Real Estate News from the We Buy Houses Team

RALEIGH - As the mortgage meltdown continues, the federal government has bailed out some financial firms and let others fail. Foreclosures are at unprecedented levels, forcing people from their homes, decimating neighborhoods and depressing the real estate market. An amendment to the bankruptcy law that allows homeowners to modify mortgages in Chapter 13 bankruptcy cases would stem the tide of this financial tsunami.

Why? Many subprime loans were two-year adjustable rate loans (ARMS). The initial relatively low interest rates adjusted in two years to significantly higher rates. A typical initial adjustment was from 7.5 percent to 10.5 percent, increasing the payment on a $200,000 loan by $388.

Wall Street created investment opportunities from these mortgages by taking the “stream of payments” and packaging them into securities. These securities were appealing to investors because the ARMS provided an increasing income stream when the rates adjusted upward.

Unfortunately, the income streams have been illusory. When the payments jumped, many borrowers defaulted, and a defaulted loan has no income stream.

The safety net for the owners of bad loans has traditionally been the value of the real estate securing the loan. The unprecedented level of foreclosures has undermined these values and cut holes into the safety net through which Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae and Freddie Mac have fallen. Reducing the number of foreclosures is the first step in restoring normalcy to the real estate and financial markets.

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CHAPTER 13 ALLOWS HOMEOWNERS TO STOP FORECLOSURES, but not as effectively as it could. Under current law, homeowners who are behind on their mortgages can stop foreclosures by filing Chapter 13, but their rights are limited to making the contractual payments while “curing” missed payments through their bankruptcy plan. The law prohibits modifying the loan to lower the interest rate or reduce the amount of the debt to the value of the home. Without the ability to do so, many homeowners can’t afford to make the payments necessary to stop a foreclosure.

U.S. Rep. Brad Miller, D.-N.C., sponsored a bill last year that allows a Chapter 13 debtor to modify a home loan by reducing the amount of the debt to the fair market value of the home, adjusting the interest rate to current market rates (plus a risk factor) and paying the modified loan over the remaining term of the loan.

Such modifications of secured debts are not unusual. In bankruptcy, all that separates the rights of a secured creditor from those of an unsecured creditor is the secured creditor’s right to repossess or foreclose upon his collateral, sell it and apply the proceeds of the sale to the payment of the debt. The principle underlying the right to modify secured debts is that when all is said and done, the secured creditor receives as much as it would upon selling its collateral.

Under existing law, debts secured by rental or commercial real estate or by personal property can be modified. The exclusion to the modification of loans secured by an individual’s most cherished asset, his home, is puzzling. The removal of that exclusion would enable hundreds of thousands of additional homeowners to avoid foreclosure.

This proposal involves lawyers, bankruptcy judges and other court personnel. Who is going to pay the costs?

The homeowners will pay the costs. They pay for their attorneys and for the administrative costs of the bankruptcy proceeding through their filing fees ($274 per case).

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THE MORTGAGE INDUSTRY OBJECTS TO THE PROPOSED LAW. Its objections have no merit.

* First, it says allowing modifications will increase the interest rates for everyone else. This is not so. The law currently allows modification of car loans, commercial loans and real estate investment loans without any increase in interest rates to other borrowers.

* Second, it argues that it is voluntarily modifying mortgages through industry programs and that nothing more is needed. The industry cites modification statistics, but what those numbers don’t reveal is the quality of the modifications. Mortgage defaults at the end of June were at 9 percent, a record high. If industry programs are working so well, why isn’t the number of foreclosures abating? Furthermore, bankruptcy modifications will not eliminate voluntary ones, just provide an alternative — an alternative that will enhance both the quantity and quality of voluntary modifications.

* Finally, the industry argues that fees from these cases will provide a “windfall” to bankruptcy lawyers.

The clients who voluntarily pay the fees are not likely to agree. In most cases, 80 percent to 90 percent of the fees are paid as part of the bankruptcy plan. If the plan fails, the attorney is not paid. Attorneys have both professional obligations and financial incentives to file cases only for homeowners with reasonable chances to succeed. When a case is successful and the client saves his home, he is more apt to view the fees as money well-earned rather than a windfall.

Amending the law will divert loans from foreclosure. The current remedies aren’t working. It is past time to give it a try.

Real Estate News from the We Buy Houses Team

The crisis on Wall Street is shrinking net worths and erasing nest eggs. Next on the block: multimillion-dollar homes.

In some of America’s wealthiest spots, that’s already happening. According to RealtyTrac, an Irvine, Calif.-based listing firm that tracks foreclosures and provided the data here, several of the country’s wealthiest ZIP codes–where year-to-date median home sales are above $700,000–have reported foreclosures into the triple digits. They include La Jolla, Calif.; Miami Beach; and Carlsbad, Calif.

In Carlsbad, for example, there are 302 homes in foreclosure. The wealthy beach town–the median home sale price is $710,000–has suffered from overvaluation and risky financing, says Rick Sharga, a senior vice president at RealtyTrac. The only thing that separates homeowners in Carlsbad from those in spots like St. George, Utah, with 274 current foreclosures and a median home price of $218,000, and Ann Arbor, Mich., with 436 current foreclosures and a median home price sale of $225,000, is that in Carlsbad folks are losing their second homes.

In Depth: America’s Surprising Foreclosure Hot Spots
“In this real estate cycle, no ZIP code, no neighborhood, was immune,” says Sharga. Not only are average Americans defaulting on subprime loans, wealthier individuals who were relying on bonuses that never came through or who took out option adjustable-rate mortgages and must now face the skyrocketing monthly rates have also had to flee.

Take Lake Forest, Ill., a Midwestern town with a love for–of all things–polo. (The local country club hosts matches every weekend in August.) The fondness for the upper-echelon game is a tip-off that the brunt of Lake Forest residents aren’t suffering financially. Still, many of the community’s properties are vacation homes, which means that those who secured a second mortgage even though it was beyond their means are now defaulting. While the median house sale price is $873,750, the current number of foreclosures is 53.

Overvaluation is another major factor in high-end foreclosures, says Sharga. During the housing boom of the mid-aughts, buyers paid prices for homes with a huge expected appreciation cooked into the price. As prices corrected, many were saddled with mortgages, with monthly payments reflecting the former value of the home.

Speculative activity, or people betting pricey homes will always have ready buyers, is another factor. “People were leveraging the equity in their homes to speculate on other properties,” says Sharga.

That’s the case in Malibu, Calif., and other California spots, including Newport Beach and La Jolla. The median home sale price in Newport Beach is $1.4 million and there are 89 homes in foreclosure; in La Jolla, there are 158 foreclosures, due mostly to second-home buyers overextending themselves.

What’s happening to housing in your community? Weigh in. Post your thoughts in the Reader Comments section below.

It’s not just vacation towns in California taking a hit. Foreclosures have been more prevalent since the credit crunch has caused those in the New York and Philadelphia metro areas who could once afford a vacation home to default as well. On the southern part of New Jersey’s Long Beach Island, Beach Haven boasts a median house sale of $722,500.

In other areas, buyers took out loans for properties that were beyond reach. This happened in Scarsdale, N.Y., just 30 minutes from Manhattan’s Grand Central Terminal. This pleasant commuter town, whose Tudor-style buildings evoke an English village, currently has 57 foreclosures.

Another problem is overabundance of property. The affluent area of Scottsdale, Ariz.–a popular spot for retired snowbirds–has been affected by overbuilding in the condominium sector. That means values have dropped and speculators have no one to sell to. “Typically, when we see an abnormal surge in an otherwise stable area, homes are being overbuilt,” says Sharga.

Whether because of overbuilding, overvaluation or risky financing, the current foreclosure dilemma suggests one thing: No one is truly “comfortable” right now when it comes to finances.

Real Estate News from the We Buy Houses Team

If you really want to see the effects of the foreclosure crisis, take a tour of Las Vegas. I’m not talking about the Strip, but rather, the city’s once-promising residential neighborhoods. That’s what Ben Tracy and I did for our report on housing for the series “Where They Stand.”

A local realtor took us around an area called Summerlin, where “For Sale” signs dotted the lawns of newly-built homes. They were barely lived-in by their former owners who lost the houses to foreclosure. There were blocks lined with empty plots of land owned by investors now too nervous to build. Homes that once sold between $600,000 and $700,000 were now selling at bargain basement prices as low as $300,000. Meanwhile, several projects in Summerlin have been put on hold, including a brand new complex of luxury condos that went into bankruptcy before any of the residents moved in.

As we visited several Vegas neighborhoods, it was easy to see why the city is considered “ground zero” of the foreclosure debacle. Las Vegas has seven of the top 100 worst-hit zip codes in the nation, and foreclosure filings are up 83 percent from a year ago, according to RealtyTrac. While there are many reasons for the housing crisis, Las Vegas residents seem to put most of the blame on speculators who bought up properties hoping to make a quick profit and fraudulent mortgage lenders who preyed on unsuspecting home buyers. In realty, there’s plenty of blame to go around – including the borrowers themselves.

But as we spoke to struggling Vegas homeowners, one message came through loud and clear: Time is not on their side. They are looking for immediate help – either from the government or lenders willing to work out a deal. I don’t proclaim to know the answer, but after covering this topic for nearly a year and witnessing firsthand the impact that abandoned foreclosed properties can have on an entire neighborhood, it’s probably in everyone’s best interest to figure out how to clean up this housing mess.

If you are facing foreclosure – or you know someone who is – there is a 24-hour national hotline for homeowners in need of help. It’s called the Homeowner’s HOPE Hotline. The number is 888-995-HOPE.

Real Estate News from the We Buy Houses Team

With financial institutions reeling from coast to coast, what does it all mean to the housing and mortgage markets whose problems triggered these catastrophes?

Believe it or not, the past eight days provided a dose of good news, at least in the short term, because mortgage rates are down. Long-term impact is harder to predict - and many experts say fallout from the turmoil could whipsaw housing and mortgages in many negative as well as positive ways.

Mortgage rates dropped last week after the government’s bailout of Fannie Mae and Freddie Mac, and they dipped slightly on Monday after the bankruptcy of Lehman Bros., the fire sale of Merrill Lynch and the struggles of AIG.

Last week’s drop came because investors regained confidence in Fannie and Freddie, thanks to the government’s backing. Monday’s was because investors fled to the relative safety of long-term U.S. Treasury bonds, causing their prices to rise and rates to drop - which generally triggers a fall in mortgage rates.

Lower rates combined with bargain foreclosures could entice more buyers into the market. Increased sales are crucial for a housing recovery.

“Lenders reported to us a fair upsurge in interest in placing loan applications last week (from) purchase and refi borrowers waiting for a ‘5 handle’ (interest rate in the 5 percent range) on their rates to pull the trigger on a deal,” said Keith Gumbinger of HSH Associates, a mortgage research firm in New Jersey. Bay Area mortgage brokers also said they’d seen a big increase in inquiries last week.

Increased refinances also might help some homeowners avoid foreclosure; stemming that tide is another important step for the health of housing.

Mark Zandi, chief economist at Moody’s Economy.com in Pennsylvania, said the Fannie/Freddie bailout was key to the housing market, while the impact from Lehman, Merrill and AIG will be slighter. He echoed what Gumbinger and mortgage brokers said about the uptick in refinancing.

Fannie and Freddie “certainly helped refi activity,” Zandi said. “We’re down 50 basis points from last week on fixed mortgage rates and are below 6 percent. That should provide a nice, measurable boost to home sales.”

But what’s next remains uncertain because there are so many moving parts. Here are some of the factors at play:

Mortgage rates: Will the lower rates last? That’s going to be crucial if last week’s increase in mortgage activity is to be sustained.

“While refi inquiries will flare higher quickly when rates drop, we’ll need a longer-lasting period at these levels to get more home buyers interested in looking,” Gumbinger said. “After all, the process of locating a home and executing a transaction typically takes weeks, if not months, and conditions will need to remain favorable all the while.” Experts are divided on what will happen with mortgage rates.

“Anything like this throws a cold shower on markets,” said Brian Bethune, chief U.S. financial economist at Massachusetts consulting firm Global Insight. One possibility is that Fannie and Freddie could be forced to pay more to borrow money - and of course would have to pass those increased costs along to the consumers getting mortgages.

But another possibility is that increased activity in the bond market will keep rates down.

“People are not investing in the stock market; they’re moving into the bond market,” said Fif Ghobadian, a broker at Guarantee Mortgage in San Francisco. “When there’s more money in it, it reduces the yield, therefore rates are better.”

Many experts think the Federal Reserve is likely to cut rates again. While that doesn’t necessarily translate into lower rates for new mortgages, it would help people with adjustable-rate mortgages, as their reset rates tend to be tied to such a benchmark.

Credit availability: Ease of getting a mortgage goes hand in glove with lower rates as a market spur. As long as getting a mortgage remains difficult for all but the most stellar borrowers, the housing market will stay stagnant.

“Credit markets are still very tight,” said John Assily, senior mortgage consultant and vice president at Mechanics Bank in Walnut Creek. Lenders “have (house) value issues; qualifying issues. That will keep things more difficult than they used to be to get people qualified.”

Zandi and some others said they think Fannie and Freddie will slowly ease some underwriting standards. “I think mortgage credit should become more available; Fannie and Freddie will be more aggressive in extending credit,” he said.

But other experts said the credit crunch that has infected all types of lending shows no sign of abating - in mortgages or anywhere else.

“This is continued tough news for real estate. Financing is going to be hard to get for a long time,” said Chris Mayer, senior vice dean at the Columbia University Graduate School of Business.

The economy: Another big question is what will happen to the overall economic health. If unemployment continues to grow, that would keep home buyers out of the market - and increase the foreclosure flood, one of the biggest factors depressing home prices.

Zandi is relatively optimistic. “I think this (weekend’s events) and last week’s takeover of Fannie and Freddie signal the beginning of the end of this painful crisis,” he said. “I think we’ve seen the worst of it now and through early next year - the combination of negative (home) equity with unemployment.”

Similarly Ken Rosen, chair of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said he thinks the market is close to bottoming out.

“We’re still going to see downward trends, but not accelerating, probably decelerating,” he said. “We’ve seen much of the price loss already.”

WASHINGTON — The source of trouble in the mortgage market has shifted from subprime loans made to borrowers with bad credit to homeowners who had solid credit but took out exotic loans with ballooning monthly payments.

The Mortgage Bankers Association said Friday that more than 4 million American homeowners with a mortgage - a record 9 percent - were either behind on their payments or in foreclosure at the end of June.

“The problem that policymakers and Wall Street once assured us was ‘contained’ to subprime mortgages has proven to be anything but,” Mike Larson, a real estate analyst with Weiss Research, said in a research note.

As the economy falters and home prices keep falling, concern is building about a second wave of mortgage defaults flooding the market through 2010.

On Friday, the Labor Department said the nation’s unemployment rate shot up to a five-year high of 6.1 percent in August.

A drop in income - whether through a lost job, divorce, death of a spouse, or health problems - is the No. 1 reason people fall beyond on their mortgages and lose their homes.

But mortgage defaults and foreclosures in many areas, especially California and Florida, can also be blamed on egregious lending practices and rampant speculation by homebuilders and small investors alike.

“We are unlikely to see a national turnaround until we see a turnaround in the two largest states,” with the most outstanding home loans, said Jay Brinkmann, the Mortgage Bankers Association’s chief economist.

The latest quarterly figures broke records for late payments, homes entering the foreclosure process and for the inventory of loans in foreclosure. The trade group’s records go back to 1979.

The percentage of loans at least one month past due or in foreclosure was up from 8.1 percent in the January-March quarter, and up from 6.5 percent a year ago, using figures that were not adjusted for seasonal factors.

New foreclosures rose from the first quarter in 35 states and Washington, D.C. The biggest increases were in Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana and Ohio.

New foreclosures actually declined in Texas, Massachusetts and Maryland. Both Maryland and Massachusetts recently passed laws to slow the foreclosure process and give borrowers more time to catch up on their payments.

Almost 500,000 homeowners, or about 1 percent, entered the foreclosure process in the second quarter.

But for the first time since the mortgage crisis started, delinquencies on subprime adjustable-rate loans declined. While more than one out of every five homeowners with a subprime ARM is still in default, that portion dipped 1 percentage point from the first quarter to 21 percent.

What’s driving up the delinquency rate now is the number of homeowners with risky, adjustable-rate prime loans made with little or no proof of the borrowers’ income or assets.

More than one out of 10 borrowers with a prime ARM is now delinquent or in foreclosure. That portion, 11.3 percent, was up from 9.7 percent in the first quarter, and is expected to rise as more homeowners see their monthly payments spike.

Many of these loans allowed the borrower to pay only the interest on the loan for a fixed period. Others gave the borrower the option to “pick-a-payment,” adding any unpaid interest to the principal balance.

Defaults on these mortgages, which earned the nickname “liar loans” because borrowers often did not document their incomes, are costing Fannie Mae and Freddie Mac billions of dollars. The Treasury Department has even pledged to bail out the mortgage finance companies if necessary.

With home prices plummeting, particularly in California, Nevada, Arizona and Florida, many borrowers with these exotic loans now owe more on their homes than they are worth.

Worse still, these loans reset to higher monthly payments when borrowers reach maximum debt limits - typically around 10 to 25 percent more than the original loan.

Those resets can increase the borrower’s monthly payment by more than $1,000 a month on average, Fitch Ratings said in a report this week.

And nearly half of these pay-option loans are expected to reset to higher monthly payments by the end of 2010, Fitch said.

One such borrower, Deanna Tamraz, 63, of Warminster, Pa., has been paying $1,700 a month - which doesn’t even cover all the interest - to Countrywide Financial Corp., which refinanced her loan two years ago.

She fears she will be unable to make payments once the balance owed rises to 15 percent more than the original $260,000 mortgage, triggering a dramatic jump in loan payments. “Like a stupid person, I trusted them,” she said.

Such loans “were not designed for senior citizens on limited incomes,” said David Berenbaum, executive vice president of National Community Reinvestment Coalition, a Washington-based advocacy group trying to help Tamraz with her mortgage.

Rick Simon, a spokesman for Countrywide - which was acquired by Bank of America Corp. this year - said in an e-mail message that Tamraz’s mortgage “does not qualify” for a refinance for less than the loan’s original value and declined to elaborate.

Real Estate News from the We Buy Houses Team 

Homeowners rushed to take advantage of last week’s drop in interest rates following the government’s takeover of Fannie Mae and Freddie Mac, but rates are rising again on investor fears over the eroding conditions in financial markets.

A mini-refinance boom started last Thursday but ended early Monday, said Pava Leyrer, president of Heritage National Mortgage in Michigan. The average rate on a 30-year, fixed rate mortgage was 6.14 percent on Wednesday, up from 6.02 percent last week after the government bailed out Fannie and Freddie, according to HSH Associates.

“We’ve had three rate changes in an afternoon and not for the good either,” Leyrer said Wednesday.

Last week, applications by homeowners looking to refinance their mortgages spiked 88 percent, according to the Mortgage Bankers Association. Refinances accounted for nearly 52 percent of all application activity, up from 36 percent the previous week, the trade group said.

The volume of purchase applications also edged up last week by 5 percent.

But while the number of applications soared last week, the approval rates will likely be low because the appraisals for many homes are coming in close to or below the amount of the existing mortgages.

“A lot of applications won’t end up in closing because the value is no longer there,” Ritch Workman, co-owner of Workman Mortgage in Melbourne, Fla.

Even if a homeowner has 10 to 15 percent equity in a house, he or she will have to pay for private mortgage insurance, which will probably eclipse any savings from a refinance, Workman said.

Nationwide home prices dropped a record 15.4 in the second quarter, according to Standard & Poor’s/Case-Shiller’s U.S. National Home Price Index. In many once-hot markets like Las Vegas, Los Angeles and Miami prices have fallen 25 percent or more, making it nearly impossible to refinance into a more manageable home loan.

Leroy Hernandez, 51, who lives outside of Richmond, Va., said he has been unable to get help with his $235,000 loan and is two months behind on the subprime mortgage he took out two years ago. Hernandez used to own three houses — two of which he purchased as investment properties, but turned one back over to the lender, sold another and faces foreclosure on the property where he lives.

Hernandez said he’s contacted several banks seeking to refinance his current loan, but they refused to consider his application.

“I’m just so discouraged,” he said.

Real Estate News from the We Buy Houses Team

LOS ANGELES - The median home price in Southern California fell 34 percent in August from last year, a research firm said Wednesday.

The cost of new and resale homes and condos dropped to $330,000 last month in a six-county region.

It was down from $500,000 in August 2007 and down 5.2 percent from $348,000 in July, MDA DataQuick said

A total of 19,366 homes and condos were sold last month, up about 9 percent from August 2007 but down almost 5 percent from July.

MDA DataQuick president John Walsh said much of the sales activity has been logged in lower-priced inland areas where the market has been driven by foreclosures.

“Foreclosure activity remains high, credit is still tight, affordability remains strained on the coast and the job market is soft,” Walsh said. “Some expect prices to bottom out soon … That may happen, but history suggests that few of us will time the bottom precisely.”

Foreclosures accounted for almost 46 percent of all resold properties last month, up from 10 percent in August 2007 and almost 44 percent in July.

Real Estate News from the We Buy Houses Team

U.S. foreclosure filings rose to a record in August as falling home prices made it harder to sell or refinance homes to pay off the mortgage, RealtyTrac Inc. said.

Owners of 303,879 properties, or one in 416 U.S. households, got a default notice, were warned of a pending auction or foreclosed on last month. That was the most since reporting began in January 2005. Filings increased 27 percent from a year earlier, about half the annual pace of previous months, because of high default totals in August 2007, the Irvine, California- based seller of foreclosure data said in a statement today.

“The chickens have come home to roost,'’ Jim Croft, founder of the Mortgage Asset Research Institute in Reston, Virginia, said in an interview. “Real estate inflation bailed out an awful lot of bad loans.'’

The worst housing slump since the 1930s shows little sign of abating. Home prices in 20 U.S. metropolitan areas declined 15.9 percent in June from a year earlier, according to the S&P/Case- Shiller index. Prices may fall another 10 percent through the end of 2009, according to analysts at Lehman Brothers Holdings Inc.

August filings were 11 percent higher than the previous record of 273,001 set in May, according to RealtyTrac. Filings rose 12 percent from July. Bank seizures, the last stage of the foreclosure process, known as real estate-owned or REO properties, more than doubled from a year ago to 90,893.

Defaults rose 10 percent and auctions rose 7 percent from August 2007, said RealtyTrac, which has a database of more than 1.5 million properties.

Unsold Homes

There are 3.9 million unsold existing single-family homes, the most since at least 1982, according to the Chicago-based National Association of Realtors. There is an 11.1 month supply of existing unsold homes at the current sales pace, up from 4.6 months in September 2005, the Realtors said.

Financing is difficult to obtain, and borrowers must put down 20 percent to 30 percent of the purchase price, said Mark Goldman, senior loan officer at Windsor Capital Mortgage in San Diego. About 90 percent of borrowers at his company get 30-year, fixed-interest-rate loans, he said.

The August increase in filings was the smallest annual gain since February 2007, when defaults increased 19 percent from a year earlier. A new federal housing law designed to help homeowners avoid foreclosure may be slowing the rate of increase of defaults and auctions.

“ The question now is whether these measures will actually reduce foreclosures or simply cause a temporary lull in foreclosure activity,'’ he said.

Nevada, California

Nevada had the nation’s highest foreclosure rate for the 20th consecutive month, with one in 91 households in some stage of default, according to RealtyTrac. Filings rose 16 percent from the previous month and 89 percent from a year earlier to 11,706.

California had the second-highest rate, one in 130 households, and the most filings at 101,724, a third of the nation’s total. Defaults increased 40 percent from the previous month and 76 percent from August 2007.

Arizona had the third-highest rate at one in 182 households, followed by Florida, Michigan, Georgia, Ohio, Colorado, Illinois and Indiana, RealtyTrac said.

Florida ranked second with 44,000 filings, a 4 percent decrease from the previous month and a 30 percent increase from August 2007. Arizona was third in filings at 14,333, up 7 percent from July and almost 63 percent from a year earlier.

Michigan, New Jersey

Michigan ranked fourth in filings at 13,605. Defaults decreased 13 percent from a year earlier. Nevada, Ohio, Texas, Illinois, Georgia and New Jersey were also among the top 10 states with the most filings, RealtyTrac said.

New Jersey’s foreclosure rate ranked 11th at one filing in 536 households, and New York ranked 33rd at one in 1,444 households.

California had eight of the 10 metropolitan areas with the highest foreclosure rates, led by Stockton at one in 50 households. Merced, Modesto, Vallejo-Fairfield and Riverside-San Bernardino ranked second through fifth. Bakersfield, Salinas- Monterey and Sacramento, the state capital, ranked eighth through 10th.

Cape Coral-Fort Myers, Florida, had the sixth-highest metro foreclosure rate at one in 66 households and saw a 3 percent decrease in filings. Las Vegas was seventh at one in 75 households, and had an 83 percent increase in defaults, according to RealtyTrac.

Real Estate News from the We Buy Houses Team  

Foreclosures in Wisconsin rose just 1.2 percent in August, compared with the same month last year, suggesting a slowdown in the rising rate of foreclosure filings.

Wisconsin’s number of foreclosures dropped the state in the national rankings from to 30th from 29th in July, according to RealtyTrac, a national database of foreclosure and bank-owned properties.

The number of homes in some stage of foreclosure in August increased to 2,226, according to RealtyTrac. That means one in every 1,138 homes in the state was facing some kind of foreclosure.

Nationally, 303,879 homes faced foreclosure in August, up 11.7 percent from July and up 26.7 percent from August 2007.

“In August, the total number of U.S. properties that received foreclosure filings as well as the national foreclosure rate were both the highest we’ve seen in any month since we began issuing our report in January 2005; however, the annual increase of 27 percent was actually substantially lower than in previous months this year, when it was hovering around 50 to 65 percent,” said James Saccacio, chief executive officer of RealtyTrac.

Saccacio said that new legislation passed in several states designed to give homeowners more time before foreclosure proceedings are initiated may be contributing to the slowdown in the increase in default and auction activity.

RealtyTrac publishes one of the largest national databases of foreclosure and bank-owned properties with more than 1.5 million properties from some 2,200 counties across the country.

Real Estate News from the We Buy Houses Team  

Property foreclosure filings for August rose 12% from the prior month to reach the highest level by one measurement since at least early 2005, but year-to-year growth slowed substantially amid measures being taken to stem foreclosures.

Foreclosure-listing service RealtyTrac said there were foreclosure filings on 303,879 properties last month, or one for every 416 households. The figures are the highest since RealtyTrac began issuing its monthly reports in January 2005.

But the number of filings was up 27% from August 2007, half the annual increase seen in recent months. RealtyTrac Chief Executive James J. Saccacio said there was a year-earlier spike in default rates that boosted the 2007 figure, but also highlighted steps being taken by state governments and loan servicers to avoid, or at least forestall, foreclosure proceedings.

“The question now is whether these measures will actually reduce foreclosures or simply cause a temporary lull in foreclosure activity,” he said.

For the 20th consecutive month, Nevada had the nation’s highest foreclosure-filing rate, with one in every 91 households receiving one.

California had the second-highest rate of activity and the highest number of filings. They totaled 101,724 for the nation’s most populous state, or one-third of the national total. Metro areas in California accounted for eight of the top 10 rates, with Stockton topping the list with one household for every 50 receiving a filing.

Real Estate News from the We Buy Houses Team  

Foreclosure filings continued to rise around the United States and in California during August, with Stockton leading the nation in filing rate and Sacramento at No. 10 out of 230 metro areas studied. Filings of all types — default notices, auction sale notices and bank repossessions — were reported for 303,879 U.S. properties during August, up 12 percent from July and 27 percent from August 2007, according to a report released Friday by Irvine-based RealtyTrac. The report showed one in every 416 U.S. households received a foreclosure filing during the month. California again was recorded the nation’s second-highest state foreclosure rate, behind only Nevada, which has topped the list for 20 consecutive months. One in every 130 California households receiving a foreclosure filing in August — a total of 101,724 filings, up 76 percent from August 2007 and more than 40 percent from July. In Nevada, the rate was one in 91, although the number of households in Nevada is much smaller. California cities accounted for eight of the top 10 metro foreclosure rates out of the 230 metro areas tracked in the August report. Stockton was No. 1, with one in every 50 households in San Joaquin County receiving a foreclosure filing during the month, followed by Merced, Modesto, Vallejo-Fairfield and Riverside-San Bernardino in the No. 2 to 5 spots. Bakersfield, Salinas-Monterey and Sacramento held the No. 8, 9 and 10 spots. Sacramento County had 5,971 foreclosure actions of all kinds during the month, including the seizure of 2,288 homes by the lender. That was up 37 percent from July and 13 percent from Aug. 2007. In the four-county Sacramento region, there were 7,726 foreclosure actions, up 16 percent in a year. Yolo County saw foreclosure actions jump 193 percent, from 112 in Aug. 2007 to 328 a year later. Florida posted the second-highest total in August, with foreclosure filings reported on 44,000 properties during the month — down 4 percent from July but still up nearly 30 percent from August 2007. One in every 194 Florida properties received a foreclosure filing in August, the nation’s fourth-highest state foreclosure rate. California, Florida and Arizona together accounted for more than half of the nation’s foreclosure activity.

Real Estate News from the We Buy Houses Team  

 A new report out Friday shows foreclosure numbers nationwide have hit a new high - with California among the hardest hit. But some say those same numbers show a glimmer of hope.

There is some good news here, of course, it’s based on perspective of the data. While foreclosure numbers are at an all-time high, it’s actually a smaller increase than in previous months this year - so overall, it could be a positive sign that rates are slowing down.
Nationwide foreclosure filings in August increased 27-percent compared to the same month a year ago. But Realty Trac, an online company that monitors foreclosure filings, says it’s a significantly slower pace than in previous months this year which had increase of 50-percent or more.

Nationwide, foreclosures increased by 12 percent from July to August of this year. Even with the slowing pace, homeowners are suffering. California has the nation’s second highest foreclosure rate and accounts for one-third of U.S. filings.
All nine Bay Area counties continue to report property foreclosures, some much worse than others. In the month of August, Contra Costa County recorded property foreclosure filings for one in every 94 homes; in Alameda County, it was one in every 165 households; Santa Clara County had foreclosure filings for one in every 205 homes; and Santa Cruz County, one in every 225 properties.
The housing crisis is clearly not over, but what remains to be seen is whether this slowing of foreclosure activity is a real sign of improvement; or is this a temporary lull perhaps because more mortgage lenders have been reworking their loan servicing guidelines, trying to help distressed homeowners avoid foreclosure

The number of foreclosure filings reported in North Carolina in August rose 32 percent to 4,600, compared with August 2007, RealtyTrac Inc. said in a report to be released today. The number of filings was up 6.9 percent compared with July.

There were 506 foreclosure filings in the Winston-Salem metropolitan statistical area during August, up from 270 in July and up from 185 in August 2007. The Winston-Salem MSA consists of Davie, Forsyth, Stokes and Yadkin counties. Forsyth accounted for 455 of the foreclosure filings, nearly triple the amount from a year ago.

By comparison, there were 1,172 foreclosure filings in the Charlotte-Gastonia-Salisbury MSA (down 17 percent from August 2007), 537 in the Greensboro-High Point MSA (up 459 percent) and 550 in the Raleigh-Cary MSA (up 27 percent

 Real Estate News from the We Buy Houses Team

WASHINGTON — Uncle Sam has just become the 800 pound gorilla in the U.S. mortgage market. The Bush administration is seizing troubled mortgage giants Fannie Mae and Freddie Mac in a bid to help reverse a prolonged housing and credit crisis.

But private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

Mark Zandi, chief economist at Moody’s Economy.com predicted that 30-year mortgage rates, currently averaging 6.35 percent nationwide, could dip to close to 5.5 percent. That’s because investors will be more willing to buy the debt issued by Fannie and Freddie - and at lower rates - since the federal government is now explicitly standing behind that debt.

Effectively, the federal government has now become the nation’s mortgage lender,” he said. “This takes a major financial threat off the table.”

Officials announced Sunday that both Fannie Mae and Freddie Mac were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars.

Treasury Secretary Henry Paulson refused to estimate how much the takeover of the two companies will cost the government, but he insisted that taxpayers will get paid back first.

“We structured this facility to protect the taxpayer,” Paulson said Monday in an interview on the CBS Early Show. “The government will be repaid … before the shareholders of these companies get a penny.”

In a separate appearance on CNBC, Paulson said “we obviously don’t know” when asked how much the takeover could end up costing taxpayers. He said that will depend on how quickly the housing market turns around.

Wall Street posted a huge rally Monday as investors reacted with enthusiasm to the government’s actions. The Dow Jones industrial average was up nearly 280 points in late morning trading.

The plan also touched off a global stock rally. Japan’s Nikkei stock average jumped 3.4 percent and Hong Kong’s Hang Seng index surged 4.3 percent. In morning trading, Britain’s FTSE 100 jumped 3.81 percent, Germany’s DAX index rose 3.21 percent, and France’s CAC-40 surged 4.44 percent.

Foreign investors own about $1.5 trillion of the debt issued by Fannie, Freddie and smaller agencies such as Ginnie Mae with about $1 trillion of that amount held by foreign governments.

Fannie and Freddie, which together own or guarantee about $5 trillion in home loans, about half the nation’s total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover.

The Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke, in exchange for senior preferred stock. Treasury will immediately be issued $1 billion of such stock from each company, which will pay 10 percent interest. Further purchases of preferred stock will be triggered if quarterly audits find that the companies’ capital cushion is below prudent standards.

The government, which will receive warrants representing ownership stakes of 79.9 percent in each company, is hoping that its moves will reassure nervous investors that they can continue to buy the debt of the two companies.

In a statement, President Bush said, “Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth.”

The conservatorship will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie, a move taken at the same time that Congress greatly expanded the power of the Treasury Department to make loans to the two companies and purchase their stock.

The executives and board of directors of both institutions are being replaced. Herb Allison, the former head of the TIAA-CREF retirement investment fund, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.

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Treasury Secretary Henry Paulson briefed Obama late Friday on plans to seize, perhaps as early as this weekend, Fannie Mae and Freddie Mac in an effort to bolster the pair and calm jittery global financial markets.

Paulson told Republican John McCain that Fannie and Freddie - which purchase mortgages from banks and package them into popular bonds sold to investors - would be seized and placed under temporary control in one of the largest government bailouts ever. The move is expected before Asian markets open Monday, which is Sunday night on the U.S. East Coast.

McCain’s campaign on Saturday called for the eventual elimination of Fannie and Freddie, complaining they have become so large and poorly managed that they pose a risk to the broader financial markets.

Senator McCain will get real regulation that limits their ability to borrow, shrinks their size until they are no longer a threat to our economy, and privatizes and eliminates their links to the government,” said Doug Holtz-Eakin, a senior McCain policy adviser.

Obama, too, has been critical, complaining that Fannie and Freddie should either operate as public entities without profit, or as private companies that won’t be rescued if they fall into trouble.

McCain’s running mate, Alaska Gov. Sarah Palin, speaking in Colorado Springs, Colo., said Fannie and Freddie had “gotten too big and too expensive to the taxpayers.” The companies, however, aren’t taxpayer funded but operate as private companies. The takeover may result in a taxpayer bailout during reorganization.

As explained to the campaigns, Fannie and Freddie would be placed under the control of their regulator, the new Federal Housing Finance Agency. This agency was created when President Bush signed legislation on July 30 replacing the prior regulator of Fannie and Freddie, the Office of Federal Housing Enterprise Oversight.

The new agency has greater powers and the authority to manage the two entities if they are placed under government control. Treasury hopes the action will stabilize credit markets, give banks incentive to do more mortgage lending and bring down mortgage rates by reducing the gap between mortgage rates and longer-term Treasury bonds.

“It should bring mortgage rates down, because Fannie and Freddie are now (after the takeover) like Treasury debt,” said Mark Zandi, chief economist for forecaster Moody’s Economy.com.

Rates on a 30-year fixed mortgage could come down to between 5.25 percent and 5.5 percent, he said, and world financial markets should respond favorably on Monday.

“Fannie and Freddie were a significant cloud over the market that presumably has been lifted,” he said. “I think investors should respond positively.”

The government takeover process is called conservatorship, and it works sort of like a Chapter 11 bankruptcy, where assets are preserved, not sold off, and the company is reorganized rather than closed.

The coming takeover was also confirmed Saturday by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. In a Saturday afternoon statement, Frank confirmed that he spoke late Friday with Paulson and was told that Treasury “intends to use the powers that Congress provided it to ensure the continued and stable functioning of Fannie Mae and Freddie Mac.”

WASHINGTON — Mortgage giants Fannie Mae and Freddie Mac - despite their robust cadre of economists and mortgage experts - failed to heed warnings that the most dramatic housing bubble in U.S. history would burst.

The companies - particularly Freddie Mac - didn’t raise enough cash to reassure Wall Street that they would be able to withstand a severe downturn in U.S. home prices.

Federal regulators after scouring the companies’ books with aid from investment bank Morgan Stanley - believe the companies pushed accounting conventions when calculating their financial cushion against losses, a person briefed on the matter said Saturday. The person declined to be named because details of the government’s actions were not yet public.

As their losses started rising at alarming rates over the past year, investors gradually lost confidence, forcing the government’s historic takeover of the two companies, which could be announced as soon as Sunday and was expected to include the ouster of top executives.

Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, said in an interview Saturday that the companies’ financial picture was better than investors assumed, but “it just plainly became clear that elements of the market wouldn’t accept that.”

Investors have had reasons to feel jittery.

On Friday, the Mortgage Bankers Association said that more than 4 million American homeowners with a mortgage, a record 9 percent, were either behind on their payments or in foreclosure at the end of June.

Also on Friday, Nevada regulators shut down Silver State Bank, the 11th failure this year of a federally insured bank. In July, regulators seized IndyMac, which had $19 billion in deposits. And earlier this year, the government orchestrated the takeover of investment bank Bear Stearns Cos. by JPMorgan Chase & Co.

Treasury Secretary Henry Paulson has been in contact in recent weeks with foreign governments that hold billions of dollars of Fannie and Freddie debt to reassure them that the United States recognizes the importance of the two companies.

Nevertheless, the Bank of China said in late August that it cut back its portfolio of the Fannie and Freddie’s debt by about one quarter since the end of June.

Washington-based Fannie and McLean, Va.-based Freddie are the engines behind a complex process of buying, bundling and selling mortgages that remains a mystery to millions of Americans whose home loans pass through this system. Together Fannie and Freddie hold or guarantee about $5 trillion in mortgage debt - about half of the nation’s total.

They traditionally backed the safest loans, 30-year fixed rate mortgages that required a down payment of at least 20 percent. But in recent years, they lowered their standards dramatically, matching a decline fueled by Wall Street banks that backed the now-defunct subprime lending industry.

Armando Falcon, who clashed frequently with the companies during his six years as Fannie and Freddie’s chief government regulator, said in an interview last month that the companies’ woes are similar to the downfall of other major corporate titans like Enron and WorldCom earlier this decade. “It boils down to a whole lot of greed and arrogance,” he said.

The companies, he said, took advantage of the perception on Wall Street that the government would stand behind them in a time of crisis, as is now the case.

With that implied government backing, the companies generated large profits for years, but ultimately took on too much risk, causing investors to lose faith in their ability to navigate the historic housing bust.

Economists who long warned the housing boom could not last are baffled that the companies were not better prepared for what they saw as an inevitable downturn.

“How could you look at an enormous rise in prices and not think there was a potential for them to fall?” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles.

Another longtime proponent of the housing bubble concept is Dean Baker, co-director of the Washington-based Center for Economic and Policy Research. He recalls several occasions when he debated top Fannie and Freddie economists, who dismissed the idea that U.S. home prices could decline.

Real Estate News from the We Buy Houses Team

WASHINGTON — Rates on 30-year mortgages fell for a third straight week, dropping to the lowest level since mid-July.

Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages dipped to 6.35 percent this week, down from 6.40 percent, the previous week. It marked the third consecutive decline and left rates at the lowest level since July 17 when they stood at 6.26 percent.

The 30-year mortgage, which hit a high for this year at 6.63 percent on July 24, has been above 6 percent since late May as financial markets have become convinced that rising inflation pressures will keep the Federal Reserve from cutting interest rates further to bolster the weak economy.

Frank Nothaft, chief economist for Freddie Mac, attributed this week’s decline in mortgage rates to recent reports indicating that consumer spending may slow further now that the boost from the economic stimulus payments is fading.

Nothaft noted that personal incomes, the fuel needed to support consumer spending, dipped by 0.7 percent in July, the worst showing in three years and a worrisome signal that spending could falter in the months ahead.

The Freddie Mac survey showed other mortgage rates also declined this week.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 5.90 percent, down from 5.93 percent last week.

Rates on five-year, adjustable-rate mortgages averaged 5.97 percent this week, down from 6.03 percent last week.

One-year, adjustable-rate mortgages dropped to 5.15 percent, down from 5.33 percent last week.

The mortgage rates do not include add-on fees known as points. The nationwide fee for 30-year mortgages averaged 0.7 point last week. The nationwide fee for all other mortgage types averaged 0.6 point this week.

A year ago, rates on 30-year mortgages stood at 6.46 percent, 15-year mortgage rates averaged 6.15 percent, five-year adjustable-rate mortgages were at 6.32 percent and one-year adjustable-rate mortgages stood at 5.74 percent

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LOS ANGELES — Lender GMAC Financial Services said Wednesday it will close all of its 200 retail offices and lay off about 5,000 employees as part of plan to reduce its mortgage lending and servicing because of the housing market downturn.

The majority of the layoffs are slated for GMAC’s mortgage lending division, Residential Capital LLC, known as ResCap, and will reduce work force at the unit by 60 percent, the company said.

In the first half of the year, ResCap’s U.S. mortgage loan production was valued at about $35.7 billion, down nearly 39 percent from the same period in 2007. Yet it was still the seventh-largest mortgage originator, with 3.9 percent market share, according to trade publication Inside Mortgage Finance.

“While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment,” Tom Marano, ResCap’s chairman and chief executive officer, said in a statement. “Conditions in the mortgage and credit markets have not abated and, therefore, we need to respond aggressively by further reducing both operating costs and business risk.”

Some 3,000 employees may get their pink slips this month. The rest are expected to lose their jobs by the end of the year, the company said.

ResCap is also the latest in a long list of lenders that have stopped using external, wholesale brokers to originate loans. Wachovia Corp. exited the wholesale mortgage lending business in July, for example, while rival Bank of America Corp. got out of the business several months ago.

Richfield, Minn.-based ResCap will continue lending through brands such as Ditech or GMAC Mortgage Direct, which customers can reach online or through call centers, said spokeswoman Jeannine Bruin.

“We’re not going to have a retail presence where customers walk in the door,” Bruin said. (But) “we are very much still originating loans and servicing the customer.”

To cover severance costs, ResCap will take a charge of $90 million to $120 million against earnings.

In July, GMAC said ResCap’s second-quarter losses widened to $1.86 billion from $254 million in the prior-year period. To try to reverse the trend, ResCap took steps to cut back the size and risk of its balance sheet, and boosted loan loss provisions.

Like many lenders have done since the credit market dried up, ResCap has focused on originating home loans that it can resell to government-sponsored mortgage companies Fannie Mae and Freddie Mac.

ResCap has also virtually abandoned the market for subprime loans. In the first half of this year, ResCap made just 13 subprime loans, compared with nearly 26,000 in the same period a year earlier.

At the end of June, 14.6 percent of ResCap’s U.S. home loans were at least 60 days past due. That’s up slightly from the close of the first quarter, but down from 15.5 percent on June 30, 2007.

New York-based GMAC is controlled by Cerberus Capital Management, but automaker General Motors Corp. still holds a 49 percent stake in the business.