March 26, 2015

People Just Don’t Want To Hang Onto Those Loans

CBS Denver reports from Colorado. “Real estate brokers say year over year they’re seeing a lack of inventory in the Colorado housing market. Real estate agent Andrew Nagel says some of the brokers in his RE/MAX of Cherry Creek office are astonished by how many offers are going into some resale homes. Nagel says about 30 percent of his buyers are now choosing new construction, which also comes with some built-in perks. ‘In 6 or 9 months that pricing is going to go up and up and up, so by the time you close and move into your house you’ve built in some equity,’ he said.”

The Journal Sentinel in Wisconsin. “With home prices slowly increasing, consumer confidence rising and interest rates still low, home equity lines of credit are making a modest comeback in Wisconsin. In 2014, the amount of home equity lines of credit on the books of Wisconsin-based banks rose 1.9% to more than $3 billion — the first time since the recession and housing market crash that such loans increased from the previous year. ‘The biggest factor has been home prices going up rather than going down,’ Doug Gordon, chief executive of WaterStone Bank.”

“Landmark Credit Union has been offering a fixed 1.99% annual percentage rate for the first 18 months of a home equity line of credit. After that period, the rate goes to 3.99% or the prime rate, whichever is higher. ‘When (home) prices are going up, they’re are a little more confident in spending. And obviously, the home equity lines are a perfect way for people to do improvements or buy cars and such because of the deductibility of the interest,’ Gordon said.”

AZ Family in Arizona. “There are a lot of hard working Arizonans who can’t afford a new home. They’ve got jobs and good credit, but don’t have enough money for a down payment. For many of them, help may be on the way. The nonprofit housing assistance group Trellis, announced this week, that the FirstBank Holding Company, has invested $1 million to make housing more affordable for low and middle income families. The new program will provide qualified home buyers up to $25,000, to be used as a down payment towards the purchase of a new home.”

“To qualify - a family of four must make less than $51,000, and a single person make less than $35,850. However, the money is not a gift - its a loan. Home buyers must repay the loan to Trellis over a 15-year period. Peoria mom Jenelle Forrester said a program like this could make a big difference for her family. ‘Coming up with money, a lot of times is really hard,’ Forrester said. ‘You don’t want to spend all your savings, because you are buying a house. You want to have something to fall back on.’”

The Wall Street Journal. “Home prices in some U.S. markets are rising much faster than rental incomes or what it would cost to build new houses in those markets, according to a new study by a real estate valuation firm. The growing gap between sales prices, on one hand, and rents and so-called ‘replacement cost’ on the other is evidence of markets that are over-heating, said the report by Jacksonville, Fla.-based Smithfield & Wainwright. ‘The build-up of false equity is on the rise again,’ the report states.”

“During the last housing boom, inflated appraisals helped contribute to the run-up in home prices. In December, The Wall Street Journal reported that appraisers are increasingly being pressured to inflate home valuations. In the story, the Office of the Comptroller of the Currency expressed concern that some of the mortgages banks are giving out are based on inflated values. Freddie Mac said it had launched fraud investigations to determine whether lenders had approved mortgages backed by inflated home appraisals.”

“Using inflation-adjusted data, the firm concluded that recent sales prices of single-family homes in 13 states and the District of Columbia are 10% more on average than what the homes would have been appraised for using two other methods.”

The New York Post. “A new time bomb in the residential mortgage market is starting to go off — potentially pushing thousands of struggling New York families into foreclosure. This year marks the start of a 3-year period for thousands of home equity lines of credit, known as HELOCs, to reset from interest-only payments to interest-and-principal payments. New York state has the fourth-largest dollar volume of HELOCs set to reset between 2015 and 2018 — roughly $8.4 billion.”

“Nationwide, RealtyTrac estimates there are 1.8 million underwater homes with resetting HELOCs, to the tune of $88.7 billion. ‘The foreclosure crisis is not anywhere near done,’ said Tom Cox, a Maine-based attorney and foreclosure expert. ‘I can’t tell you we’ve had enough time with it yet to say the stats demonstrate an uptick in actual foreclosures through HELOC resets, but … we know it’s going to happen.’”

8 News Now in Nevada. “New numbers show Nevada’s housing market could be headed for trouble. Notice of default, which is the beginning stage of a foreclosure, saw a sharp rise in its numbers last month. According to RealtyTrac, more than 350 default notices were filed in February 2014 while 662 were filed in February 2015. That’s an 80 percent increase. The hardest hit zip code, 89108, is near Lake Mead and Jones boulevards. Currently, about three out of 10 homes in Clark County are underwater. ‘Even though the market has gradually climbed and increased in property value, it’s still going to be decades for many, many people,’ said attorney Tisha Black, who has helped many struggling homeowners through the foreclosure process.”

“Numbers from RealtyTrac show many zip codes spiked in default notices last month. The zip code 89108 led the valley with 32 notices and 89031 came in second place. The top zip codes all have at least 25 homes in danger of foreclosure. ‘I think it’s a combination of a number of factors as to why that number has increased,’ Black said. Some homeowners declared bankruptcy which halted the foreclosure process, until now. Also, homeowners tired of being underwater have chosen to walk away from their homes.”

“‘I think a lot of those people just don’t want to hang onto those loans, when you’re that far undervalue,’ Black said.”

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