Bank Foreclosures Information

Despite a continuous rise in the number of foreclosures and bank owned homes, lenders are allegedly slow to approve short sales. These types of transactions are being seen by most housing market analysts as a better alternative to foreclosure and involve the sale of homes for a price lower than what the borrower owed to banks.

The California Association of Realtors has recently conducted a survey participated by more than 2,000 respondents with regards to short sales. According to the survey, banks usually take longer than two months to respond to an offer for a short sale. Among approved offers, less than 60% eventually end up getting sold through short sales, with the remaining transactions breaking down and the properties involved ending up as Riverside bank owned homes or foreclosed properties in some other areas of California.

Some housing experts stated that promoting short sales might help lower the number of foreclosed homes and bank owned houses in California and in the rest of the U.S., but the survey results showed that getting all parties on board is not that easy. They also stated that the length of time it takes for a bank to reply to a short sale offer based on the survey results is way too long when compared with the time specified under government guidelines.

Some analysts have asserted that increasing short sale transactions will help prevent further increases in the number of foreclosures and bank owned homes in California and will aid the state's economy in its recovery. However, some housing experts also stated that the process of short sale seemed to be in need of some changes.

Although the survey was conducted only among agents in California, some members of the National Association of Realtors have asserted that similar observations have been made in other states of the U.S. They revealed that in hardest hit areas like Arizona and Nevada, banks are deemed to be ill-equipped when it comes to making decisions about short sales. Analysts stated that since real estate investments and home sales have also become a big part of most banks' operations following the housing market crisis, then they should also exert more effort getting familiar with short sales.

With foreclosures and bank owned homes continuing to rise in California, analysts expect values of properties to continue to decline and underwater mortgage numbers to rise. They argued that short sales should be promoted to help alleviate some of the foreclosure problems of the state.

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The number of foreclosed homes and bank REO properties for sale in California is one of the highest in the entire U.S. Realtors and market analysts have stated that short sales can help control the continuous increase in the number of foreclosed homes in the state. However, several factors are preventing transactions from getting completed.

As the number of Los Angeles bank owned homes and foreclosed properties in the rest of the state continues to rise, realtors and housing advocacy groups are exerting more efforts to find ways to stop the number from further increasing. Recently, the California Association of Realtors launched an all-out promotional campaign aimed at bringing short sales to the forefront of everyone's attention and, at the same time, calling for reforms to streamline the short sale procedure.

Analysts stated that the short sale process is a confusing and time-consuming one, resulting in more buyers favoring the purchase of California bank owned homes over buying a short sale property. The issue with the complicated process is also not helped by majority of banks allegedly taking a very long time to respond to short sale requests that most interested buyers lose patience and drop out of agreements. These factors are just some of the issues that the association's campaign was trying to address.

The group has taken out advertising pages at publications to call attention to the need for reforms. According to local reports, the campaign was particularly aimed at government officials, federal and state agencies and lender banks. The reform should allow short sales to compete with bank REO properties for sale by making the process simpler and easier to complete.

Meanwhile, some bank officials have stated that there is nothing much that the banking industry can do. They argued that short sales are just inherently complex, mainly because of multiple parties involved in the transaction. In comparison, when buying bank and Fannie Mae foreclosures, it is only the buyer and the seller that are involved. They further added that, in a short sale, several investors are often part of the transaction, particularly in cases when there is more than one mortgage holder.

The goal to establish a uniform process or a procedure as simple as the one used in purchasing bank REO properties for sale is practically impossible, some lenders have stated. They argued that a standardized process cannot be enacted as short sales often differ from one situation to another.

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The number of buyers of bank owned homes foreclosures that are using cash to close their purchases increased in California. The trend, according to realtors, has also spilled over the more expensive residential property markets, something that has not been seen often in the past.

In January of this year, buyers of San Francisco bank owned homes, condominiums and non-foreclosed properties who used cash to secure their deals accounted for 30.9% of all residential sales transactions in California. According to realtors, the increase in the number of all-cash deals in the state's housing industry is buoyed by the low prices of properties, which make it easier for buyers to come up with enough money to close deals.

However, it is not only buyers of low-priced bank owned foreclosures in California who are relying on cash transactions to get properties. Realtors have reported that even high-priced dwellings in the luxury residential property segment are increasingly getting snatched by all-cash buyers. According to realtors, around two-thirds of housing sales in the priciest communities of Southern California have been completed using cash payments.

Paying in cash might be easier if the buyer is seeking bank owned homes foreclosures since most of them are offered at bargain prices, but it is not that easy when buying luxury houses, particularly in California, where prices of homes have remained more expensive than most U.S. markets. However, more buyers of pricey dwellings have reportedly opted for full cash payments in the past few months.

Housing analysts stated that in such cases, it is more about not having much choice as majority of lenders are refusing to finance jumbo mortgages for fear of suffering another mortgage market meltdown. In addition, investors are reportedly expecting prices of government repo homes and other types of residential properties to rise soon. Most have expressed an optimism that in the coming few years, they will get massive returns from their housing industry investments.

The rise in the number of all-cash transactions involving bank owned homes foreclosures can be seen in almost all parts of the U.S. However, California is one of the first areas where luxury homes are getting purchased by buyers who pay cash.

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The latest report on bank foreclosure homes filings in California revealed a 17.5 percent decline during the last quarter of 2010 as compared to 2009.  Actual loss to lender repossession dropped by 30.6 percent.

Such data could only mean two things. First, there were fewer borrowers who lost their homes to foreclosure. Second, lenders are easing off when it comes to foreclosing, especially since regulators are scrutinizing their every move following allegations of procedural mistakes and complaints lenders are not really working with borrowers to avoid foreclosure.

For the last quarter of 2010, there were 69, 799 default notices filed at California county offices. Based on MDA DataQuick information system, the figure is 17.5 percent less from 4Q of 2009 and 16.2 percent fewer from the third quarter of 2010.

DataQuick is not sure of the slowly recovering economy is a huge factor for the decline of bank foreclosure homes filings or it is simply because there are fewer households who are suffering from financial distress. Of course, more California bank foreclosures, including Los Angeles foreclosures for sale, will enter the market if not for loan modification and short sale options.

With the growing concern for the large number of homes ending up as bank owned residential properties, mortgage assistance events and fairs have increasingly become popular. In a similar event held at the Los Angeles Sports Arena, it was observed that more lender are approving loan modification proposals, particularly those involving the risky mortgage, such as adjustable rate mortgages or ARMs.

These risky loans were actually approved without verification of the borrowers’ true financial conditions. Most of them could not really afford the loan, but agreed to take them out, especially after being enticed by offerings of interest-only payment, no down payment scheme and the popular ARM. Most of these subprime loans defaulted almost immediately, resulting to millions of bank foreclosure homes in the market and the eventual crash of the mortgage industry.

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The issue of bank foreclosed listings in California was among issues addressed by seven mortgage-related laws signed this week by Governor Arnold Schwarzenegger.

The seven bills all provided additional protections for consumers, particularly homeowners.

One of the bills signed was AB 260, which aimed to protect mortgage borrowers from brokers or lenders who entice prospective home buyers from taking out risky home loans and buying higher-priced homes. This is to prevent a repeat of bank foreclosures that arose over the past years and months.

The bill, proposed by Assemblyman Ted Lieu, will take effect on January 1 next year. It will ban lenders from offering pay option flexible-rate mortgage loans, which allow borrowers to make very low monthly payments in the initial years and then enable lenders to increase to higher interest rates and much higher monthly payments after 3 to 5 years of low payments.

AB 260 also limits prepayment fees to a maximum of 2 percent of the loan and enables state officials to implement federal lending laws.

Last year, a similar legislation was vetoed by the governor because of pressure from the California Mortgage Association, California Association of Realtors and the California Association of Mortgage Brokers. But Assemblyman Lieu was able to campaign effectively for his cause, arguing that his bill will cut down the rising number of homes going into bank foreclosed listings.

Lieu cited foreclosure statistics from a real estate research firm which indicated that more than 92,300 California mortgage borrowers were hit with default and foreclosure notices last August.

Another bill signed was the Buyer’s Choice Act, which was proposed by Assemblywoman Cathleen Galgiani. This bill aims to enable buyers of repo properties in California to choose escrow firms operating in local areas to handle their closings. Galgiani claimed that lenders have been using their affiliated escrow firms to handle closings, eliminating escrow opportunities for local escrow firms. Galgiani also said that escrow entities based in Southern California are being used for closings in Northern California, making work more difficult for brokers and real estate agents in Northern California.

The other bills signed include SB 36, a bill proposed by Senator Ron Calderon to establish licensing requirements for home loan originators, and AB 1160, a bill proposed by Assemblyman Paul Fong to require lenders to provide borrowers with mortgage documents written in the language used during verbal negotiations concerning the mortgage. This bill aims to help non-native English speakers have a thorough understanding of their mortgages and help them save their properties from bank foreclosed listings.

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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 owned 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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Distressed homeowners who are facing the danger of seeing their properties on bank owned foreclosure listings may become desperate in their desire to save their homes. This desperation drove them to accept any offer of help that could save their properties from foreclosures. And before they even know what hit them, they have lost their money and sometimes their properties to fraudsters.

Fraud investigator Glenn Gulley, whose job requires him to go after con artists who defrauded distressed homes, said that there is nothing more satisfying than going after fraudsters and making them pay for their crimes.

Troubled homeowners in San Joaquin Valley, California are lucky to have people like Gulley who are committed on preventing unscrupulous people from taking advantage of homeowners facing bank foreclosure listings.

Now, the arm of the law gets longer in the valley as the Federal Bureau of Investigation (FBI), Internal Revenue Service and the Secret Service joined the local law enforcement in going after mortgage loan fraudsters.

Gulley and his team will benefit from the federal partnership by having access to sophisticated technology and extensive law enforcement contacts. Gulley and his fellow investigator Mark Smith were named U.S. marshals and given authority to process subpoenas and make arrest.

According to District Attorney Birgit Fladager of Stanislaus County, fraudulent companies offering to help homeowners avoid bank foreclosure listings are becoming rampant throughout the Central Valley. Fladager explained that unscrupulous people do not limit their illegal activities in just one place so it is better to deal with the problem on a global level.

As foreclosure filings continue to rise unabated, more fraudulent activities in the real estate market are expected. Nationwide, an estimated $6 billion annually is lost to foreclosure prevention fraud. According to the FBI, it registered 63,173 fraudulent activities in 2008. And last month, the FBI logged about 40,901 fraudulent activities.

The boom in the real estate market and its subsequent collapse attracted con artists who specialized in flipping properties and victimizing lenders and homeowners. Both Gulley and Smith are handling cases of bank foreclosure listings prevention fraud, in addition to bankruptcy fraud and Ponzi schemes.

On its part, the FBI is investigating bank foreclosure listings prevention fraud because mortgage lending and the real estate market have significant influence on the country’s economy.

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Toxic wastes may be present in some bank owned homes sale and this possibility has prompted the California Department of Toxic Substances Control to develop the cheat sheet, entitled “Managing Hazardous Waste at Foreclosed Properties.”

The guidelines will help potential buyers of distressed properties how to dispose certain toxic waste or potentially hazardous materials that they may discover.

Some of the hazardous items that may be left behind by owners of bank owned homes sale are common household chemicals, electronic devices, aerosol cans, batteries and fluorescent.

It is illegal in the United States to dispose of these hazardous wastes in landfills, private or public drains and household trash bins because they can pose danger to people and the environment. Under the California law, improper disposal of hazardous waste may result in fines for a maximum of $25,000 daily per incident or imprisonment.

The state Department of Toxic Substances Control advises buyers of bank owned homes sale to use these hazardous items such as common household chemicals, old appliances and electronics. According to the agency, most household chemicals left behind by previous owners can still be used. Or, they can donate the household chemicals to businesses or charities.

Furthermore, buyers can use the appliances and electronics if they are still in working condition. Using them may prove to be cost effective than self-managing these hazardous items as wastes.

The department pointed out that homebuyers may qualify for Conditionally Exempt Small Quantity Generator (CESG) if they generate less than 100 kilograms of potentially hazardous waste, about 27 gallons of liquid or a dry weight total of 220 pounds.

To qualify, homebuyers should get an Environmental Protection Identification number. Homebuyers have also the option to self-transport hazardous items to the nearest collection facility in their areas without registering as hazardous waste transporter.

Meanwhile, the department also recommended that homebuyers hire hazardous waste transporters. For homeowners who have a large of volume of hazardous waste and they think that they could not handle them, the department has a Registered Hazardous Waste Transporter Database.

The database is a list of for-hire hazardous waste transporter, registered and accredited by the department to haul dangerous items to a certified facility.

Homebuyers are required to submit an EPA ID number and a hazardous waste manifest to transporters.

Lastly, the department suggests that homeowners, especially those who invested in many bank owned homes sale that generate hazardous items, should consider becoming waste transporters themselves. They can register with the California Highway Patrol and follow requirements for packaging, shipping and marketing hazardous wastes.

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Lender Orson Benn left a lot of homes into waste after writing a $349 million loan, along with his partner Argent Mortgage, for 2,000 assets. Nationwide, around 600 of these apartments, suburban ranches and town houses are in foreclosure. Fifty percent of these homes are in West Kendall, ten percent in Miami and five percent in Hialeah and Miami. Hopefully the massive foreclosure cases do not occur escalate further.

It is not yet sure if Benn’s mortgages are untruthful and tricky but the Miami Herald saw several related questionable transactions.

According to records, many houses were dropped even without handing off money and instead used quitclaim deeds. Quitclaims are formal declarations that remove legal liability. That was already a bad sign for the industry for quitclaim deed is considered the best choice for frauds.

Then it was found that 6 percent of the loans went to the hands of industry people. There were some who took on multiple loans, but are now also in foreclosure.

Naïve renters do not know that Argent and Benn are now facing financial difficulties and are not capable of lending money for a home. Like Dayami Reyes who after signing a six-month loan found out that her home is actually in foreclosure.

These foreclosures do not only affect the homeowners, but also the neighborhood. Foreclosure generally brings home prices lower and crime rates higher.

Some renters left their homes trashed and inhabitable. The used to be $300,000 home may be left in a ruin. The eyesores of overgrowing loans and dilapidated houses bring down home values in the neighborhood, leaving others to another foreclosure.

Then, these forsaken properties also attract drug lords, prostitutes and homeless squatters. Poor neighbors troubled by the foreclosure of another.

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Last September, the California Senate Bill 137 was passed as response to the worsening problem in the state’s housing industry. The said bill included a provision that requires lenders to contact the distressed homeowner several times and wait for another 30 days after initial contact before filing for foreclosure.

After its implementation, ForeclosureRadar.com reported a 61.8 percent decline in default notices and a 47.3 percent drop in trustee sales notices.

Although this should be interpreted as good news, the website does not consider it as such. Instead, it believes that it has only made it even more difficult to understand and determine the real state of the local housing industry.

For them, the long term effect of the said bill is to only delay the foreclosure process and not really provide troubled borrowers with genuine assistance.

To make matters worse, the new legislation also encourages loan modification. The problem is that most of the troubled mortgages show negative equities which will make it close to impossible for lenders to change any terms of the mortgage.

The only way a loan modification can work is if the lender agrees to significantly reduce the principal balance or lower the interest rates – both of which pose considerable risks to the lenders. If the lender agrees, it could encourage the other non-defaulting borrowers to default just so they could enjoy lower mortgage rates or principal reduction.

For homeowners facing foreclosure in California, it is probably best for you to consider availing of the mortgage relief program sponsored by the government. There are certain requirements you mist meet before qualifying but if you do qualify, you will be able to shift your existing mortgage to a government-backed housing loan, which has a fixed interest rate.

Check with your local county office for more details about this program.

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