Bank Foreclosures Information

The city of Minneapolis in Minnesota has been offering financial assistance to people who want to buy bank foreclosed homes for sale in neighborhoods severely affected by the foreclosure crisis.

Minneapolis Mayor R.T. Rybak said that so far, about 100 people had become homeowners under the city’s forgivable loan initiative which aims to have people live in foreclosed houses.

Under the Minneapolis Advantage Program, a $10,000 loan is provided for people who want to buy a foreclosure home in neighborhoods severely affected by the foreclosure problem. The funds are used for paying the initial and closing costs.

Borrowers have the option not to repay the loans if they live in the properties they had purchased for not less than five years.

City leaders are hoping that the program would help homeowners reclaim and revive communities across Minneapolis that have been suffering from high repossession rates.

Foreclosure houses could greatly affect neighborhoods as they pull down prices and values of properties in surrounding areas. City officials believed that new buyers could help a lot in fixing neighborhoods devastated by foreclosures by renovating abandoned and vacant houses.

Rybak said that the program allowed the city to invest in bringing back the economic vitality and sustainability of neighborhoods destroyed by the increasing number of foreclosed houses. He added that the program is a positive measure to getting abandoned and vacant foreclosure homes return to productive use.

Minneapolis launched the program last year with about 50 loans. Because of the success of the program, Rybak and the city council have decided to fund another set of loans this year.

The city money for the program is also supported by a $1.5 million grant from the Federal Home Loan Bank of Des Moines Affordable Housing Program. This allows enough funds to provide 200 loans.

Interested buyers could still avail of the $10,000 funds by applying for the loan through their mortgage lenders.

Minneapolis foreclosure has been rising since the start of this year. In the first quarter, foreclosure filings were made on 6,800 properties, an increase of 10 percent compared with the last quarter of 2008 and 71 percent from the first quarter the previous year.

Just like other cities across the country, the growing unemployment rate is taking up all the blame for the rising foreclosures in the city.

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Over 14 percent of Ohio homes purchased with loans were in default or had already become foreclosed houses for sale in the second quarter of this year, according to a bank survey conducted by the Mortgage Bankers Association.

In the first quarter, 13 percent of homeowners in the state with home loans were in default or in foreclosure.

Across Ohio, almost 9.8 percent of mortgage borrowers were in default by 30 days or more but not yet in foreclosure in the second quarter. Approximately 4.5 percent of homeowners with home loans were in the process of foreclosure.

Nevertheless, Ohio is not among states with the worst default rates. Florida is still the highest in default rate, with nearly 23 percent of all its mortgages in default by at least a month or in foreclosure. California, Nevada and Arizona are the other states following Florida’s default rates.

In a nationwide survey of foreclosures in the second quarter of 2009, Ohio ranked 12th in foreclosure rate, with 1.16 percent of all households receiving a default or foreclosure filing.

Jay Brinkmann, the lead economist of MBA, said that the mortgage problem will continue to worsen until 2010 and 2011.

He predicted that unemployment and home loan defaults will reach their highest levels midway in 2010 and that foreclosures will reach their peak about 6 months later.

Brinkmann further explained that there will be no significant reductions in default and foreclosure rates until the unemployment problem is solved. He also cited the situation of homeowners in many areas where home values have gone down far below their loan amounts.

Across the U.S., over 13 percent of households with home loans were in default by at least a month or in foreclosure in the second quarter. With a 14-percent rate, Ohio is in a worst state of delinquency.

According to housing analysts, the high default rates arose from rising unemployment rates and increasing defaults in the home loan category previously thought as safe from delinquency and foreclosure.

In 2008 and in the first months of 2009, only borrowers who took out subprime and other risky home loans were defaulting and going into foreclosure. But now, borrowers who had strong credit, had higher incomes and who took out prime loans with proper documentation are the ones missing their monthly payments because of reductions in income and loss of jobs.

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Economists are trying to find some hope in the current economic situation in Rhode Island. Trying not to be dampened by the persisting house repossession activity in the state, economists pointed out some positive news, including the slowing unemployment, few jobless claims and home sale gains.

In June, Rhode Island posted an unemployment rate of 12.4, making it the second highest among states, behind Michigan. Some economists noted that the figures could be worse if taken into account the almost 25 percent of people who have settled for having part-time jobs or just gave up looking for employment.

Economists are hoping that these positive news, withstanding the growing foreclosure activity, could indicate the end of recession in the state and the start of the recovery. However, they cautioned that people who have been jobless for quite awhile would not find it easy to get back on their feet immediately because the future for the job market will continue to be bleak for some time.

A survey of state residents’ attitude in May showed that 69 percent of respondents personally knew relatives or friends who lost their jobs. The survey noted that even people who have stable employment are being affected by the economic downturn.

Overall, Rhode Island’s economy is in a poor state. The bankruptcy rate in the state rose by 8 percent in the first half of 2009, compared with the same period the previous year. The number of people who have depleted their resources, indicating that they have been without work for a long time now, increased twice in June.

Furthermore, the median value for single family homes in the state dropped by 23 percent from April to June this year compared with the same period last year. Meanwhile, the median sale price for single family homes declined by 6 percent. But the figures exclude sales of short sales or foreclosures.

Industry analysts said that the increase in the number of properties sold was due to low prices and interest rates, in addition to the federal tax credit of $8,000 for first-time buyers.

On the other hand, economists are expecting an easing in the employment market despite the continuous increase in the unemployment rate. Their optimism is pushed by the slow pace of unemployment claims. They believe that Rhode Island’s unemployment rate would go down if people will start to move out of the state or find employment in neighboring states of Connecticut or Massachusetts.

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Both Ada County and Canyon County in Idaho saw record number of house repossession filings in July. Both counties posted over 800 combined default notices last month. The county of Ada leads the foreclosure filing activity with 534 notices, an increase from the 493 filings posted in June.

Meanwhile, default notices in Canyon County reached 285 last month, showing just a slight gain from the 279 posted in June, but still below the 346 filings posted in March.

Industry analysts said that the trend of increasing foreclosure filings is expected to continue the rest of this year and through 2010. They pointed out that the number of filings posted so far is just a tip of the iceberg, with more expected to swamp the housing market.

They cited the rising unemployment rate, scheduled resetting of adjustable-rate mortgages, declining property values and tighter credit as factors driving the foreclosure trend.

Recent market data showed that listings of distressed properties, including bank foreclosures and short sales, increased by almost 3.6 percent in the Treasure Valley area last month, for a total of 3,788 foreclosure properties.

Short sale deals rose by 1.5 percent in July compared with the previous month. Short sales mean lenders approved the sale of distressed properties by homeowners for less than the total amount they owed for a mortgage.

Data showed that short sale started at 1,540 this year and has since increased steadily every month, reaching 2,686 at the end of July.

Bank foreclosure listings in the area went down as low as 986 in May but rebounded the following two months, increasing by as much as 9.1 percent last month for a total of 1,103.

Meanwhile, the metropolitan area of Boise-Nampa posted 5,214 foreclosure filings, indicating that one out of every 46.5 households received notices of defaults, auctions or bank repossessions. The figures earned the metropolitan area the 32nd spot in terms of filings among 200 areas in the country with population of over 200,000.

Statewide, Idaho was ranked as one of the states in the country with the worst foreclosure rate last month. According to market data, one in every 479 properties has been foreclosed, earning the state the 10th spot in the foreclosure rate ranking.

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Multiple offers are returning to many housing markets as banks create buying frenzies by releasing their real estate owned foreclosures for sale to the market at low prices.

According to agents and brokers, banks are deliberately listing their foreclosed properties under value to create competition among buyers, get multiple offers and increase the sales price.

In many markets across the country where there are a lot of short sales and foreclosures in the past several months, homebuyers and investors have been competing to get the best deals.

In Seattle, homes listed at $300,000 get a lot of offers and are often sold in its first weekend of listing. Based on data from the National Association of Realtors, the median price for an existing single family home in the area covered by Tacoma, Seattle and Bellevue in the second quarter has fallen by 13.7 percent from the second quarter of 2008.

Also, according to a home price index, home prices in the Seattle metro area have dropped by around 20 percent from their peak level in 2007.

These price declines have created a frenzy of home buying, shrinking inventories of homes for sale and increasing pending home sales in the Puget Sound region in July by 21 percent from July 2008, according to a regional multiple listing service.

Housing market analysts said multiple offers are rising in markets that suffered sharp home declines but are still viewed by many as desirable markets.

In Cape Cod, Massachusetts, area brokers have observed that oftentimes multiple offers arise because banks have been slow in responding to purchase offers. They also said that foreclosure homes priced under $200,000 get the most number of offers.

In the past months in Chicago, real estate businessman Paul Gorney has observed that homes priced below $400,000 are getting multiple offers. He has interpreted this increase as an increase in demand for beginner homes. Even short sales, according to him, have been getting a lot of offers as soon as they are listed.

In Montclair, New Jersey, brokers said sellers routinely list their homes at low prices, hoping that their low initial asking price will create a frenzy of offers and will drive up the sales price.

Housing analysts however point to areas battered by foreclosures, such as Fort Myers in Florida, as having the sharpest rises in multiple offers. Bank owned homes oftentimes receive over 30 offers with prices about 150 percent above the asking price.

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William C. Thompson Jr., comptroller of New York City, said that the city’s Foreclosure Prevention Helpline was able to help about 5,000 troubled homeowners avoid foreclosed VA homes, HUD and bank foreclosures.

Thompson said that his office started the Foreclosure Prevention Helpline on April 26, 2007 with the intention to help thousands of individuals and families who are in danger of losing their properties to foreclosures. Since then, nearly 5,000 sought the helpline assistance.

Thompson said that during these trying times, families who are struggling to pay their monthly mortgages should be given help. He has been working to help residents of New York City obtain the financial skills crucial to avoiding the threat of foreclosures.

The Helpline has handled 4,815 calls from distressed homeowners. As a result, 2,614 cases were opened. In Queens, 865 cases were opened or 33.09 percent, 689 or 26.36 percent in Brooklyn, 476 or 18.21 percent in Bronx, 162 or 06.20 percent in Staten Island and 47 or 01.80 percent in Manhattan. The Helpline also handled 375 or 14.34 percent cases outside the city.

The Helpline concept involves linking callers with housing counselors certified by the U.S. Department of Housing and Urban Development (HUD). Also, members of the Community Action Center of Thompson’s office received comprehensive training to allow them to handle repossession cases and expertly monitor each foreclosure case to make sure that it is provided with necessary help.

Meanwhile, Thompson published the Foreclosure Prevention Guide that provides pertinent information about mortgage loans, how to protect properties from foreclosures and counseling services to avoid repossession.

New York City saw an increase in the number of foreclosure filings last month. In July, about 2,517 households were in some kind of foreclosure proceedings, representing a 15 percent rise compared with June figures and July the previous year.

Industry analysts said that the jump in foreclosure activity in the city follows a brief rate reduction as a result of the 90-day grace period given to troubled homeowners before the start of the foreclosure process. They said that the law did not stop the foreclosure process, only delayed what is inevitable.

Queens is the borough leader in terms of high foreclosure rate, with a total of 939 last month, representing an 11 percent rise from June and 1 percent from the previous year.

Industry analysts expect more foreclosure increases as default notices in the city hit 2,183 last month.

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The Federal Home Loan Bank of Boston posted a net loss of $4.2 million in the second quarter largely because of write downs in mortgage-backed securities clobbered by bank repo homes. In the second quarter last year, the bank posted a net income of $71.4 million.

In the second quarter this year, the bank posted $211.1 million in write downs, with approximately $71 million directly affecting the bank’s net income.

Meanwhile, the bank’s average advances dropped to $48.1 billion in the first 6 months of 2009, a decrease of $11.8 billion from the same six-month period in 2008.

According to FHLB, the decline in advances was prompted by the decision of member banks to deleverage their balance sheets in an effort to preserve their capital levels. Member banks also depended less on advances from FHLB as they experienced significant increases in deposits. Investors deposited their funds in banks after experiencing substantial stock market losses.

The June 30 statement by FHLB showed that its capital was $2.6 billion, lower than the $3.4 billion reported 6 months earlier. The decrease has been attributed by bank executives to investments in securities backed by Alt-A home loans.

FHLB said that the biggest risk faced by the bank is its portfolio of $3.22 billion Alt-A mortgage-backed securities. Alt-A mortgage loans are risky because they were provided to borrowers with little financial documentation and weak credit scores. According to the bank’s statement, most of the Alt-A investments, amounting to $2.5 billion, are junk-rated mortgage securities.

The bank also added that because of the continued rise in defaults and foreclosures on Alt-A mortgage and subprime loans, prices for subprime and Alt-A mortgage-backed securities have been trading for lower than 50 cents on the dollar.

Meanwhile, in a letter sent to member banks by FHLB of Boston CEO and president Edward Hjerpe III on August 12, Hjerpe explained that the bank could suffer additional losses in certain investments due to uncertainties in the capital and housing markets. To protect the bank’s capital and retained earnings, he said that the bank is extending its moratorium on quarterly dividend payouts and excess stock repurchases despite its negative impact on members.

However, Hjerpe assured members of the status of FHLB of Boston as a strong low-cost source of funding despite the economic downturn. He reiterated that the bank remains compliant with all regulatory bank capital ratios as of the end of the second quarter.

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The commercial real estate market in California is currently taking a beating from the foreclosure crisis that has been pummeling the residential real estate market for several years now. Adding to the growing number of bank foreclosed properties in the state are Maguire Properties’ seven office buildings located in Los Angeles and Orange County.

Maguire Properties, one of the biggest real estate investment trusts (REIT) in the country, is compared to a heavily indebted homeowner who is trying to renegotiate troubled loans and deal with foreclosure.

Because of its inability to pay its mortgage, the Los Angeles-based REIT decided to turn over seven office buildings to lenders. This is the latest development in the company’s efforts to strengthen its balance sheet, which include renegotiating terms of another major loan.

Since the start of the housing market collapse in 2007, investors have been pondering when the foreclosure crisis would cross over from the residential real estate market to the commercial real estate market.

Market data showed that office buildings with combined worth of $127 billion are in danger of foreclosure because their owners are deep in debt in the current market that makes recovery an impossible task to achieve.

Industry analysts said that Maguire Properties has $4.4 billion assets and liabilities of $4.6 billion. They said that the REIT’s problems stem from its acquisition of office buildings worth $3 billion from Blackstone Group in 2007. During that time, these office buildings were occupied by mortgage brokers mostly from Orange County.

They explained that the acquisition deal was done during the peak of the housing market. And when the market collapsed and lending went kaput, vacancies in Maguire Properties buildings rose.

In the second quarter of this year, the company’s revenues were pegged at $135 million. It took charge-offs on its office properties thereby producing shareholder losses amounting to $384 million. For the same period last year, Maguire Properties reported only $110 million losses.

The company’s operational funds amounted to $339.7 million, a loss for $7.10 a share. A year earlier, the company took a $56.4 million loss or $1.18 a share.

Maguire Properties was established by Robert Maguire III, a major developer of downtown skyscrapers in Los Angeles. He tried but failed to raise funds for the company by taking it private. He resigned as the company’s chief executive office last May.

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The country’s largest mortgage funding provider, Fannie Mae, has reported a total net loss of $14.8 billion in the second quarter of 2009, marking the eighth consecutive quarter it reported a loss.

The $14.8 billion loss is much higher compared to the $2.3 billion loss reported in the second quarter of 2008 and is lower than the $23.2 billion loss reported in the first quarter of this year.

Total credit-related costs in the second quarter dropped from the total credit costs of $20.9 billion in the first quarter, but the lingering effects of defaults and foreclosed for sale inventories still put total credit costs at the high level of $18.8 billion.

Fannie Mae explained in its report that the negative effects of the nearly three-year drop in home prices have been worsened by the continued rise in unemployment, increasing the rate of defaults in its portfolios of less risky home loans.

In June, Fannie Mae said that its non-performing guaranteed loans increased to $171 billion from $144.9 billion in March and from $119.2 billion in December 2008.

With the still huge losses and increased non-performing loans, Fannie Mae said it has asked the Treasury for $10.7 billion to cover its deficit, bringing the total of funds withdrawn by Fannie Mae under its preferred stock purchase facility to $45.9 billion.

Meanwhile, net interest income increased to $3.7 billion in the second quarter, an increase of 15 percent from the first quarter. Its income from mortgage guarantee fees however dropped to $1.7 billion from $1.8 billion in the first quarter.

Fannie Mae and Freddie Mac together guaranteed or owned about 50 percent of all home loans issued in the U.S. as of 2008, which amounted to $12 trillion.

Currently, the two entities are operating as government-sponsored enterprises mandated to help carry out the Obama administration’s Making Home Affordable Program. They are however losing billions from the loan refinancing and modification schemes of the program as they have to post losses when they pull out home loans that back their mortgage securities.

Fannie Mae stated in its documents filed with the Securities and Exchange Commission that there is a high level of uncertainty in its financial situation because of its housing obligations, its dividend payments and the persistent effects of the economic downturn.

In one announcement from the White House, the federal government refuted a report by Washington Post that federal officials were planning to isolate the bad debts of Fannie Mae and Freddie Mac.

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Four apartment buildings in East Orange, New Jersey are referred to in bankruptcy documents filed by apartment owner and operator Connolly Properties Inc. in the U.S. Bankruptcy Court in Newark in the last week of July.

The same apartment buildings were the target of motions of foreclosures filed by Fannie Mae in the U.S. District Court in Newark two days before the bankruptcy case was filed.

According to the documents filed by Fannie Mae against Connolly Properties, its CEO David Connolly and the 4 limited liability companies holding the 4 apartment buildings, the Connolly enterprise owed $17.8 million for the acquisition of the apartment buildings in June 2007. Connolly agreed to pay Fannie Mae approximately $115,700 a month until July 2017, but Fannie Mae claimed Connolly has failed to pay its monthly due since April 1.

Fannie Mae also included in its filing a letter in June to David Connolly demanding immediate payment for almost $18 million, representing the loan balance plus interests and late fees.

In the Fannie Mae filing, Connolly Properties was also accused of reducing the value of the apartment buildings because of its failure to maintain the properties and pay water, sewer and other municipal charges.

Meanwhile, in the bankruptcy documents filed by Connolly, additional loans by Connolly and the four LLCs to various entities were listed. Included are unsecured loans of $230,469 owed to Hess Corp., $182,626 owed to Citibank, $47,908 owed to PSE&G and over $56,000 owed to law firm Brach Eichler.

Connolly also included in its filing a document ordering utility companies to continue providing services to the 4 apartment buildings, which have lots of tenants.

Jon Searles, spokesperson for Fannie Mae, said that typically in apartment foreclosures, the court appoints receivers that become managers of the properties, doing things such as collecting rents, repairing defects and ensuring the safety and good quality of life of tenants.

Ron Simoncini, spokesperson for Connolly Properties, said that the firm is negotiating with Fannie Mae concerning the debts and is hoping to continue as operator and owner of the buildings.

The biggest of the 4 buildings, called Fulton Towers, is an 11-story building with 114 units. It was built in 1929, the same year the building on 158 S. Harrison was built. The building on 120 S. Harrison was built in 1925.

Recently, Connolly Properties became the target of criticisms from local officials and tenants for substandard conditions in several of its 29 properties in East Orange and in other cities.

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