Throwing Money Away In California
The Marin Independent Journal reports from California. “In the nine-county Bay Area, default notices rose to 12,092 in the third quarter, up 22.2 percent from the previous quarter; in California, they rose 25.9 percent over the same period to 71,275. Loan modifications…can take months or years filled with uncertainty, said Dianne Levy, who fell on her house payments three years ago and eventually obtained a loan modification. ‘It’s a horrible, horrible process,’ said Levy. Levy, who paid about $700,000 for a house in Santa Venetia that is now worth less than $400,000, will likely never see any financial upside from keeping her house, but as a retiree she could not afford to walk away and rent an apartment instead, she said.”
“‘If I were younger, I would have walked away,’ said Levy, 68. ‘It’s that difficult to get a modification.’”
The Desert Sun. “‘I expect to see an uptick in foreclosure activity and inventory over the coming months,’ said Bret Cohn, senior VP of Franklin Loan Center in Palm Desert. One reason is because loan modifications offered by many banks merely lowered the interest rate for five years, with delinquent payments applied to the back end of the loan, Cohn said. ‘This does not help a homeowner when it will take 20-plus years to get back to the value which they owe,’ Cohn said. ‘Most people who accepted loan modifications realized within a few months that it was not in their best long-term financial interest to continue on this path, and they have already stopped making their modified payments.’”
The Press Enterprise. “Chris and Jacque Ford stride joyously through the sales model of the house in Ontario that they plan to buy. Foreclosure was the lever that improved the Ford family’s economic prospects and lifestyle. Known in modern parlance as ’strategic defaulters,’ people like the Fords who could afford to stay current on their mortgage payments are deciding to ‘walk away,’ letting their lenders foreclose. They are relieved to dump houses that as a result of a real estate crash are worth far less than the mortgages on them.”
“The couple said In March of 2006, when they bought an 1,100-square-foot house in Calimesa for $285,000, they expected it would serve as a stepping stone. They planned to stay in that house about five years to accumulate enough equity so when they sold it they could put a down payment on something larger. Calimesa home prices immediately tumbled.”
“In 2009, the Fords said they tried to sell their home and received offers in the $80,000 to $120,000 price range, which terrified them. ‘We started talking to financial advisors and every one of them said we needed to get out of that house right away,’ Chris said. ‘They said you are literally throwing your money away every time you make your mortgage payment.’”
The San Francisco Examiner. “As of July 20, county banks own more than 10,000 homes foreclosed since 2007, and this giant pool of distressed properties is still growing. The average delay between when a homeowner receives a notice of default and when the bank ultimately resells the property has increased from about 325 days in late 2008 to roughly 600 days in mid-2011. ‘Banks are sitting on a lot of properties and they’re not releasing them,’ said Becky Irwin, legislative aide for county Supervisor Rose Gibson, whose staff helped assemble the report.”
“Many observers believe banks are hoarding distressed properties to prevent a continued decline in property values. ‘The market can’t absorb all that inventory,’ said Donald Kung, broker with Remax Investments, which sells repossessed properties for banks. ‘The overall price will decline.’”
“While the bulk of foreclosures have occurred among midpriced homes in the $500,000 to $600,000 range, houses worth over a million dollars have a much higher rate of foreclosure, said Irwin. ‘Most of the high-end homes were bought with stated income, or liar loans,’ said Kung. ‘Today’s lenders don’t provide those kinds of loans anymore so how is a homeowner going to refinance their home? They really can’t.’”
From NPR. “In East Los Angeles, Realtor Felipe Acuna works in a once-glamorous neighborhood that is trying to make a comeback. In 2004 investors began snatching up City Terrace properties left and right. Houses in awful condition sold for up to $500,000. Today many of those same homes go for just over $100,000. The City Terrace housing bubble burst in 2007, and Acuna says he saw it coming.”
“‘Even though you were like a gardener or a housekeeper and suddenly you were able to buy a half-million-dollar home that two, three years earlier was only worth $250,000,’ he says. ‘Unfortunately I tell people I probably could have increased my business two- to threefold if I would have took in those people and put them into something they couldn’t afford and not worry about it, but I like to sleep at night.’”
The San Gabriel Valley Tribune. “‘We are dramatically undersupplied for housing,’ said Steve Johnson, who oversees the Southern California office of Metrostudy. The 2000 Census showed that California had 1.7 million overcrowded households. Ten years later, the 2010 Census showed no significant sign of improvement. Johnson doesn’t dispute that.”
“‘It’s a tough time out there,’ he said. ‘Many people have doubled up or moved in with friends or family. We’re on the road quite bit on the weekends and you see a lot of cars parked in and around neighborhood houses. I saw about eight cars parked at one home. Everyone likes to think that this is a socioeconomic thing and that it just happens with poor people. But I’ve seen the same thing happening in gated communities.’”
The Daily Journal. “The Foster City Council voted last night to negotiate exclusively with a consortium of builders to construct affordable senior housing at the vacant 15-acre site adjacent to City Hall. Community Partners will sell townhomes in the $400,000 to $750,000 range. The Sares Regis proposal listed its housing prices between $800,000 and $1 million.”
“‘I’m not sure the average Foster City resident could afford that,’ Councilwoman Pam Frisella said about the Sares Regis proposal.”
The Telegraph. “Since 2008 the value of an average home has dropped by about $90,000 and about three per cent of mortgages are in foreclosure. Inland Californian towns like Stockton, Merced and Modesto, regularly feature on lists of places where Americans are most likely to lose their homes. In Stockton homes once worth $500,000 have sold for less than $200,000.”
“At Rev Bales’ shelter 100 families who have had their homes foreclosed are now taking refuge. Perhaps the starkest example of how far some people have fallen in the economic downturn is a man in his 50s, who once earned a six figure salary as a producer on television studio sitcoms and small budget Hollywood movies.”
“A few years ago he lived in a three-bedroom house with two cars in the drive and occasionally mixed with A-list stars. Now, he lives with his wife and two children in one room at the Union Rescue Mission. The producer, who asked not to be identified because he is still applying for work in the film industry, said: ‘There was this concept that the economy would grow and grow, so don’t worry about it, and people didn’t hold on to their money.’”
“‘Things spiralled downward for me. It got very rough and ugly. We lost our home, then stayed in a hotel for a while, and then we came here. I can’t tell people in Hollywood I’m living in a shelter. It’s an unforgiving town. There’s a lot of reasons you find yourself among the disenfranchised and the dregs of society, and a lot of them are not your own doing. The economic squeeze was across the board. People in $5 million homes in Beverly Hills had to move into high end apartments.’”
Realtors Are Liars®
‘about three per cent of mortgages are in foreclosure’
From the PE link:
‘In Riverside and San Bernardino counties, about 45 percent of homes with a mortgage, or almost 385,000 properties, were worth less than the amount borrowed against them in the second quarter of this year’
The Desert Sun article:
‘If you look at the (September) price per square foot of bank-owned properties at $93 and regular sales of $161, you can see where this is going,’ said Jim Franklin, broker associate with Prudential California Realty and president of the Palm Springs Regional Association of Realtors.’
also from the PE Link:
this Ford guy walked away from his old home which he bought for 285K, and now is buying a new home at 315K?
If lenders/fha/va are approving loans like this, we still have a ways to go, my friends.
‘It takes three years of waiting—and a good record of handling finances in the interim—after a foreclosure to qualify once more to buy a house with a mortgage insured by the Federal Housing Administration. Then “If you have a 620 credit score and otherwise qualify based on your debts and income you are good to go with FHA,” said Brian Weide, loan production manager at Sunstar Mortgage in Ontario.’
‘And it takes only a two-year wait for someone with a military background to qualify for a VA loan.’
And then there are the GSEs, who will loan you the money to buy one of their REOs for little to zero down, after incentives. For all the crying you hear about the govt not ‘doing anything’ about the ‘foreclosure crisis’, they basically are the housing market now.
I had to look up where “Calimesa” was. Good lord it’s out beyond San Berdo on I-10. You really had to be a true believer to think a house way out there would appreciate quickly.
true believer to think a house way out there would appreciate quickly ??
Drive until you qualify…Build it and they will come….
Also from the Desert Sun article:
Federal officials have attempted to reach a settlement of up to $25 billion with Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo & Co., among others ??
So tell me A.G., how do you plan on divvying up the spoils ??
Lier loans ?
Flippers ?
squatters ?
heloc’s ?
spec builders ?
or the local mechanic with the nurse wife and two kids who find themselves upside down ?
Yep. It’s going to prices south of $100 per square foot. Luckily, this is of little concern to the deflation-paranoid Fed, as houses are assets, and asset prices are not subject to deflation.
“There’s a lot of reasons you find yourself among the disenfranchised and the dregs of society”
Don’t be so hard on yourself. There is only one reason as regards your situation. Debt.
While a bit extreme, this gentlemen’s situation doesn’t surprise me a bit.
I have a fair amount of personal contact with some of these Hollywood folks described (via the technical/engineering side).
If you ever want to see over-the-top examples of wanna-be fake, Hollywood is the place.
In reality, most of the folks I have known are actually pretty decent.
However, the pressure to pretend that you are something that you aren’t is almost overwhelming.
On that level, Hollywood is quite a bizarre place.
“Behind the phony tinsel of Hollywood lies the real tinsel.” — Oscar Levant
‘Most of the high-end homes were bought with stated income, or liar loans,’ said Kung. ‘Today’s lenders don’t provide those kinds of loans anymore so how is a homeowner going to refinance their home? They really can’t.’
‘in 2004 investors began snatching up City Terrace properties left and right. Houses in awful condition sold for up to $500,000. Today many of those same homes go for just over $100,000. ‘Even though you were like a gardener or a housekeeper and suddenly you were able to buy a half-million-dollar home that two, three years earlier was only worth $250,000′
We really aren’t given all the facts when these ’save the homeowners’ stories get run. The great majority of these people would be better off walking away, and they know it:
‘Most people who accepted loan modifications realized within a few months that it was not in their best long-term financial interest to continue on this path, and they have already stopped making their modified payments.’
I’ll wager Mr. HuFlungChit The ReaItor was right there cheerleading phoney financing just 5 years ago.
Strawberry pickers deserve $750,000 houses…
The only people who might ever have found City Terrace “glamorous” are the sort who would pay 500K for a crack shack.
If Felipe Acuna can now sleep at night knowing he once told housekeepers and gardeners that pre-bubble housing there was worth $250K, he’s a… now what was that line again? Wait, I think I wrote it down somewhere…
Oh yeah.
He’s a liar.
The markets booming,
but where are buyers?
Inventory is looming,
reaItors are liars.
~Liz Pendens
Levy, who paid about $700,000 for a house in Santa Venetia that is now worth less than $400,000, will likely never see any financial upside from keeping her house, but as a retiree she could not afford to walk away and rent an apartment instead, she said.”
“‘If I were younger, I would have walked away,’ said Levy, 68. ‘It’s that difficult to get a modification.’”
TRANSLATION:
I have LOTS of other assets. I can still make the payments.
I can’t declare bankruptcy because ALL the other assets go into the pot.
I can’t walk away because the bank can come after those other assets.
If I was young with nothing to my name…well I could just walk away
(in the dark ages of 20 years ago - a young person with nothing to their name would have been LAUGH OUT OF THE BANK’S OFFICE for asking for a $700,000 loan - but I digress)
I work with a nice guy in his 70s who drives back home to his several thousand square foot house and his wife in Atlanta on weekends. He admits a $4,000 per month mortgage payment and he says he cannot figure out if he should sell for a loss and move them to a small apartment closer to downtown Atlanta or to keep paying $4,000 for a rapidly deteriorating asset.
He’s stuck. I feel bad for him. But he should know better.
It’s one of those situations where I wonder why people in their 70s became stupid now but were smart in their 30s when they did not gamble on real estate. RE was not considered an investment 40 years ago. Why did they think in 2005 that RE is all of a sudden an investment?
Same thing with stocks. Many of you HBBers swore off stock for several years. But cycles are cycles. In the long run you cannot deny that stock indices do better than bonds and real estate if you have more than 25 years time frame.
‘They said you are literally throwing your money away every time you make your mortgage payment.’”
I have heard this phrase before in the past. But just worded a little different.
Can anyone help?
Something about saving a bundle every month by renting? It is so hard to remember the old talking points.
The Daily Journal. “The Foster City Council voted last night to negotiate exclusively with a consortium of builders to construct affordable senior housing at the vacant 15-acre site adjacent to City Hall. Community Partners will sell townhomes in the $400,000 to $750,000 range.
The insanity continues…
Townhomes for $750,000 that will be called “affordable”
I live on the Penisula. There is sooo much denial here about housing, it is unreal. To be fair, this is an expensive market. At lunch, a co-worker told me today he has a mortgage of 950,000 (Burlingame). Yikes! We both make good money, but that is insane.
Re: Foster City
This is a city built on landfill, sits right on the bay, Just South of the San Mateo Bridge. These houses will be “underwater” in more ways than one if climate change raises the sea level.
People in $5 million homes in Beverly Hills had to move into high end apartments.’”
Man’s inhumaity to his fellow man on full display in Beverly Hills…
The article about “affordable senior housing” in Foster City cracks me up….
..the retail component will fall under one vision in a plan that includes boutiques and smaller stores like wine and paper shops.
I guess candle and pirate shops are out of the question these days.
Yeah, what is a paper shop?
A stationary store? Anything called Papyrus (that isn’t the really cool Morningside Heights used book store where I bought my copy of The Trial of Socrates)?
Yeah, think Hallmark, but classier (i.e., more expensive).
It’s a girl thing.
There is a shop in the Bergamot Station art complex in Santa Monica that has a huge selection of paper—blank paper. They have all kinds of paper, from Japanese cherry wood cut paper thin to wrapping paper made out of Mongolian butterfly wings (I made that up, but the obscurity sounds right).
It’s an amazing store.
Before I left California, I did a little math. Median house price in my town are still 400k (down from 600k, which is nice), so to buy a median house, you’d have to pull down about 100k (median in the area is 55k). Out of that 100k, you’re paying about $750/month in state taxes, and about 450 a month in property tax.
So we start with a monthly income of 8300
Federal taxes are about 1/3 of that, leaving $5533.
Subtract state and property tax, and that leaves you with $4333
PITI on the mortgage would be about $2500, leaving $1833 for utilities, groceries, gas, car payments, insurance, and (ha!) retirement savings.
Simply by moving to a non-sales tax state and buying a house you’d be up $1200/month in taxes and probably another $1500 in house payment, which would put another 32k in your bank account each year.
Its nice there, but not that nice. I suspect there’s going to be another California exodus, not equity locusts this time, but people that just can’t make it in California.
‘people that just can’t make it in California’
You should read the Telegraph article above.
Pretty horrendous. I lived in kind of a bubble, out in the country on the coast, so I never saw all the unemployed. Even those with decent incomes can’t really make it in California though.
You can’t believe how overpriced it is to live in California. My family got there in the 1800s, and every generation since has lived less well than their parents. When I moved out to retire in 2006, I was shocked how prices were elsewhere in the country for essentials such as housing, taxes, utilities, etc. Here in Idaho electricity is around 4.6 cents per KWH: in San Jose it was more like 14 cents per KWH. My auto policy premiums went from $1,600 per year to $800 per year - both with AAA. The sales tax is 6% here compared with 9+% in California. My prop-13-protected (from 1981!) property tax was around $2K and here it’s around $1K for a much larger and nicer house.
As a Civil Engineer in California our family would be living very near the poverty line on my income, and retirement savings would be slim at best. In eastern Washington we are positioned on the upper half of the middle-class with decent savings, a paid-off house and pretty soon — zero debt. I’m hoping the college bubble bursts before we get there, our last serious hurtle.
My house (in FL) cost 500K. I put down a little over 100K. My household income is between 250-300K.
Let me tell you something.. Carrying a 400K loan (or, in your example 300K) on 100K in income isn’t a cakewalk, not even close! And I’m in FL, with no income tax (but, on the flip side, my property taxes are almost 10K a year, and my insurance is sky high as well, combined taxes/homeowners/flood is around 15K/yr).
I realize that people say “3X income is a “safe” loan amount”. I think they are smoking crack. I’m less than 2X income to loan amount, and still, it’s not a “trivial” payment as most would have you believe it should be at that multiple.
Granted, of 300K in income, you only see about 180K of it (~33K to 401Ks, the rest to income tax), so that certainly doesn’t help. But, let me just say; most people following the old rule (3X income) are going to find that it’s a stretch to pay that much for housing. It’s doable, but it’s not “easy” as most would have you believe. And it’s almost certainly going to cut significantly into their ability to save (both short term and longer term in retirement accounts).
Of course.. The other thing that nobody wants to talk about is the tax burden.. By FAR my biggest yearly expense are taxes; income, real estate and sales tax likely come close to 40-45% of my net pay.
I agree. I spent most of my adult life paying on houses that were 2x my income. Maybe just a little more but not 3x. Maintenance, taxes, insurance utilities and diapers left little in the way of pin money. I’ve never bought a new car. Some of my friends called me “Mr. Success”. LOL.
3x maybe if you never have kids. And taxes will have to go up.
“I suspect there’s going to be another California exodus, not equity locusts this time, but people that just can’t make it in California.”
To be followed by even more vacant homes which won’t sell or rent at anywhere near current price levels…
‘The market can’t absorb all that inventory,’ …
maybe not at 2006 price levels, anyway…
Unreal what these politicians are pushing…and scary that “we” elected them…
“Ana Eshoo: Obama fails on foreclosures
By Bill Silverfarb Daily Journal staff
October 19, 2011
U.S. Rep. Anna Eshoo heaped criticism on President Barack Obama and his administration this week for failing to address the “catastrophic” wave of home foreclosures across the country and is pressuring the White House to adopt effective policies to turn the housing crisis around.
Eshoo’s office wants to see Obama get a little more aggressive in tackling the issue.
Numbers released yesterday suggest the crisis may worsen as real estate information service DataQuick reported that banks sent nearly 26 percent more default notices to California homeowners in the third quarter compared to the previous three months.
Default notices actually reached a three-year low in the second quarter this year at about 56,000 but the number spiked dramatically in July, August and September to more than 71,000 first-time notices of default, a 26 percent increase in just three months, according to DataQuick.
To combat the problem and keep people from losing their homes to foreclosure, Eshoo, D-Palo Alto, and other California Democrats in Congress, including U.S. Rep. Jackie Speier, D-San Mateo, are urging the Obama administration to institute a “Homeowner’s Bill Of Rights” and to establish a plan to refinance all mortgages owned or guaranteed by Fannie Mae and Freddie Mac.
The Homeowners Bill of Rights would affect federal programs including the Federal Housing Administration and Home Affordable Modification Program.
In response to Eshoo’s demands, a White House spokesman said Obama is focused on taking steps to help struggling homeowners, particularly in states hardest hit by the housing crisis.
“This includes not only the $2 billion in funds committed directly to California through the Hardest Hit Fund, but the president’s recent announcement to provide 12 months of mortgage forbearance to unemployed borrowers through the [Federal Housing Administration] and [Home Affordable Modification] programs, and the administration’s efforts to transition vacant property into rental housing,” White House spokesman Adam Abrams wrote in an email to the Daily Journal yesterday.
Obama is also working with the federal housing agencies to knock down barriers to allow more responsible borrowers to refinance into lower interest rate mortgages, Abrams wrote in the email.
But Eshoo and the rest of the California democratic delegation want more.
The group is calling for a principal reduction plan that would allow a restructuring in Chapter 13 bankruptcy of certain underwater mortgages.
“With virtually no cost to taxpayers, we could put $500 per month in the pockets of many Bay Area homeowners with Fannie and Freddie mortgages by simply lowering interest rates from 6 percent to the current 4 percent interest rate. Doing this with underwater homeowners would lower the risk of default and ultimately save taxpayers money because taxpayers own Fannie and Freddie,” Speier wrote in an email to the Daily Journal yesterday.
Financial institutions that handle delinquent mortgages, mortgage modifications and foreclosures are failing to act in good faith, according to a letter Eshoo and the other delegates sent to Obama earlier this week.
Eshoo, along with U.S. representatives Mike Thompson, D-St. Helena, Doris Matsui, D-Sacramento, and George Miller, D-Martinez, met with Edward DeMarco, acting director of the Federal Housing Finance Agency, last week to discuss the crisis in a meeting that Eshoo could only characterize as “disappointing.”
DeMarco provided the delegation with “few answers and fewer solutions. My constituents deserve so much better than this,” Eshoo wrote in a prepared statement following the meeting.
Eshoo’s office wants to see Obama use his executive power coupled with legislation to tackle the issue more aggressively as Republicans in Congress have stood in opposition to virtually everything the White House has tried to accomplish in recent months.
The group also wants to institute a Homeowners Bill of Rights that would make the process homeowner-friendly; eliminate the obstacles to effective mortgage modifications; ensure accountability and establish an appeals process to create an Office of Consumer Advocate and conduct random audits of loan modifications.
The Obama administration, however, contends it has made some of the steps Eshoo is asking for already.
The Home Affordable Modification Program has put into place a number of homeowner protections, such as requiring servicers to establish a single point of contact for homeowners seeking assistance and limiting “dual-track” foreclosure, evaluating a homeowner for assistance while simultaneously referring them to foreclosure, according to the Obama administration.
Foreclosure activity began to slow nationwide last year after allegations that lenders were using abusive practices such as “robo-signing,” or approving foreclosure paperwork without actually reading it. Attorneys general in all 50 states have been working on a settlement of the allegations but California Attorney General Kamala Harris announced last month that she would not agree to a settlement.
Harris said the deal was inadequate in a state where more than 2.2 million residents owe more on their mortgages than their homes are worth.
In California, there were 8.1 notices of default filed per 1,000 homes.”
‘They said you are literally throwing your money away every time you make your mortgage payment.’
Whatever became of the concept of throwing away money on rent?
Foreclosure activity soars in third quarter, ending lengthy lull
The number of notices of default jumps 25.9% from the second quarter. The increase comes as settlement talks have stalled between banks and state attorneys general over the robo-signing scandal.
Although more California homes entered the foreclosure process in the third quarter, the number of homes taken back by banks continued to decline, according to DataQuick. Above, a for-sale sign on a foreclosed house in Glendale.
(Kevork Djansezian, Getty Images)
October 18, 2011|By Alejandro Lazo, Los Angeles Times
Banks fired up the California foreclosure machine in the third quarter, breaking out of a nearly yearlong lull that began in the midst of widespread revelations that banks were improperly seizing homes from delinquent borrowers.
A big August surge in foreclosure actions, led by Bank of America, sent the numbers up in the third quarter, according to DataQuick, a real estate information service in San Diego.
Notices of default, the first formal step in the foreclosure process, jumped 25.9% over the second quarter, when such filings had dropped to a three-year low.
News of the increase comes as talks have stalled over a broad foreclosure settlement by state attorneys general with the nation’s five largest mortgage servicers. California recently stepped out of those discussions, saying it would pursue its own path.
State and federal officials are trying to lure the state back into talks, floating an idea for helping creditworthy homeowners refinance loans that are underwater, or higher than the values of their homes.
Activists and consumer advocates criticized the recent default-notice increase as a move in the wrong direction. They have been protesting foreclosures and urging bank and government officials to take further steps to stem the tide of home seizures.
“Everyone in the economy is being hurt because the banks, the administration and Congress are not doing anything about the foreclosure crisis,” said Richard Hopson, chairman of the Alliance of Californians for Community Empowerment, which has led several protests in Los Angeles against banks in recent weeks. “Unless there is a resolution to that, there are going to continue to be problems with the economy.”
Kevin Stein, associate director of the California Reinvestment Coalition, an advocacy group in San Francisco, said foreclosures would probably only get worse unless banks and government officials took action soon.
“A lot of people are suffering, and the policies that we need are not in place,” Stein said.
An estimated 71,275 notices of default were filed against California properties during the three months that ended Sept. 30, with some properties receiving multiple notices because they had more than one loan, according to DataQuick. That was down 14.4% from the same quarter last year.
The majority of those loans were made during the peak bubble years of 2005 through 2007, when lending practices were at their loosest, DataQuick said.
…
AirTalk for October 19, 2011
California’s foreclosure machine revving up again
Andrea Wang
Foreclosures Spike As Banks Accelerate Loan Default Notices
Kevork Djansezian/Getty Images
A foreclosed house in Glendale, California.
In the third quarter of the fiscal year, California homeowners received nearly 26 percent more default notices than in the previous three months. DataQuick, a real estate information service reported Tuesday that 71,275 first-time notices of default were issued in July, August and September compared to 56,633 in the second quarter of the fiscal year.
For nearly a year, there was a lull in foreclosures when banks were found to be improperly processing them, using abusive practices such as “robo-signing,” approving foreclosure paperwork without actually reading it. Now the banks must deal with the backlog of foreclosures.
This increase comes at a time when talks with State Attorney General Kamala Harris over a broad foreclosure settlement have broken down. Notices of default are the first formal step in the foreclosure process and La Jolla-based DataQuick reported that most of the mortgages, home equity loans and lines of credit going into default are from 2005 to 2007.
Chris Thornberg, founding principal of Beacon Economics told Larry Mantle that he’s not sure whether the negotiations between Harris and the banks will spark notable changes. While the pace of overall foreclosures picked up in the third quarter, the number of homes substantially behind on mortgage payments continues to fall in California.
“The primary reason people get foreclosed on is because they’re not paying their mortgage, simple as that. And whatever sort of contractual gimmicks you want to play — ‘Well this wasn’t signed, that’s not here, or this piece of information is missing’ — doesn’t take away from that fact that these folks simply aren’t paying their debt,” he said.
Thornberg went on to say that refinancing mortgages is “probably one of the best policy proposals that have been put forward by the administration on the housing market” for those with minor financial problems. However, he suggested a more controversial move for those significantly underwater with payments: Walk away.
“I would almost argue that not allowing those folks to refinance, that hastening the foreclosure process, might ultimately be in the best financial interest of that particular household. I mean, if you’re 25 percent underwater in the state of California, you’re probably in a $50,000 to $100,000 hole. Frankly, your credit score is going to heal a lot faster than your equity,” he said.
Thornberg said though it would be traumatic in the short run, people should stay hopeful.
“I think you’d be surprised by how rapidly people can get back into the housing market,” he said. “If you’ve kept your nose clean in other parts of your financial life, that is to say you’ve kept up-to-date on your credit cards, your auto loans, things like that — why not have Fannie [Mae] and Freddie [Mac] be willing to extend a new loan to those folks despite the recent foreclosure?”
…
Home Sale After Bad Foreclosure Isn’t Valid, Court Rules
Thom Weidlich
Wednesday, October 19, 2011
Oct. 18 (Bloomberg) — A Massachusetts man who bought property in a faulty foreclosure sale isn’t the true owner and so doesn’t have the right to sue over it, the state’s high court ruled.
The Supreme Judicial Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the court ruled.
The high court upheld a lower-court decision that said Francis J. Bevilacqua III, the buyer of residential property in Haverhill, Massachusetts, never owned it because U.S. Bancorp foreclosed before it got the mortgage. Today’s ruling could have implications in the foreclosure crisis, in which banks are accused of clouding home titles through sloppy transferring of mortgages.
“By alleging that U.S. Bank was not the assignee of the mortgage at the time of the purported foreclosure, Bevilacqua is necessarily asserting that the power of sale was not complied with, that the purported sale was invalid, and that his grantor’s title was defective,” the court wrote. “In light of its defective title, the intention of U.S. Bank to transfer the property to Bevilacqua is irrelevant and he cannot have become the owner of the property pursuant to the quitclaim deed.”
…
Interesting. Isn’t the national figure something like 25% of all home sales are foreclosures? So these “bargain hunters” may have just bought themselves a legal nightmare.
At what point does this debacle become so ludicrous, folks simply stop buying houses? Who would want the risk?
Me, I’m still renting, waiting. Next house will be 100% cash. Not before 2014, methinks.