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Friday, October 9, 2009
According to this REUTERS article, Foreclosures mark pace of enduring U.S. housing crisis, in the US there is a foreclosure every 13 seconds which translates into "more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending, a nonpartisan watchdog group based in Durham, North Carolina. With nearly two million already this year, the flood of foreclosures shows no sign of abating any time soon."
According to the article, "the country's worst housing downturn since record-keeping began in the late 19th century may only get worse since foreclosures, which started with subprime borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment. In congressional testimony last month Michael Barr, the Treasury Department's assistant secretary for financial institutions, said more than 6 million families could face foreclosure over the next three years."
The article references a September 2009 report from a FL foreclosure task force as finding that people are now defaulting on their mortgages for different reasons. The report states "People are no longer defaulting simply because of a change in the payment structure of their loan. They are defaulting because of lost jobs or reduced hours or pay."
According to the article, "A recent pickup in sales and home prices in some regions has been heralded as a sign that the crisis in residential real estate may be close to bottoming out, after the steepest price decline since at least 1890. But nearly half of recent sales have been attributed to foreclosures or "short sales" at bargain-basement prices. Even as the U.S. economy seems to be recovering from its worst recession since the Great Depression, mortgage delinquencies continue to rise. And that adds risk to any relatively upbeat assessment, since foreclosures depress the value of nearby properties while eroding the net worth of homeowners and the tax base for communities nationwide. The Center for Responsible Lending says foreclosures are on track to wipe out $502 billion in property values this year. That spillover effect from foreclosures is one reason why Celia Chen of Moody's Economy.com says nationwide home prices won't regain the peak levels they reached in 2006 until 2020. In states hardest-hit by the housing bust, like Florida and California, the rebound will take until 2030, Chen predicted."
The article quotes Celia Chen of Moody's as saying "The default rates, the delinquency rates, are still rising. Rising joblessness combined with a large degree of negative equity are going to cause foreclosures to increase. Anyone doubting that the recovery in U.S. real estate prices will be long and hard should take a look at Japan, Chen said. Prices there are still off about 50 percent from the peak they hit 15 years ago."
According to the article, the chief economist for the Mortgage Bankers Association, Jay Brinkmann, thought that foreclosures would peak in the second half of 2010. The problem is that this somewhat rosy prediction is based on unemployment falling in 2010 after reaching a peak "barely in double digits by the middle of next year." As we already know, the US unemployment rate reached 9.8% in September 2009 and show no signs of going down anytime soon.
I think this article provides even more evidence that the US real estate/housing short sale and foreclosure crisis is not going to end anytime soon. As more people lose their jobs, short sales and foreclosures will increase for the next several years since it will take until at least 2011 before the unemployment starts to go back down and even then it will take until at least 2012 or 2013 before the US unemployment reaches a level where people can afford to pay their mortgages. The net effect of all this will be that US real estate and housing prices will continue to decline for the next several years leaving more homeowners underwater.
If you are a homeowner in Middle Tennessee who is unemployed, have seen your income decline, has been turned down for a loan forbearance or loan modification and your home is worth less than your mortgage balance, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle TN Short Sale and Foreclosure Expert and REALTOR.
Tuesday, October 6, 2009
According to this New York Times article, A Plan for Forbearance, due to continuing high unemployment "federal regulators are intensifying efforts to curb the effects of job losses or underemployment before they fuel another wave of home foreclosures. The Federal Deposit Insurance Corporation (FDIC), which protects consumer deposits when banks fail, recently recommended that lenders provide certain borrowers with a temporary respite from mortgage payments, or a forbearance. That relief would last up to six months, and sometimes longer, as the lenders work on long-term loan modifications." This new forbearance plan was announced in September 2009.
The article quotes Michael H. Krimminger, the special adviser on policy to the FDIC chairwoman Sheila C. Bair, as saying "We want to make sure lenders do this as a strategy to mitigate losses to the F.D.I.C., but also because it’s the right thing to do."
According to the article, the FDIC's plan recommends (i.e. does not require) that certain lenders (see below) reduce loan payments to "affordable levels" for borrowers who cannot pay their mortgages as a result of login their jobs, or having their incomes reduced. The FDIC says that the new reduced mortgage payments would "be low enough to allow for reasonable living expenses in addition to the mortgage." The plan "applies only to the 53 financial institutions that relied on the F.D.I.C.’s insurance fund while acquiring failed banks. It does not include the four major mortgage lenders: Citigroup, Wells Fargo, JPMorgan Chase and Bank of America. These banks already have unemployment forbearance programs, though they differ from the F.D.I.C. plan."
The article offers some information about about the proprietary plans offered by Wells Fargo, Bank of America, Citigroup and JPMorgan Chase. A summary of those plans is below:
- Citigroup - The article states that in March 2009 "Citigroup introduced its Homeowner Unemployment Assist program, which lowers the monthly payment for many unemployed borrowers to $500 for three months. To qualify, a homeowner must have a loan owned and serviced by CitiMortgage, and be 60 days or more delinquent, among other things."
- Wells Fargo - The article states that Wells Fargo has had forbearance programs in place for years for years for "unemployed borrowers who cannot pay their mortgages". According to Debora K. Blume, a Wells Fargo spokeswoman, the forbearance terms are "highly dependent on the customer’s full financial and personal circumstances."
- JPMorgan Chase - The article states that a spokesman for JPMorgan Chase said "if the borrower’s income is too low or not certain, but there are prospects for future employment, we may offer a loan forbearance program that allows a borrower to pay a reduced amount, or even zero, for a limited length of time, often three months."
- Bank of America - The article states that "Bank of America offers up to six months of forbearance, according to Jack Schakett, the bank’s credit loss mitigation strategies executive." The article quotes Mr. Schakett as saying "borrowers generally receive better forbearance packages if they have "reasonable prospects for employment," though his bank also examines their financial management skills. Bank of America looks at mortgage-payment habits and overall debt payment success, among other things. People who were already struggling with their mortgage payments would be less likely to end up with a job that would help them be successful in the future."
According to the article, the lenders insist that "they have been working together, and with the federal government, to create more consistent strategies for unemployed borrowers." Personally, I laugh at this. Lenders are completely botching this situation and causing significantly more short sales and foreclosures than they need to.
If you are a homeowner in Middle Tennessee who has lost their job, but have either been turned down for a loan forbearance or loan modification, or you still cannot pay your mortgage and your home is worth less than your mortgage balance, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.
If you need to sell your home fast via short sale you can my request help on my website JimTheRealEstateExpert.com.
Tuesday, September 15, 2009
- More than 1,000 financial institutions could fail.
- Housing prices will likely to fall another 12 percent in the next year making the total decline approximately 40 percent since the market began its steep decline. This will result in nearly one half of all homeowners owing more on their mortgages than their houses are worth.
Regarding commercial real estate, he warns that regulators are repeating some of the same mistakes made during the financial crisis. He states "Allowing forbearance in the deeply troubled sector will mask underlying problems that will come back and bite the economy".
While I do have a BA degree with a major in Economics from an Ivy League University, I am not a professor or professional economist. However, I have been saying much of the same for months now. That is that housing prices are still too high and there is still too much new construction. We do not need new construction reduced to such and such levels - we need all new spec construction to come to a halt for at least a year. Of course, that will not happen. Instead new homes will be built, housing will continue to decline, more short sales and foreclosures will occur and more bailouts will be doled out to foolish banks and lenders. It's an endless cycle of disaster.
With respect to the Middle Tennessee real estate market:
- Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
- Williamson County Tennessee: Brentwood TN and Franklin TN
- Davidson County Tennessee: Nashville TN and Belle Meade TN
Tuesday, September 1, 2009
Here is my synopsis of the real estate market based on the information above and other information.
- The most financially responsible borrowers (prime mortgagors) are hurting. Even large down payments are not enough to counter the huge price declines. More homeowners underwater = more foreclosures.
- Foreclosures are increasing in general. This will cause more price declines.
- While the "Fab 4" (California, Florida, Arizona and Nevada) are still the kingdoms of foreclosure and prices will surely continue to fall in those markets, the decrease in % of total foreclosures nationwide from 46% to 44% while overall foreclosures increased means that foreclosures in other states increased at a higher pace that the "Fab 4" states. This means prices will decline nearly everywhere.
- More distressed homeowners will cause more people to try to rent out their homes. Until prices decline to a point where monthly rents exceed total monthly housing payments prices will continue to decline. Rampant foreclosures will make sure prices actually head below this normal equilibrium.
- Government meddling (expanded FHA mortgages, tax credits, etc.) has not and will not work to save the real estate market. The market is correcting itself to sustainable levels. FHA mortgages are now failing at alarming rates. Tax payers will once again have to foot the bill for regulatory incompetence. It seems that very few people are stating the truth about the real estate market. That is that high housing prices are bad for people (especially lower income people) and high commercial real estate prices are bad for business, which is in turn bad for job growth. Also, real estate has never (until the last few years) been the driver of the economic bus. It has been the passenger, meaning that economic growth (and the resultant business, job and income growth) caused housing prices to increase and new construction to increase. Not the other way around. Any attempt to work in reverse logic = insanity.
Tuesday, August 11, 2009
In short, the real estate market is still in for a world of hurt in formerly fast growth areas such as CA, NV, AZ and FL. Rising commercial loan defaults will lead to large numbers of short sales and foreclosures. The coming ARM resets will cause even more problems. Together, they will wreak more havoc on the real estate markets across the US over the next 12-24 months. Only after these issues play out will we hit a true real estate bottom.
Tuesday, August 4, 2009
- The home owners were shaky from the beginning and so they are not the most financially responsible people to start with.
- Their homes are worth far less than the their mortgage balances. Eventually these people realize that they will never "get even" and just give up by letting the go into foreclosure.
The result of all of this is that short sales are rely best solution for the lenders and the homeowners since it is statistically proven that loan modifications will not work. Regardless of what the all knowing Obama says, keeping people in their homes is not the answer to our real estate crisis. Letting the market hit bottom as soon as possible is.