Bank Foreclosures Information

According to data from the Federal Deposit Insurance Corp., the foreclosure home inventories of 20 of 24 chartered banks in Saint Louis, Missouri have increased in the first quarter, compared to their foreclosure home inventories in last year’s first three months.

The 24 banks collectively posted $139.4 million in foreclosure home inventories in the first quarter, a 48-percent jump from the $94.2 value in last year’s first quarter.

Also, seven banks posted over three percent of their current loans as nonperforming – three months or more in default. In last year’s first quarter, only two banks posted more than three percent in noncurrent loans.

Truman Bank had the highest percentage of noncurrent loans – 10.42 percent. Following is PrivateBank, with 4.2 percent nonperforming loans. The other five banks, namely Business Bank of Saint Louis, Pulaski Bank, Jefferson Bank and Trust, Bank of Washington and Saint Louis Bank, had a noncurrent rate ranging from 3.08 to 3.41 percent.

Meanwhile, Saint Louis regional, national and community banks performed poorly in their lending in the first quarter. Bad loans originated by 24 community banks jumped by a staggering 282 percent in the first quarter compared to last year’s first quarter. Similarly, bad loans provided by six national and regional banks also increased by a staggering 248 percent.

The community banks collectively posted $41.7 million in bad debts in the first quarter, compared to only $10.9 million in last year’s first quarter.

The national and regional banks operating in Saint Louis collectively had $4.9 billion in nonperforming loans, compared to $1.4 billion in last year’s first quarter.

Additionally, 18 community banks posted more nonperforming loans in this year’s first quarter compared to last year’s first quarter. The six national and regional banks operating in Saint Louis posted more noncurrent loans compared to last year’s first quarter.

In the meantime, Marshall & Ilsley, the Milwaukee-based parent firm of Southwest Bank of Saint Louis, has extended for the second time its foreclosure moratorium by three months to September 30 in an effort to help reduce foreclosure home inventories in Saint Louis.

The bank’s first three-month foreclosure moratorium was launched in December 2008 and was extended at the end of March. Only homeowners staying in their homes are qualified for the moratorium.

Marshall & Ilsley’s Homeowners Assistance Program is a foreclosure home prevention program that should be emulated by other mortgage banks to contain foreclosures not only in Saint Louis but in other cities.

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Harvard University’s State of the Nation’s Housing 2009 report stated that the offspring of baby boomers will play a significant role in the recovery of the country’s housing market which is currently being pummeled with bank owned foreclosures.

According to the report, limits on credit and income are the factors that sustain the already three-year crisis. It also noted that the emerging progress in home sales made possible with the help of the Obama Administration is being derailed by increasing unemployment rate, bank owned foreclosures and strict lending process.

Echo boomers, who are the children of baby boomers of the post-World War II generation, may offer a big source of support for the housing market, according to the report. It explained that echo boomers are on renting ages between 25 and 44 and are entering the height of home buying.

The report said that echo boomers totaled more than five million compared with the number of their parents’ population.

Harvard’s director of Joint Center for Housing Studies Nicholas Retsinas said that with echo boomers’ big population and immigration, the stage is set for a possible housing recovery.

The report said that echo boomers will boost demand for the coming years, thus reducing bank owned foreclosures and stabilizing the housing market.

However, Retsinas pointed out that there are myriad of challenges that have to be faced and overcome before housing market stability could be achieved, adding that there is a need to stabilize the housing finance in the country.

Industry experts said that a healthy and stable housing market is a very important ingredient of the growing economy.

The collapse of the housing market has pressured the economy to remain in a longest recession ever, causing the lost of thousands of jobs which derailed the housing recovery.

Retsinas said that the housing recovery should come from the solutions that would be provided for foreclosures and job losses.

Meanwhile, mortgage interest rates continue to increase despite a federal effort to keep them low. The number of bank owned foreclosures also rose despite government efforts to help distressed homeowners remain in their properties.

It seems that foreclosures could not keep up with the growth of loan failures due to drastic drop of home prices and increasing job losses.

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Option adjustable rate mortgages (ARM) are a type of loan popular among 1 million borrowers who took them out during the peak of the housing market because of their low minimum payments.

Now, these payment-option ARMs are expected to reset higher, either next year or by 2011. The peak of this loan resetting is expected to happen sometime August 2011, when almost 54,000 mortgages recast, and the rise in the number of repossessed house will soon follow.

University of Pennsylvania’s Wharton School real estate finance professor Susan Wachter said that option ARM with high monthly payments is a threat to the repossessed house recovery and the economy.

She explained that the recast of option ARM will push the repossessed house supply to a higher level, undermining both the housing and economic market recovery. She added that the option ARM is partly the reason why the path towards the full recovery of the country’s economy and housing market is slow and time consuming.

Since 2004, over $750 billion option ARMs were initiated in the country. For example, a homeowner took out an option ARM of $315,000 to refinance his first loan on his house. He started his payment at 1 percent or below $100 per month.

Fast forward to today and the homeowner is already paying $3,500 monthly. Data from the U.S. Federal Reserve showed that interest rates on ARMs are usually very low in the first three months upon taking out of the loan.

ARMs usually recast every five years and low payments may end if the loan principal rises to as much as 125 percent of the original loan.

According to the Federal Reserve, option ARMs are usually marketed to borrowers who have good credit scores. Immigrants and older people are also favorite targets of lenders who offered option ARMs.

Meanwhile, refinancing is difficult to have in many states given the drastic drop in home prices nationwide. Also, mortgage rates are increasing from 5.29 percent to 5.59 percent for the period ended June 11.

The median price of a single-family home in California declined by 37 percent in April compared with $256,700 during the same month a year ago.

Industry experts agree that amortizing option ARMs will cause payments to surge and worsen the repossessed house crisis.

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Members of the Florida Minority Community Reinvestment Coalition will stage a protest against the minority lending practices of the Bank of America which they believed contributed to its high bank foreclosure property rate. Coalition President Al Pina is set to stage a hunger strike to protest what he believed to be a lack of transparency by the Bank of America on low-income minorities.

Pina pointed out that the banking institution has a high bank foreclosure property rate, high interest rates for credit card and failed to increase available credit for struggling businesses. All these, Pina said, while the bank is accepting federal bailout funds.

The coalition believed that the lending practices of the Bank of America violated the Community Reinvestment Act of 1977. The law was passed to stop banks from practicing redlining, which means denying loans to borrowers in underserved areas.

A representative of the bank disputed charges of the coalition, pointing out that Bank of America has been the recipient of outstanding Community Reinvestment Act ratings for six consecutive terms.

However, Pina claimed that Bank of America is one of the three major banks in Florida that refuses to accept and follow the rules of transparency. The other two banks are Wachovia and Washington Mutual which were acquired by Wells Fargo and Chase Bank, respectively.

The coalition is convincing minority customers in the state to stay away from the Bank of America and instead, patronize Wells Fargo. In line with this, the coalition launched the Wells Fargo YES-Bank of America No campaign.

Bank of America Florida’s Mike Fields said that the bank is aware of the needs of low-income and minority communities in the state and nationwide. In fact, the bank started delivering its $750 billion investment and community development lending goal in 2005, Fields said.

Meanwhile, Pina pointed out that transparency and accessibility are the biggest problems with Bank of America. He said that some major banks have allowed the coalition to monitor their minority lending practices to prevent high bank foreclosure property rate.

Furthermore, Pina claimed that Bank of America’s sub-prime mortgages, which are the root cause of bank foreclosure property crisis that the housing market is experiencing right now, is worse than Wells Fargo. He said that 65 percent of mortgage loans issued by the bank to Florida minorities in 2005 to 2006 were sub-prime.

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Many homeowners in Nevada were relieved to hear about the state’s foreclosure help program that was passed by the state assembly in June and which will take effect on July 1.

But homeowners need to know that there are restrictions and requirements for participants. They should approach a state HUD-certified foreclosure help counselor or visit the web site of the Nevada Supreme Court and check if they are eligible to participate in the program.

Basically, the program helps homeowners work out an affordable repayment scheme with their lenders through a court-supervised mediation.

Homeowners and lenders will each pay $200 for the mediation process and non-native English speakers need to bring their own translators.

The major limitation of the foreclosure help program is the scope of the program. It applies only to borrowers who receive a default notice starting July 1, which excludes many borrowers who have already defaulted.

Homeowners and advocates are sad about the restriction because many homeowners purposely defaulted when their lenders refused to modify their loans because they have not been delinquent.

In response to complaints about the scope of the program, the state Supreme Court advised homeowners who have defaulted before

July 1 that they can still participate in the program as long as they can get the consent of their lenders.

Bill Uffelman, president of the Nevada Bankers Association, said that many homeowners can still negotiate with their lenders even without the court mediation law.

Another limitation of the foreclosure help program is its application to owner-occupied homes only. Court mediation will not be provided for investors who speculated on home prices.

Unemployed homeowners are also exempted from the program. A bank representative said that any borrower who does not have a job can never be helped by the program. He added that only homeowners who have adequate monthly income and who did not buy houses beyond their financial capabilities will be helped by the program.

The other major limitation of the foreclosure help program is the voluntary nature of the loan modification part of the mediation process. The participation of the lender in the court-supervised mediation process is mandatory, but the achievement of a modified loan is not mandatory. Much of the process still depends on the lenders’ policies and their representatives in the mediation process.

Additionally, homeowners who have already filed for bankruptcy or who have already surrendered their houses to their lenders are not eligible for the foreclosure help program.

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As predicted by critics of California’s government foreclosure prevention program, seven major mortgage lenders in California have just been exempted from the foreclosure moratorium imposed across the state, and more are expected to become exempted.

The first three big lenders to get exemption were Bank of America Home Loans, Carrington Mortgage Services and CitiMortgage.

The law passed by the state in February and implemented in June requires lenders to notify defaulting homeowners and give them at least 90 days to restore their loans to normal status or work out a loan modification or loan refinancing before foreclosing on them.

But the law also provided a way by which lenders can get exempted from the foreclosure moratorium – establish a comprehensive a loan modification program. Since many have already established their loan modification programs, many are already exempted.

The web site of the state’s Department of Corporations has already listed 38 lenders which received temporary immunity from the foreclosure moratorium as their programs are being reviewed.

The other lenders which got exemptions early were EMC Mortgage, Kondaur Capital Corp. and Select Portfolio Servicing.

Among the big lenders who were given 30-day temporary reprieves were Bank of America NA, JPMorgan Chase Bank, Wells Fargo Bank NA, Wells Fargo Home Mortgage, Wells Fargo Financial and America’s Servicing Company.

Some critics said that the government foreclosure prevention law will not be helpful because the three major lenders, which will surely get exemption, are also owners of Wachovia, Washington Mutual and Countrywide Financial, considered the three largest banks that provided toxic home loans.

Other banks that got temporary immunity were GMAC Mortgage, American Home Mortgage Servicing, HSBC Mortgage Services and U.S. Bank National Association.

Meanwhile, the Department of Financial Institutions gave temporary approval for the loan modification programs of seven applicants and the Department of Real Estate approved two applicants temporarily.

Rick Simon, spokesperson for Bank of America Home Loans, said his bank easily got the 90-day exemption because the bank has been a leader in implementing loan modifications under the federal government foreclosure prevention program.

Mark Leyes, spokesperson for the Department of Corporations, said his agency expects hundreds of companies to get involved in the government foreclosure prevention program.
In the past couple of years, California has posted over 365,000 foreclosures listings, with around 37,000 occurring in the Sacramento region.

Despite criticisms of the law passed recently to help facilitate the federal government foreclosure prevention program, California officials expect the moratorium and the loan modification programs of lenders to help more troubled homeowners.

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Tennesseans who want to prevent turning their properties into a repossessed house due to missed mortgage payments may host a yard sale to earn extra income to boost their finances.

This is the suggestion of Consumer Credit Counseling Service (CCCS) of East Tennessee. CCCS, which provides free housing counseling and foreclosure prevention services, said that hosting a yard sale would provide an opportunity to homeowners struggling to make mortgage payments to earn extra income and save money to bridge the financial gap brought about by the economic crisis.

Aside from helping homeowners prevent repossessed house, a yard sale is a great way for them to reduce clutter in their homes and relieve them of unused items.

CCCS offers tips to homeowners who want to host a yard sale. The first thing to do is choose a date for a yard sale. As much as possible, do not schedule a yard sale on holiday weekends. CCCS said to have the scheduled event and date approved by the local government or homeowners’ association.

It would be better if other residents in the neighborhood could join in the yard sale. Hosting a multi-family sale event could bring in several advantages, including increased traffic and shared advertising costs.

CCCS suggested promoting the event by using local advertising and signs. When pricing items for sale, remember that many prospective shoppers are looking for cheap deals and the lower items are priced, the more they are attractive to buyers. If an item is in good condition, the general rule is to sell it not more than 30 percent of its retail value.

According to CCCS, homeowners who are hosting a yard sale should be prepared to deal with shoppers who will haggle for a lower price.

CCCS President Daru Burdge said that the counseling provider’s goal is to motivate distressed homeowners to act on the foreclosure problem immediately and understand their options. He pointed out that CCCS counselors are trained to assist and help homeowners manage their finances and to determine various repossessed house prevention options available to them.

CCCS is a certified U.S. Department of Housing and Urban Development (HUD) housing counseling agency with HUD-trained counselors who can help distressed homeowners avoid the repossessed house nightmare.

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Owner Randall Nixon plans to sell a part of the 127-acre family-owned farm in West Friendship, Maryland and to expand the business. The plan is to develop a multi-generational housing facility to be called West Haven at Nixon’s Farm.

However, the fact that Nixon’s Farm is on listings of bank owned homes is hampering the owner’s plan to turn the place into a haven for older people where they can live with their grandchildren and children.

According to 52-year-old Nixon, the development plan is consistent with his family’s values. His mother, who is 81 years old, lives in a house on the farm, near the home where he and his wife reside. Nixon believes that there will be a paradigm shift in the way people live as a result of the recession.

About 97 acres of the farm are on listings of bank owned homes and scheduled to be auctioned by the American Auctions and Appraisals in front of a courthouse in Ellicott City on June 24. The repossessed assets included the Pennsylvania Dutch Bank barn which was transformed into a ballroom.

A total of three foreclosure cases have been filed against properties of the Nixon family since 2006. The foreclosure cases resulted from the failure of the family to pay mortgages on loans taken out to fund development plans for the property.

Columbia Bank is the one that placed the delinquent 97-acre on listings of bank owned homes. The farm has been the site of various company picnics and wedding events. Nixon is hoping that the bank will consent to his request to postpone the auction of the property.

He explained that he had arranged financing on July 1 which will be used to settle the foreclosure case and jump start his development plans.

Nixon’s development plans include the construction of about 47 houses, with 50 percent of them allotted for assisting living. The plan also includes the preservation of scenic views and open spaces, with most construction to be done in the area surrounding the central banquet hall. The 5,000-square foot central banquet hall itself will be expanded to 15,000 square feet.

Despite the inclusion of the farm on listings of bank owned homes, the farm continues to experience a booming business.

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Despite constantly battling against low foreclosed home for sale prices since the start of the foreclosure crisis, many home builders have been able to endure the battering.

National home builders have been cutting costs, streamlining processes and building smaller-size homes as they cope with losses and stock price declines.

In the West this June, increases in sales of new homes have pushed up home builder confidence and boosted hopes that the effects of foreclosed home for sale prices on new construction are weakening.

The National Association of Home Builders/Wells Fargo HMI or Housing Market Index increased by 2 points in Western states, putting current reading to 14, just one point below the said HMI reading of 15, which represented a drop of one point.

Despite the uptick in home builder confidence in Western states, the confidence level remains low, as any reading lower than 50 represents negative sentiment. Compared to other regions, the West had the lowest confidence level.

NAHB chief Joe Robson explained that the improvement of sales of new homes in recent months has improved home builder confidence levels in many areas. He attributed the increase in sales to the improved home affordability, the first-time buyer federal tax credit and lower mortgage rates.

However, Robson is concerned about the situation of the home building industry in the coming months. He said that the federal tax credit is expiring in November, mortgage rates are increasing and loans for housing construction are still very difficult to find and obtain.

Home builders in Northern Nevada are particularly affected by current developments because of large foreclosed home for sale inventories in the area.

Nevada home builders are hesitant about building new homes because of foreclosed home for sale prices that are falling further and further down to bottom levels.

Gregory Peek, a top executive of Reno-based real estate developer ERGS Properties, said that it is difficult to build a home that can compete with foreclosed home for sale prices. He explained that Northern Nevada is different from other areas in the region where some builders have been making sales.

Peek admitted that Northern Nevada experienced high peaks in home prices during the housing boom, so it is expected that they are now experiencing among the lowest bottoms in prices.

Nevertheless, many Western home builders, including Peek, expect that they will recover once foreclosed home for sale prices stabilize.

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The city of Syracuse in Central New York got along fairly well during this time of recession as indicated by the fair number of properties on bank foreclosure listings. According to Brookings Institute’s quarterly report MetroMonitor, the city is not doing as badly as the rest of the country.

However, not everything is rosy in Central New York. In Syracuse metro area, the economic activity dropped by 5.4 percent from its peak in 2007, according to economist Howard Wial. Counties included in the Syracuse metro area are Madison, Oswego and Onondaga.

Wial said that the decline in the gross metropolitan product placed the Syracuse metro area in the 11th ranking for worst among top 100 U.S. cities. Other economic indicators, except the number of properties on bank foreclosure listings, performed badly.

The average wage in the area dropped by 2.2 percent from the last quarter of 2008 to the first three months of 2009. The wage decline in Syracuse was the second worst recorded nationwide, according to the report. The city that topped the worst average wage was Rochester, with a 2.3 percent drop.

Meanwhile, the real estate market in Syracuse is the only sector showing some positive activity. The report noted that 0.58 out of 1,000 houses in the city were placed on bank foreclosure listings. According to Brookings Institute, the city’s foreclosure rate was the lowest in the country.

Brookings Institute’s MetroMonitor report studied the financial condition of 100 biggest metropolitan areas in the country to get a glimpse of national economic trends. The ranking of cities was based on changes in economic indicators, including foreclosures, economic productivity, unemployment rates and home prices.

Co-author Alan Berube said that all cities included in the study are suffering from the effects of economic crisis. However, he pointed out that the hardships and difficulties are not equally shared.

He said that some areas have experienced a slight economic downturn and are in the process of recovering from the recession. Meanwhile, those who live in metropolitan areas that showed a weak economic performance should brace themselves for a tedious and long recovery.

The report claimed that effects of recession have been distributed unequally across the country, with unemployment data in Provo, Utah surging by 5.1 percent, 17.5 percentage points in Modesto, California and prices of properties on bank foreclosure listings drastically dropping by 30.6 percent in California city, Stockton.

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