Bank Foreclosures Information

Prices of regular residential properties and bank owned homes improved in Boston, Massachusetts in February of this year compared with one year ago. A report from CoreLogic showed that housing prices in the Boston-Quincy metropolitan region jumped by over 4%, marking the second month in a row that prices have increased in the metro area.

Boston bank owned homes and regular houses recorded a 4.6% rise in prices in February 2011 compared with the same 2010 month. According to housing industry analysts, the rise was significant given that nationwide prices and rates in majority of metro areas have declined over the same period. The February increase also followed a January when prices also recorded a surge.

Despite a challenging home market dominated by Massachusetts bank owned property and foreclosures, prices in the Greater Boston region increased in the first two months of the current year. In January, housing prices jumped by 5.54% compared with January of last year. When distressed property sales and short sale transactions are excluded, prices in the region increased by a lower margin in February at 3.11%. For January, the price increase was 2.95% minus distressed property transactions. Overall, U.S. housing prices are reportedly doing much better when distressed home sales are taken out of the equation.

When bank owned homes, foreclosures and short sales are excluded, the decrease in nationwide prices during February was a mere 0.1%. However, when prices of all types of residences are considered, the year-over-year decrease was 6.7%. Analysts have reported that the nationwide drop in residential prices during the month was mainly due to the high percentage of sales accounted for by foreclosures and short sales.

With bank and government foreclosed houses being sold at almost half their original prices, the overall price is depressed further, analysts further added. They claimed that the impact of foreclosed properties on housing prices is highly evident among states hit hard by the housing industry crisis as most of them also recorded the biggest price declines during the month. The biggest drop was recorded in Idaho for the month, followed by foreclosure hotbeds Arizona, Florida and Michigan.

In Boston, housing analysts are confident that despite the presence of foreclosed and bank owned homes, prices will continue to stabilize in the coming months. Any decline, according to them, will be minimal and will not reach the same level as seen in areas hit hardest by the industry crisis.

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Latest housing data showed that bank foreclosures in the region of Southeastern Massachusetts have declined in February 2011. However, housing market experts stated that declaring a recovery for the residential industry now would be foolhardy since it is not yet clear whether the drop was due to the crisis abating of whether lenders have slowed processing due to several controversies that emerged last year.

Most of them agree however, that Boston foreclosed homes and distressed properties all over the state will remain a major concern for most of 2011. The good news is that, in areas like the southeast where foreclosure activities have eased a bit, a big number of homeowners will be experiencing some respite from the foreclosure crisis that has hammered the region in the past four years or so.

Bank foreclosed homes in Massachusetts dipped in southeastern areas like Bristol County and Plymouth County during February of this year. In Bristol, foreclosure notices dropped by almost 70% in February 2011 compared with February 2010. Meanwhile, completed foreclosures also declined in Bristol by nearly 50% over the same period. In Plymouth, foreclosure petitions plummeted by 57% year-over-year in February, while completed foreclosures dipped by 14% over the same period. Barnstable County also posted massive declines, with petitions dropping by 59% and completed foreclosure actions plummeting by 48%.

For the whole state of Massachusetts, petitions, or the initial step in the process of foreclosure, declined by a massive 67% from last year, while bank foreclosures and other completed foreclosure-related actions declined by 44% over the same period. Despite huge drops in foreclosure activities in most areas of the state, analysts reported that the foreclosure crisis is still far from over.

They asserted that foreclosures and real estate owned properties for sale are likely to increase again in the coming months. Analysts cited high unemployment rates and continuous increase in delinquent mortgages as primary reasons for the expected increase in foreclosure numbers in the coming months. In addition, a big number of residents are currently holding underwater mortgages, which means that they hardly have any remaining equity in their homes, something that could eventually lead to foreclosure, particularly if they are also experiencing reduced income.

Economists are predicting that bank foreclosures will continue to depress the housing industry of Massachusetts in 2011 unless the job market stabilizes and prices of real estate start to improve. They did express some optimism however, reporting that an increased number of lenders are now more willing to approve short sales.

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Federal Reserve Bank of Boston in Massachusetts has released a study which showed another reason why bank REO properties keep increasing despite the Obama Administration’s loan modification program.

The study concluded that mortgage lenders are lacking in their efforts to rework many troubled home loans because it would mean losing more money.

The results of the Federal Reserve’s study suggested that the major effort of the Obama Administration to contain the number of bank REO properties in the country by giving lending institutions almost $75 billion to modify delinquent home loans to make them affordable may not work out as expected.

Paul S. Willen, a Boston Federal senior economist and a co-author of the study, said that the Obama Administration would be in a better position to solve the foreclosure problem if they would give the money directly to troubled homeowners to help them defray their mortgage payments rather than giving it to lending institutions that are not keen on working out delinquent loans.

Willen pointed out that if loan modification is profitable to lenders, they would have gone out and hire staff to do the work.

House Financial Services Committee head, Representative Barney Frank said that the results of the study may offer insights on why only a handful of troubled borrowers were able to receive help to prevent their homes from turning into bank REO properties.

Frank is planning to hold a hearing to discuss his proposal to give government loans to struggling homeowners who lost their jobs and could not qualify for loan modification programs and other assistance initiative because they do not have income.

According to the study, only 3 percent of delinquent borrowers who are behind on their payments for more than 2 months were able to have their loans altered to reduce monthly payments. Meanwhile, 5.5 percent of distressed homeowners received loan alteration that failed to give reduced payments.

The study covered 665,410 troubled home loans that were taken out from 2005 to 2007. And for six months, researchers monitored almost 150,000 homeowners who have received help.

The results of the study also refuted a widely held idea that the delay in loan modifications is due to investors using mortgage-backed securities to control the loans.

The number of bank REO properties nationwide rose to 844,389 during the first three months of this year, an increase of 73 percent from the same period a year ago.

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Massachusetts Governor Deval Patrick has launched the housing nonprofit called Citizens’ Housing and Planning Association (CHAPA) to manage the acquisition, repair and disposition of residential properties in private and government foreclosures.

CHAPA will prevent foreclosed homes from turning neighborhoods into areas of blight and crime. It will also help lower-income families access affordable properties to buy or to rent. CHAPA will be funded from a $54-million federal scheme aimed at helping states mitigate private and government foreclosures.

Governor Patrick said CHAPA will screen local nonprofit housing groups to pre-qualify about 50 housing nonprofits and several for-profit housing developers it will work with. CHAPA will connect these nonprofits to private mortgage banks, including giant lenders Bank of America, JPMorgan and Wells Fargo and to government-controlled lenders Freddie and Fannie Mae, which have thousands of private and government foreclosures.

The private-public alliance will allow nonprofits to take a first look at private and government foreclosures ahead of speculators and higher-income homebuyers. This will ensure the sale of bulk properties in foreclosure-laden areas, such as Brockton and New Bedford, to nonprofits able to choose needy but deserving families and committed to protect neighborhoods from deterioration.

Massachusetts is 20th in RealtyTrac’s ranking of states by foreclosure rate in January this year. It had a total of 3,362 foreclosure filings, including notices of default, notices of foreclosure sale and real estate owned foreclosures. In 2008, it had more than 12,000 private and government foreclosures.

Since the start of the year up to the middle of March, according to foreclosure.com, there were 6,789 pre foreclosures, 439 sheriff sales, 2,266 bankruptcies and 2,989 completed foreclosures across the state. Meanwhile, foreclosuresmass.com reported 3,360 foreclosure filings for the previous two-month period. One positive thing about Massachusetts though is its drop in pre-foreclosures in February compared to the previous month, as surveyed by foreclosures.com.

CHAPA President Aaron Gornstein said the program will not only help low-income families and at risk- neighborhoods. It will also help mortgage lenders reduce nonperforming assets and holding costs for lender and government foreclosures.

Furthermore, to make the program more efficient in averting private and government foreclosures, Gornstein made sure that the chosen nonprofits and private home builders have the capability to rehabilitate homes and educate borrowers on how to keep up with payments and avoid foreclosures.

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