Archive for the 'REO' Category
2011 WILL BE REMEMBERED AS THE YEAR OF FORECLOSURES, SHADOW INVENTORY, STRATEGIC DEFAULT, UNDERWATER LOANS, AND ROBO SIGNING
2011 WILL BE REMEMBERED AS THE YEAR OF FORECLOSURES, SHADOW INVENTORY, STRATEGIC DEFAULT, UNDERWATER LOANS, AND ROBO SIGNING
So what did we learn from all of this?
According to Joel Cone, the staff writer for Realty Trac’s Foreclosure News Report Borrowers learned how to use strategic default and walk away from their underwater loans instead of making payment.
Cone goes on to say that “armed with knowledge that the financial institutions are so far behind the eight ball playing catch-up with the delayed foreclosures, homeowners have no motivation to move on”
He also stated “there are documented cases now of homeowners who are simply staying in their homes without making a mortgage payment for as long as three years, figuring they can stay until the bank gets around to foreclosing on them. In the meantime, they are living rent-free”.
SO WHAT DOES 2012 LOOK LIKE?
We are seeing employment figures improve slightly so we will probably see less delinquent loans.
However, foreclosures will continue to rise as the banks push through the backlog of the Shadow Inventory that was previously stalled partially from the robo-signing.
Trulia said an increase in “foreclosures will depress prices for several reasons-foreclosed homes are often sold at a discount and used as comps for non-distressed homes”
“Agents should be gearing up with competitive pricing strategies to catch buyers and preparing to counsel their traditional seller-clients about the depressed prices to come in high-foreclosure areas,” Trulia said.
With many people losing their homes and the need to rent, they will find the rental market cost to rise in 2012.
Based on what we are hearing, this seems like the absolute best time for the first time home buyer to capitalize on low interest rates and low home prices.
For the long term investor there are great opportunities for rehabbing and renting these distressed homes to capitalize on the strong rental market and long term appreciation and positive cash flow potential.
2012 should be the year that will be remembered with the words: HOUSING RECOVERY BEGINS.
A Broker’s Paradox – Dustin Brown
Six months ago, an established San Francisco REO broker closed down his operation, leaving the REO business for good. Around the same time, a Florida broker was forced to let go half his staff. And these aren’t isolated incidents—it’s happening nationwide.
At the June REO Expo in Fort Worth, TX, I spoke with brokers from across the country. Many of them had already made similar cuts. Even the brokers who hadn’t cut staff knew brokers who had.
Which begs the question: what is happening to REO brokers?
Two factors seem to be affecting them the most. First is the decision by some of the biggest lenders, in an effort to cut costs, to slash broker commissions on REO properties by as much as 1/3. Facing such drastic cuts, many brokers find themselves actually taking a loss on each property sold.
Couple that with the continuing effects of the robo-signing fiasco, where kinks created in the pipeline months ago mean that in some places properties are not being foreclosed on at all. Nationwide, available inventory continues to trickle out at a fraction of its potential rate.
As if conditions were not bad enough, prices in most areas of the country either remain stagnant or continue to decline. The end result is that more brokers are competing for fewer properties for less money.
Somewhere, something has got to give.
One California broker I spoke to on condition of anonymity told me how dire things have gotten, and what some brokers are doing to sruvive. Since the start of Q1, his REO volume is down 50%. To compensate, he has both cut staff and branched out in his business.
“Where our old business was about half and half REO/short sales, now we’re about 1/3 REO, 1/3 short sale, and 1/3 standard retail,” he said, and it’s a practice that’s becoming more common with brokers who are just trying to stay in the game.
Some brokers, however, recognize opportunity in this uncomfortable state of affairs. Darren Brown , an REO broker based in Fair Oaks, CAtold me how he and his staff are adapting to the current market conditions.
“Some staff have had to be laid off, but the remaining staff are a lot more versatile. We’re doing a lot more cross-training,” he explained. “With volume down, my people are able to perform more than one task, which helps keep overhead low.”
As an example: while volume is still low, there are fewer BPO’s to do, which means that staff who used to focus solely on BPO’s now have time to do field inspections on existing inventory.
In this way, Brown and his staff are able to continue their focus on REO and short sales. “We’re still pushing forward [in REO], trying to absorb the inventory left behind by brokers leaving the business.”
Sherry Rahnama –a Fairfax, VA based broker–has a similar strategy. Although overall volume in her area has decreased, her business hasn’t been nearly as affected as others, with asset managers continuing to assign her steady listings.
“I think that’s because of the level of service we provide them,” she says. Rather than branch out, she continues to focus heavily on REO.
“Where other brokers might only be capable of taking one or two listings at a time, we provide the services that asset managers need. If they need a rush BPO, we’re able to do it the same day.”
Some day, the REO market will normalize. The pipeline will straighten out, and prices will reach equilibrium.
No one knows when that day will come, but one thing is certain:
The brokers who emerge on the other side of this mess will be the ones with the ability to adapt to current conditions and the foresight to realize that dedication now will yield huge dividends in the future.
S&P is now putting the “Shadow Inventory” principal balance at $450 Billion
S&P is now putting the “Shadow Inventory” principal balance at $450 Billion
Shadow inventory is a term that refers to real estate properties that are either in foreclosure and have not yet been sold or homes that owners (banks) are delaying putting on the market until prices improve. These are mainly the result of the mortgage meltdown of 2007-2008.
According to Realty Trac, one in every 577 housing units received a foreclosure filing in February 2011.
Here is a breakdown of the number of foreclosure filings in February, by county, for Cook and the surrounding collar counties in Illinois:
- Cook County 1 in every 470 homes
- Lake County 1 in every 308 homes
- McHenry County 1 in every 298 homes
- DeKalb County 1 in every 405 homes
- Kendall County 1 in every 174 homes
- Will County 1 in every 279 homes
- Kane County 1 in every 293 Homes
The total foreclosure activity in these 7 counties accounts for 7,574
Sales Trends:
Cities with the highest gains in Home Sales prices, based on the last 2 calendar quarters, are River Forest with an average sales price of $602,967,a 39.39% quarterly increase, followed by, Schiller Park, Hazel Crest, and Prospect Heights.
The city with the greatest drop in home sales prices was Downers Grove with an average sale price of $255,258 (a 25% quarterly % decrease in value), followed by Hoffman Estates, Ingleside, Lincolnshire, Winnetka, Burbank Zion.
How do we rank on a National level regarding the foreclosure rate?
- Nevada
- Arizona
- California
- Utah
- Idaho
- Georgia
- Michigan
- Florida
- Colorado
- Hawaii
- Illinois
NOTE: Before we get that warm fuzzy feeling about NOT being in the top 10, keep in mind that in Judicial foreclosure states there was a 19% decrease in the foreclosure filings in January and a decrease of 48% from February 2010. Judicial States are taking much longer to clear up the robo signing mess than non-judicial states. These figures do not reflect the increased delay in filings which could be substantial.
From everything we are hearing in the industry, there appears to be some agreement that 3rd and 4th quarter will see an increase in REO inventory at a controlled pace.
Current foreclosure trends for December 2010
While Sales of Foreclosed properties appear to be down, the figures are misleading.
Many properties have been held off the market during the foreclosure freeze the past several months.
In fact, while we are still seeing the numbers down almost across the board, the properties actually hitting the market has all but stopped.
Where are these properties? When will the banks start releasing them? Why haven’t they released them? What effect will it have on the market once released?
Once these questions are answered, we can get a true picture of the future of the housing market.
Until then, we have to base everything on what current data is available.
One in every 376 housing units in Illinois has received a foreclosure filing in December 2010 according to RealtyTrac. This is down from 1 in every 311 in October.
The foreclosure activity in the Chicagoland area shows Cook county number one with 8117 in new foreclosure activity in December.
New foreclosure activity as defined by RealtyTrac is the total number of properties that received a foreclosure filing, default notice, foreclosure auction notice or bank repossession in the most recent month.
Top 5 foreclosure activity counties in Illinois for December
1. Cook 8117
2. Lake 883
3. Will 1041
4. Du Page 1099
5. Kane 624
Basically 65% are in pre-foreclosure, 15% public auction, 20% bank owned.
Foreclosure activity in December for the United States as reported by RealtyTrac shows Illinois still #4 from the last report in October.
1. California 65915
2. Florida 25641
3. Michigan 16061
4. Illinois 14042
5. Arizona 13561
6. Nevada 13472
7. Texas 11,162
8. Georgia 11,042
9. Ohio 13,233
10. Colorado 5123
Some other interesting figures are the average sales price by the top 5 counties in Illinois:
1. Cook- Avg Sales Price $264,197 Avg Foreclosure Sales Price $145.064 45.10% Savings
2. Lake- Avg Sales Price $306,108. Avg Foreclosure Sales Price $184.670. 39.68% Savings
3. Will- No Data Available
4. Du Page- Avg Sales Price $285,661 Avg Foreclosure Sales Price $190.074 33.47% Savings
5. Kane- Avg Sales Price $230,236 Avg Foreclosure Sales Price $111,237 51.69% Savings
With all of this data, the big question still looms out there. Where are the properties in these statistics? They certainly are not coming into inventory or being listed for sale.
I welcome your feedback and would like to know of other topics you may want to discuss regarding foreclosures, short sales, and REO (bank owned) properties.
“The 12 Days of Christmas” As Seen Through The Eyes Of The REO Agent.
The Twelve Days of Christmas
On the first day of Christmas,
my A.M. sent to me
An abandoned foreclosed property.
On the second day of Christmas,
my A.M. sent to me
Two discolored basements,
An abandoned foreclosed property.
On the third day of Christmas,
my A.M. sent to me
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the fourth day of Christmas,
my A.M. sent to me
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the fifth day of Christmas,
my A.M. sent to me
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the sixth day of Christmas,
A.M. sent to me
Six outstanding bills,
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the seventh day of Christmas,
my A.M. sent to me
Seven winterizations,
Six outstanding bills,
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the eighth day of Christmas,
my A.M. sent to me
Eight missing lockboxes,
Seven winterizations,
Six outstanding bills,
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the ninth day of Christmas,
my A.M. sent to me
Nine scheduled lockouts,
Eight missing lockboxes,
Seven winterizations,
Six outstanding bills,
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the tenth day of Christmas,
my A.M. sent to me
Ten listing agreements,
Nine scheduled lockouts,
Eight missing lockboxes,
Seven winterizations,
Six outstanding bills,
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the eleventh day of Christmas,
my A.M. sent to me
Eleven pipes a bursting,
Ten listing agreements,
Nine scheduled lockouts,
Eight missing lockboxes,
Seven winterizations,
Six outstanding bills,
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property.
On the twelfth day of Christmas,
my A.M. sent to me
Twelve squatters – squatting,
Eleven pipes a bursting,
Ten listing agreements,
Nine scheduled lockouts,
Eight missing lockboxes,
Seven winterizations,
Six outstanding bills,
Five angry Realtors,
Four BPO’s,
Three MMR’s,
Two discolored basements,
An abandoned foreclosed property!
Fannie Mae: REOs moving back to market
Back in September, Fannie Mae responded to “Foreclosure-gate” by halting evictions and closings on all bank-owned properties whose loans were serviced by GMAC, Bank of America, PNC Mortgage, JP Morgan Chase, One West Bank, and Sovereign Bank.
According to a memo from Fannie Mae, those properties will start moving back into active, available-to-market status this week, meaning REO specialists can proceed with the marketing and closing of these homes.
Current Foreclosure Trends for October 2010
The purpose of the following statistics is to give a quick snapshot of the most current data available for a specific month in the Chicagoland area and also provide an overview of where Illinois ranks as a state.
If you follow these figures each month, you will have a clear picture of where we are now and where the market is going.
One in every 311 housing units in Illinois received a foreclosure filing in October 2010 according to RealtyTrac.
The foreclosure activity in the Chicagoland area shows Cook county number one with 9,040 in new foreclosure activity.
New foreclosure activity as defined by RealtyTrac is the total number of properties that received a foreclosure filing, default notice, foreclosure auction notice or bank repossession in the most recent month.
Top 5 foreclosure activity counties in Illinois
- Cook 9,040
- Lake 1,465
- Will 1,379
- Du Page 1,232
- Kane 1,037
Basically 49% are in pre-foreclosure, 29% public auction, 22% bank owned.
Foreclosure activity in October for the United States as reported by RealtyTrac shows Illinois to be #4.
- California 66,475
- Florida 56,858
- Michigan 19,288
- Illinois 16,969
- Arizona 16538
- Georgia 14,850
- Nevada 14,205
- Ohio 13,233
- Texas 13,008
- Washington 6,346
This is only part of the picture as to where the market is heading.
Now take into consideration the estimated 7 million in “shadow inventory” and the current freeze on REO properties due to the “Robo signing” debacle and we have a whole new set of problems which I will discuss at a later date.
I welcome your feedback and would like to know of other topics you may want to discuss regarding foreclosures, short sales, and REO (bank owned) properties.
Foreclosure Freeze is causing the Big Chill with Closings
The chill in the air today is not just from the changing of seasons. We are about to run into an iceberg with the near halt of distressed property closings across the country.
Is anyone aware that the majority of the REO properties that are under contract can’t close because they are now part of the moratorium?
Let’s look at this from the standpoint of the home buyer. They put an offer on a property that has been probably vacant for over a year. Their offer is accepted by the seller and a closing date set. They hire a mover, pack up their things only to and find out a few days before closing that they can’t close. There is a title issue and the closing is delayed indefinitely.
Feel the chill? Wait, it gets better. Now what happens to all of those properties that can’t close? They are put on temporarily off the market status and sit there, empty. The bank incures more holding costs, the realtor doesn’t get a commission, and the home buyer does one of 3 things; hangs on hoping the moratorium won’t last, buys another property, or pulls himself out of the market until Spring. We now have one more vacant property to deal with this winter.
Please understand that the robo signing needs to be addressed and that the potential for any errors must be minimized. This is just another side effect of the moratorium. What I am trying to draw attention to is the fact that the properties currently vacant, under contract, and ready to close must be addressed sooner and not later.
This along with the ever growing ”shadow” inventory and the backlog being created by the foreclosure freeze is going to make this a very, very long winter. BRrrrrrrrr!
Frank DeNovi: Upscale foreclosures are changing the game
Robo-Signing scandal could dramatically slow up the housing recovery
While we in the REO business saw this coming, I really don’t think the general public understands the impact this will have on the already anemic housing recovery.
When this started to happen and JPMorgan Chase and GMAC Mortgage announced they were freezing foreclosures, the general public thought it may be good to slow down the amount of bank owned properties already on the market.
What most people fail to understand is this is backing up the “Shadow Inventory” even further. The immediate affect is all of the bank owned properties currently under contract and set to close are either being cancelled or given a minimum 60 day extension.
We had dozens of properties scheduled to close this month. Over half were either cancelled or extended for 60 days. . The deals cancelled were purchased by average homebuyer’s’ expecting to move into their new home this month who now have no place to go.
The ripple effect continues down the line. With over 1/3 of all the home sales across the country being bank owned or short sales, the numbers become staggering. The foreclosure process and inventories will have to be depleted before we will be able to start to see the recovery for home values.
