll probably never see 2006 and 2007 again,’ said Greg West, president of Westan Homes, referring to past booming sales years. ‘But 2012 was bad; 2013 was better.’”

“Sales of existing homes picked up in 2013 after declining for several years. Brokers said some sellers have given up on waiting for their home’s value to rise enough to cover the costs they have in the property and are accepting lower prices and ponying up the difference in order to move on. ‘They’re taking their losses,’ said David Evans of Manning Realty. ‘It’s finally sinking in.’”

The News & Observer in North Carolina. “William Van O’Neal, a 57-year-old truck driver from Garner, was laid off from his job last January. He received an unemployment check for six months, but when “the money ran out,” he had to scramble to take care of his family. O’Neal, who is raising three children – ages 7, 11 and 17 – had worked for the same company for 17 years when he lost his job. He looked for other work while on unemployment without luck.”

“With money running out and his home in jeopardy of being foreclosed on, he turned to Triangle Family Services for financial counseling. With their help, O’Neal was able to get help with his mortgage and save his three-bedroom, two-bathroom home. He also learned how to pare expenses (the cable was among things to go) and ask for help. He now receives food stamps, and his children are on Medicaid.”

“Now to make ends meet, he relies on landscaping jobs around the Triangle and would like to be able to start his own landscaping business, but his credit – hurt by his unemployment – isn’t good enough to let him buy the needed equipment. Rick Miller-Haraway, regional director for Catholic Charities for Wake County, doesn’t see much relief coming in the new year. ‘It’s not going to change. We have an economy that has replaced good paying jobs with low paying jobs.’”

The Aquarian Weekly on North Carolina. “The housing crisis of 2008 wiped out a staggering amount of wealth, especially among minority and low-income Americans. While this was going on, Wall Street hedge funds, such as the Blackstone Group were busy buying up the foreclosed homes, often outbidding families that qualified for traditional financing, because they were able to pay cash up front for the property, and turning those homes into rental properties.”

“Two occurrences—violently increased police presence and aggressive acquisition of foreclosed properties at the expense of actual families—were not unrelated. In Charlotte, NC—where Blackstone has purchased over 2,000 homes—this manifested in a curious new strategy by local police. A friend who grew up in the southwest part of the city, where the foreclosure crisis hit like a jackhammer, described how police on dirt bikes started appearing out of nowhere. ‘It was like they were trying to clear the place out,’ he said.”

The Herald Mail in Maryland. “Although property assessments have increased in some areas of Maryland, home values in Hagerstown and some nearby areas have decreased by an average of 5.6 percent since they were last assessed three years ago, according to the Maryland Department of Assessments and Taxation. The lower assessments are ‘bad in a number of ways,’ Hagerstown homeowner Brett Wilson said. ‘First, for the city, it’s getting less revenues.’”

“For property owners wishing to sell their homes or commercial properties, it means they will get less value, Wilson said. The value of a property in some cases will be less than what a person or company paid for it, especially if they purchased it in the past few years when the housing market collapsed, he said. While home sales have been up recently, Wilson said he thinks that is bad, if prices are down. ‘It’s indicative of people fleeing the city because they don’t believe it is headed in the right direction,’ Wilson said.”

News 4 I-Team in Maryland. “Foreclosure rates are skyrocketing in Maryland, according to reports obtained and reviewed by the News4 I-Team, and the state’s efforts to protect homeowners could be fueling the problem. Montgomery, Frederick and Howard counties each suffered from 100 percent increases in home foreclosures between autumn 2012 and autumn 2013. There was a 50 percent increase in Prince George’s County. In Anne Arundel County, the spike is much larger: 400 percent. ‘This is just the beginning of the wave of foreclosures,’ RealtyTrac analyst Darin Goodwin said. ‘There are homes that haven’t hit the housing market yet.’”

“On the steps of the Montgomery County Courthouse in Rockville, News4 I-Team cameras captured images of one of the dozens of recent home auctions outside local courthouses. Auctioneers contracted by Montgomery County disposed of more than 10 foreclosed homes in an hour. A Gaithersburg townhouse was purchased for $210,000, about 30 percent less than the estimated price of neighboring homes.”

“Ann Lytle, of Capitol Heights, is trying to escape the foreclosure of the Addison Road home in which she’s lived for 65 years. Lytle said she’s fought a yearlong battle with her bank, which she said was triggered by a dispute over a missed monthly mortgage payment. ‘It’s like somebody took a nail and drove it through your heart,’ Lytle said. She’d taken out a new mortgage on the house in 2009 to help pay for repairs and remodeling.”

The Virginian Pilot. “You wanted a reliable pot of money to tap when your kids started college. Or to pay for a new car when the old clunker finally conked out. Or to splurge on a tropical vacation. So you asked your bank for a home equity line of credit back during the housing boom, when money was easier than ever to borrow and equity was through the roof.”

“You’ve probably enjoyed low, interest-only payments for years – but the honeymoon may be over. Starting this year, monthly payments could more than double for millions of Americans who will have to begin paying back the money they’ve borrowed for life’s major expenses. Nearly 50 percent of outstanding HELOCs were originated between 2004 and 2006, according to Lender Processing data, and the majority of borrowers will have to begin paying the principal on the oldest of those this year.”

“The number of delinquent HELOCs that have already passed the 10-year mark – and presumably are costing borrowers more money – is going up, said Herb Blecher, senior VP of Lender Processing Services. The low monthly payments during the draw period are attractive to borrowers. ‘Often, someone is going for an interest-only loan to get the lowest payment because that’s all they can afford,’ said Johnna Strahle, manager of equity lending at Navy Federal.”

“Some banks allow borrowers to extend their lines of credit so they can continue paying interest only. The rub here is that homeowners have to go through the loan-qualification process all over again. In the wake of the financial crisis, home values are lower, credit standards are higher and the amount of money you can access is smaller. Monarch Bank and TowneBank both offered HELOCs worth 90 to 95 percent of the value of a home in the mid-2000s, but neither lend more than 80 percent today.”

“‘People were taking on more debt,’ said Brad Schwartz, CEO of Monarch Bank and Financial Holdings Inc. ‘We probably took on some risks that, looking back, we wish we hadn’t. We’ve tightened our underwriting standards since then.’”

“Locally, payments for a $50,000 HELOC at TowneBank could jump to $401 from $175, based on a 15-year repayment schedule and assuming the prime interest rate climbs a percentage point, said Robin Cooke, director of retail banking. Some borrowers may be hit with a balloon payment instead of a price increase. At Monarch Bank, HELOC balances are due all at once at the end of the draw period, said Debbie Morgan, senior VP in charge of consumer lending.

Bits Bucket for January 7, 2014

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