Bank Foreclosures Information

The high number of homes in bank foreclosure listings in New Orleans, Louisiana, has been largely blamed for the decline in values of properties in the area. However, one local market was able to buck the trend and posted a higher home price average for 2010.

As New Orleans foreclosures rise, prices of homes declined, with values of properties starting their descent in 2008. For majority of the metro area's local markets, this price decline continued until last year, but not for Orleans Parish. The area posted a 9% gain in housing prices in 2010, while prices for the whole New Orleans metro area declined by 4% over the same period.

According to housing market analysts, despite having its share of Louisiana foreclosures, the parish was able to benefit from more people moving into the area to live in homes closer to their jobs and from the overall optimism that Orleans Parish is looking at a brighter future than other cities in the region. In addition, the parish has good housing units on offer and most consider its schools quality institutions.

Housing market observers stated that other areas continue to suffer from huge supplies of homes in bank foreclosure listings and from the effects of the oil spill disaster. Some markets are still feeling the aftershock of Hurricane Katrina a few years after the disaster occurred. For the whole metro area, St. Bernard reportedly had the worst housing market in terms of prices.

Home prices in St. Bernard dropped by 13% last year, with most housing experts attributing the value decline to the fact that the place built the most number of residential properties after the hurricane, which eventually ended empty or under listing of REO properties since the market was unable to provide enough demand. In Jefferson, prices dropped by 8% in 2010, while St. Tammany Parish saw prices falling by 5% over the same period.

Despite the continuous drop in prices, local realtors believe that the market is getting better as sales of non-foreclosed and homes in bank foreclosure listings rose last year in the region. Total housing units sold in 2010 was 640 more than the total sold in 2009, with the biggest share accounted for by St. Tammany Parish.

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Although foreclosed properties and homes under bank owned property listing remained high last year, some areas of California were able to post housing price increases. However, majority of local realtors expect the housing market of the state to continue to struggle this year.

San Diego bank owned homes and distressed properties from other key areas of the state continued to pull the prices of dwellings down last year. Based on statewide housing reports, however, the areas of Burbank and Glendale were able to avoid the worst of the crisis, with both markets performing relatively well in terms of prices. In Glendale, the average selling price of houses jumped to $560,000 during the last month of 2010 compared with the December 2009 average sales price of $538,000.

In Burbank, average selling prices dropped to $484,000 in December 2010 from December 2009's price of $516,000. Despite the drop, the difference year-over-year in Burbank was considered better than in other state markets. Other cities and counties in the state recorded huge declines, particularly those with massive supplies of bank owned properties in California.

Housing market analysts stated that it was not just the presence of properties under foreclosed and bank owned property listing that pulled the prices down in most California markets. They stated that unemployment also played a major role, particularly now that majority of foreclosure victims are homeowners who have stable traditional loans, but who found themselves unable to pay their mortgages due to loss of job.

Meanwhile, both Glendale and Burbank, along with La Canada Flintridge, saw higher number of short sale transactions last year. Local realtors stated that more lenders have become open to foreclosure prevention in 2010. The fact that federal authorities are putting pressure on lenders to favor short sales was also part of the reason for the increase in short sale agreements, realtors further added.

The percentage of total housing sales in Glendale accounted for by foreclosures rose to 30% last year from 24% in 2009. In Burbank, figures rose to 27% in 2010 from 24% in 2009. Meanwhile, properties in bank owned property listing accounted for 20% of home sales in Glendale last year, down from the 2009 figure of 23.5%.

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Figures for foreclosures and bank owned houses continued to increase in Austin, Texas in 2010. Last year, foreclosure-related filings in the metro area and the rest of the state recorded considerable increases compared with the years since the housing market crisis started around four years ago.

Filings that are related to foreclosed and bank owned homes in Austin totaled 9,809 in 2010, representing a 23% jump from the previous period. Total foreclosure-related filings for 2009 were at 8,002. The figure for 2010 also represents a 70% rise when compared with 2008 figures and a 90% rise compared with 2007 figures. The year-end data also showed that 1.49% of properties in Austin received a filing during the period, with a ratio of one household out of every 81 residential units.

Meanwhile, Texas bank owned homes and foreclosures also increased last year. Statewide, filings for foreclosures totaled 118,923, representing a rise of 19% compared with 2009 figures and up 24% compared with 2008 levels. When held against 2007 data, statewide filings last year rose by 41%. Texas was ranked 29th nationwide last year in terms of foreclosure totals.

Bank owned houses and foreclosed dwelling numbers in Texas might have jumped last year, but the region's total was still lower than most U.S. states. For 2010, 1.24% of housing units in Texas received a filing for foreclosure, which means that one household out of 67 received a filing during the period. This ratio is better compared with the national average wherein one household out of every 45 has a filing.

Nationwide, the number of bank, government, and FNMA foreclosures also increased in 2010, with a total of 2.9 million properties all over the U.S. being in some form of foreclosure during the year. The figure represents a 2% rise compared with 2009. According to housing analysts, the moratorium on the sale of foreclosed properties that was put in place during the fourth quarter of last year helped lower the filings total for 2010.

Housing market observers predict that bank owned houses and foreclosed properties will continue to increase in 2011 not only in Austin and Texas, but also in the whole U.S. Prices of homes, however, are expected to remain low for majority of U.S. markets.

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The Riverside Hotel in downtown Detroit has been added to lists of Michigan bank foreclosures after Chicago-based lender Mutual Bank foreclosed on the hotel in July.

The hotel, formerly called Pontchartrain, was acquired by Florida-based investment partnership Shubh Hotels Detroit LLC in 2005. The partnership promised to renovate the ailing Pontchartrain and make it into a first-class hotel, but it failed for various reasons.

Hospitality industry analysts said the temporary closure of the Riverside Hotel, which has about 400 rooms, may improve the occupancy rates of other hotels, but on the whole, the foreclosure is not good for the city and the hospitality industry, according to Michael O’Callaghan, a top executive of the Detroit Metro Convention and Visitors Bureau.

Nonetheless, downtown Detroit still has the ability to host large conventions because of the addition of 2,000 new rooms at three casino resort hotels and at the renovated Doubletree Fort Shelby and Westin Book Cadillac hotels.

Before the foreclosure, Shubh Hotels had not paid the salaries of its employees for two months. In late June, the participants and guests of the National Baptists Convention who stayed in the hotel left early because of lack of air conditioning and problems with services.

The problems of the hotel worsened when hotel lender Mutual Bank also suffered the same fate as the hotel. At the end of July, the bank was closed by the Illinois Department of Financial and Professional Regulation Banking Division due to insolvency. The appointed receiver Federal Deposit Insurance Corporation in turn approved the application of Garland, Texas-based United Central Bank to take over Mutual Bank. The Texas bank acquired Mutual Bank’s assets, deposits and loans, including loans provided to the Riverside Hotel.

Lawyer David Findling was appointed receiver for the hotel by the Wayne County Circuit Court. Findling said the hotel needs renovations before it can operate again. He said he hopes United Central Bank puts more funds into the hotel so it can reopen and operate fully. He argued that a fully functioning hotel would get a better sales price than an unoccupied and closed hotel.

Findling also added that a vacant hotel building is not good for the image of the city which is trying its best to recover from the adverse effects of closures in the automobile industry.

According to Chuck Skelton, head of the hotel advisory firm Hospitality Advisors, the 1965-built Riverside Hotel needs around $100 million to modernize it even after a partial upgrade worth $35 million some years ago.

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Over 14 percent of Ohio homes purchased with loans were in default or had already become distressed 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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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 repo 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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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 distressed properties in East Orange and in other cities.

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The vacation home market in Steamboat Springs in Routt County, Colorado was a favorite among affluent baby boomers. Investor speculations created a market boom in the area between 2003 and 2007, spurred by the growing demand for vacation properties.

According to industry experts, many investors competed for pre-construction prices planning to sell for profits upon completion of a condominium project.

But the real estate development market took a beating in 2007 due to the collapse of subprime lending, decline in consumer spending and bank failures. The devastating developments wreaked havoc on the local economy, resulting to a drop in construction and homes sales, increase in the number of bank foreclosed home listings, shut downs of restaurants and retail centers and massive lay offs.

According to analysts, the mountain real estate development is driven by affluent people belonging to the 5 percent of the total population of the country. They believed that the key to the recovery of the mountain resort property market lies on the financial conditions of affluent families in suburban Texas, Connecticut, California and Illinois.

They said that baby boomers wanting vacation homes transformed the real estate market in Routt County into a booming business in 2007, reaching $1.5 billion total home sales. The booming market attracted all sorts of buyers, many wanting to capitalize on investment potentials of mountain resort properties.

Many of them bought grand houses and paid their mortgages by renting the properties to vacationers. The amount earned from vacation rentals were more than enough to pay for their mortgages.

Until the latter of 2008 when the financial market collapse and recession spreads quickly across the country, leaving the affluent vacation home market dried up. And to make matters worse, a great number of loans taken out for vacation homes were adjustable rate mortgage with higher interest.

The turn of events left many owners unable to save their properties from foreclosures. Some of them just walk away from their properties when they learned that they were worth less than their mortgages.

The number of properties that received foreclosure filings as of July 24 reached a total of 96, and the figures keep getting higher every day.

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The mortgage servicers accused of abusing mortgage borrowers are the ones receiving much of the billions of dollars allocated to the Obama administration’s Making Home Affordable Program, which aimed to help Americans keep their houses from becoming repossessed houses, according to a study made by Associated Press.

AP said also that the federal government has to work with mortgage servicers despite their blemished records in treating borrowers because they stand as the only connection between mortgage lenders and borrowers.

Mortgage servicers are entities that collect monthly loan payments from borrowers and then distribute collections to the lenders or investors holding the mortgages.

According to the AP, the servicers are the ones in the best position to restructure distressed home loans under the federal government’s $50 billion home loan reduction program and they are also rewarded for their service.

Despite their role in the Home Affordable Modification Program, the AP found that more than 30 mortgage servicers have been sued for systematically charging illegal fees and harassing borrowers. Recently, they are again accused of hindering efforts to modify loans, increasing the fees they earn while delaying the delivery of help to borrowers.

Even the biggest names in the mortgage servicing industry, like Bank of America, JPMorgan Chase, Wells Fargo and Citigroup, have been sued for mortgage lending and servicing abuses and some of them have made settlement agreements with entities that represent homeowners. They are also being rewarded for every loan modification they work out.

Meanwhile, the smaller players which are now servicing the majority of subprime loans and holding volumes of delinquent loans have been sued for worse accusations.

The biggest abuse lawsuit pursued against a mortgage servicing company was the suit brought by the Federal Trade Commission and the Department of Housing and Urban Development against Select Portfolio Servicing. The servicer was accused of charging illegal fees, including costs for insurance not needed by borrowers.

Select Portfolio settled in 2003 and paid $55 million, but now it can receive up to $660 million for working out loans under HAMP.

According to AP, more than 30 servicers are facing lawsuits accusing them of charging illegal fees, engaging in illegal loan collection practices and prematurely foreclosing on houses.

More than 14 have been sued for misleading borrowers about HAMP, leading to more foreclosures. At least 3 of the servicers have settled predatory collection accusations and promised to stop any illegal practice, but they are still being sued for the same accusations.

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