Second Wave of Foreclosures

Hi Marjie.  Interesting viewpoint.

Are you concerned being publicly negative on the housing market could hurt your business?

I too am concerned, but also hesitant to write about it.

Also, I voted for Obama.  But I still believe in less government intervention.

Thanks for writing,

Ken

One thing to consider.  it is way better to have a market with movements and issues then a stable market.  we are lucky to be in a field where we decide what we make and our value.  they don't pay well to solve easy problems.  So now that we have difficult problems to solve we should be getting the value back we deserve.  Bring it on!

I was told by someone that the foreclosure process takes 2 years for the bank and costs them 85k. If this is true then foreclosures coming onto the market now and even back in 2008, were defaulting on their loans back in 2006 and 2007. The amount of homeowners losing their homes has increased since 06 and 07. I am not an expert in this area, but I do think it is going to be several more years and much higher volumes of foreclosures coming. These coming waves will not be good for home values. It's really sad to watch people go through situations like this.

You are so right.  Grab your surf board or boogie board and ride it the best you can.  I think about December you will start seeing people who have been holding on to start losing their homes. 

We list and sell a lot of bank properties but we have noticed a sharp decline in new REOs.  We're still getting some new properties but not like the last 1.5 years.  In our market we get multiple offers on the REOs and they sell pretty much immediately, and often signficantly over asking.  The last home we listed at $212K and sold for $250K.  There are a large number of short sales, but most of them are not selling.  We also hear about the anticipated new wave of REOs coming.  We'll see.  It's nice with a breather...

Lisa and Goran Forss

www.teamforss.com

Allison James Estates & Homes

Wait for the CRE market to get in the mix. just over a trillion is coming due for refinance. 

I agree that the CRE market will be in the mix in the future.

You made an important point that I think too many people overlook, Marjie:

It is key to remember that those "losses" will only be realized if they sell in a down market.

Yes, it's rough.  Yes, it can be ugly.  But, your concern about what your home is valued at really should only matter if you are looking to sell your home.  If you don't plan on going anywhere, stick with it.  It will come back.

By the way, I've been hearing rumblings of this sort of thing for months, too.  So, I'm not surprised.  I know I've got to strap in, though, because you are absolutely right.  We ARE in for a bumpy ride still.

I have heard that some "A" quality loans are also starting to go into foreclosure or are in foreclosure.  Some people who had great credit have lost their jobs due to the recession and are not able to pay their bills on a timely basis.

Hopefully the economy will improve soon.

I watch the HUD foreclosures come in waves....  It seems like the REO's that other agents handle also come in waves.  I hope the surf calms soon.  I put my sign in the yard yesterday(Memorial Day) on a HUD that my office just got and also got my first call on it 3 hours after putting the sign in the yard....it was a "recovery agent" looking for the down on their luck folks that lost their home to foreclosure.  My heart bleeds for the people who are loosing their homes.  I ask the question all the time to myself and to my spouse - "where do the people go that don't have families to move in with?"  I don't see how the decisions that have been made by government are going to be the solution to the economic crisis. 

It will be interesting to see how this new wave of foreclosures trends across the country.

I guess all we could do is continue to hold on through this roller coaster ride!!  It's not a fun one!!

Not to mention the 3, 5, and 7 year arms people took out.  Those will becoming due as well.  In some instances when the buyer goes to refinance those homes, either, 1. they cant qualify for their own house any more, or 2. the house value just ist'n there.  Hang on!

Hi Marjie, Great info here. I really haven't heard about the second wave yet but it sure sounds possible.

@ Scott Baker #51:  That's the mindset here.  For real.  It's sad and sick at the same time and then everyone pretends it is the "bad loans"

@ Bill Armstrong #54:  No the process can take as little as 4 months but as long as a year or two.  They have to make an honest effort at trying to do something first or BK to drag it out to the year or two mark.  Most of the time they are squatters in their home pretending to loan mod or short sale to live rent free for longer.  That's why it is frustrating to determine whether a short sale is for real or not. THEN you have all the other problems that are the norm with short sales.

Marjie:  SORRY TO HIJACK, good topic!

Wasn't there suppose to be some sort of stimulus plan to help slow the foreclosures. Has anyone got any help.

Yes we are all in for the bumpy ride -- hang on and arms inside the seat.

Right now with the buyers available, I could use some REOs. They have dried up on the low priced house and there is nothing to be had.

I don't want to bring anyone down, but I'm probably going to with this comment.

I've heard through my banking and financial contacts that there is a large shadow inventory of REO properties which the banks haven't put on the market yet.  If Alt-A loan failures add significantly to this, the banks will probably feel like they have to liquidate inventory at a faster rate.  The only possible result will be to drive prices even lower.  This will mean that the people who were optimistic in the last few months and purchased will be facing a drop in their properties' value. 

Of course, there is no loss unless you have to sell, but our business in predicated on the propensity of Americans to move.  If they all sit still in order to avoid taking a loss, then a recent prediction a speaker at a leadership training course I attended will come true.  He stated that we'd see more brokerages and agents go out of business this summer than at any time in the history of modern real estate.

If you think that government forcing loan modifications is the solution, think about this: Would you personally loan a large sum of money to a stranger or even a friend if you knew that there was a high probability that the government would step in and tell you that he didn't have to pay it back?  Government messing with private contracts is a receipe for complete disaster.  There'll be no loans available for anyone and where will we be then?

If someone can rent the same home as theirs for 600 less a month, can you blame them for walking away. No one is going to build equity in this market, not going to happen sorry.

I thnik it is wrong for this to happen but it is a fact and when it comes to cutting to survive and you can shave $600 you are going to do it.

I have had several folks that can rent the same tract home that they are living in for as much as a $1000. less and their equity had dropped by 24 to 36%.

The second wave also includes negative am loans. The third wave is coming from job loss.

Marjie,

It's going to be a while before the real estate market will start recovering. Some areas will do so sooner than others, but the big variable is the amount of foreclosures.

And we all need to educate ourselves on how to handle this one, and then the next one, which will be a result of job losses.

Marjie -

I fear the ripple will be more a like a big wave.

Coming soon, perhaps - those with jumbos, previously thought untouchable - as the wave of lowered home values has reached across the board, bottom to top.

And it is very SCARY!

DEAN & DEAN'S TEAM CHICAGO

I know there is another "wave" coming and I hope that many of these loans are owned by Fannie and Freddie so they are able to take advantage of the loan modification plan by Obama. :)

I agree with those that have stated that Agents that are not property trained in Short Sale shouldnt do them. How can your provide reasonable care when you dont know what the heck you are doing! I personally dont list Short Sales as I have not gone thru any training on them. I know my limitations. It is usually these short sales that end up staying on the market forever and give the short sale its bad name. A properly marketed short sale and an agent that can eeffectively negotiate with the lender can usually get it done quickly. Maybe not 30 day quickly but certainly not 6 months...

I know it is hard to look at the short sale listing and pass on the potential commission but I say make the referral to an agent that can do them and take the referral fee. Not to mention avoiding the potential litigation you could expose yourself to down the road if the home didnt sell or the contract was not properly executed and followed thru with.

I think you're right and it's one of the primary reasons I got into the foreclosures market as a listing agent. Sad but true.

I sense that bank foreclosures are only going to make the pain worse for everyone, good credit or not.

National Public Radio had a piece on Morning Edition on 15 May. Chris Arnold spoke of how many of the foreclosures don't need to happen. He reported that Ocwen has a software program in place to calculate the cost of foreclosure v loan modification, and has practices in place to keep people in their homes. It was noted that most of the larger lenders lack the tools and personnel knowledge to evaluate the options as quickly and simply as Ocwen. Consequently, lenders are foreclosing where the lender / investor might reap a greater reward / return, by keeping the home owner in place. And, the executives of these lending institutions know this -- I wonder what they are doing about it.

Yikes!

Hmm -- I think we all are going to have to ride this wave!  It is certainly a challenging market.  Unemployment also is still on the rise!  This is not over yet!

It seems to me that any intervention to date has always been too late and too little with the wrong focus.  The average person is the one bearing the brunt of this mess.  Moreover, it's now a global problem, which only makes an issue harder to solve.

It's tough to say how bad things are going to get, but it's quite possible we're not through it yet.

Fox news this week of May 24, 2009 said that 92% of all homeowners are still paying their mortgage on time.

This is when the agents who are in for the long haul will remain while others who thought they could tuff it out will return to their 8 to 5 job.  This business is not for the faint of heart.

Great post Marjie - and congrats on having it featured! Hope all is well with you and you find a way to help some clients through the mess and others take advantage of the mess!

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I like Jill's comment:  Fox news this week of May 24, 2009 said that 92% of all homeowners are still paying their mortgage on time.  However, the other 8% will make up a huge part of the available real estate inventory for months to come.

I agree that foreclosures aren't finish yet. . I feel very confident . This is the new "NORMAL" market for all of us. .we better get used to it.

I could write a book and I am a "financing guru" - prefer to be called mortgage expert - but I will spare you the volume. I know why you wrote this and I understand that most people don't understand the real difference between Non-Conforming (subprime), Alt-A and Prime loans yet I do want to add two things:

1. What used to be speculation is now just throwing bombs instead of darts. The likelihood of yet another wave of fallout that can be blamed on the mortgage industry is fairly broad. We're in a deep recession with salaries decreasing, property values decreasing, unemployment increasing and headed into years of much higher taxes and costs of consumer goods which will impact the middle class in a huge way.

2. When we look at percentages of people actually paying their mortgages because they made a covenant to do so the number of those who are compared to those who aren't fall somewhat greater across class lines than mortgage classification lines. In other words there are Prime credit borrowers out there walking away from mortgages for many wrong reasons just as there are Non-Conforming and Alt-A borrowers.

When the numbers are finally in many years from now when it's too late to do anything about it they will say one of the biggest perpetuators of the steady decline in value was the belief that people could simply stop paying their mortgage with the belief they were now owed something by the horrible banks. Nevermind they have $800 a month cars, $50,000 in credit card debt, still eat out 5 nights a week, have a $180 a month cable bill, a $150 a month cell phone bill, and absolutely no debt management desire - much less skills.

Waves indeed. The vast majority of the short sales that do not sell will also become foreclosures. Meddling in the free market by the Prez isn't helping, will not help and only makes the problem worse by creating uncertainty. I do agree that this climate will continue for some time. Agents who prepare will prosper, agents who make no adjustments will fail.

Gene

My sword is sharpened, shield is up, and I am ready for battle.

We have officially crossed the Rubicon, but this time we are going to change history!

- Harrison Painter

I agree that agents need to prepare for this. It's scary to think about what the future may hold. I'm trying to look at the glass half full for now though. Dallas/Ft. Worth is doing well compared to the rest of the country.

You know folks I do believe it's all going to work itself out in time.  We have been swamped with foreclosures for sometime and bring some more on........buyers are hungry and sick of waiting. We have multiple offers flying around.

The trouble is not in changing thought but rather in keeping thoughts changed!

I went thru the late 80's and we all made it thru that period of time. This too will pass.

Marjie, I completely agree. The 2nd half of this year is goiong to get ugly. It will be many years before we see the end of this large amouont of foreclosures. Short Sales are alos here to stay for the next decade or so. Folks best hone up on these skills if they don't have them.  

Add the new wave of foreclosures to the credit card meltdown.... = uhhhhhgly

I don't believe the moratoriums on foreclosures are helping..just prolonging the inevitable. The faster we cycle through these foreclosures the sooner we'll get to a healthier market. I do believe however that the banks need to work with buyers to keep them in their homes if they are on the cusp of being able to afford it. Whether that requires lower interest payments or longer mortgage terms, or both....we need to get to a point where these borderline homeowners can sustain paying a reasonable mortgage payment and not have to go into foreclosure.

It's just a shame that our "government" cannot understand that if the housing crises was fixed, if people who were given mortgages that they could afford could keep the same criteria for their loans, and if people who were paying their mortgages could refinance...perhaps the correction wouldn't be so tough on everyone.

I'm told by some people that they've ballooned to 10 -12%....while current rates are between 5.5-6%.  It doesn't take a brain surgeon to see where if the banks worked with these people and this was a new loan, they would be offering 5.5 - 6 %...rather than to carry a foreclosure, end up as an REO, why doesn't the government mandate cooperation with their customers?

It's very sad when I get phone calls from folks who are looking to rent 4-5 bedroom homes so that Mom & Dad, son/wife/2children, and brother/sister of first son and her husband are all looking to rent one home.

Where, I say, where are all these people who are being evicted from their homes going to live?

And, I agree with Brad above.

However, I'm going to try and stay positive about this so called next new wave and hope someone wakes up in Washington and mandates the banks work with people as Brad says.

Then again, what is more scary is the fact that North Korea is  (testing) detonating nuclear bombs, geeze, if they drop those here, we will just be a little fallout, drifting in the wind.   I can get through the housing debacle.  I have no control of the North Koreans...

I was reading today that the jumbo loans are looking a little shifty right now too.  There just seems to be one obstacles after another with the housing market.

It really is an unbelievable mess the lenders have gotten us all into, and they're the ones who are getting off the hook easy. LEASING is starting to look like the very smart move at this critical juncture....

Here is what I want to know....maybe someone knows, because I don't

You work on a short sale for a year (CW) you get an offer at market value that agrees with the

 BPO..then the bank says, they want a promissory note or they will "close the file".

They don't get the note so they foreclose! and then they turn around and sell it for 575K!

I may sound bitter but im not, just trying to make sense of it all.

How much money was lost there?

Does anyone know?

Sorry my offer was for 620k (BPO PRICE)

Can you delete #88 a blatant ad.

If I had to pick a short sale OR a REO . . . I'd go with REO any day of the week.  It's the banks property, at least there not fighting over who has first position on the mortgage, and who will reduces wait, etc.

Can you delete #88 a blatant ad.

If I had to pick a short sale OR a REO . . . I'd go with REO any day of the week.  It's the banks property, at least there not fighting over who has first position on the mortgage, and who will reduces wait, etc.

What is surprising to me, in one area home values have dropped and keep dropping, yet a 20 minute drive and there is fierce competition for homes.  I don't understand it.

Don't forget about the "No Money Down" or "100% financing" mortgages.  People who have no vested financial interest in properties that they are currently living in and have 20-40% negative equity have no reason to stay - they can consider the mortgage payments they have made for the last few years rent and move on.  In many cases, their credit rating is already in poor condition due to late payments, etc., so another hit to their FICO means very little.

Cruz:  I have seen these types of unreasonable decisions by banks time and time again.  Banks continue to foreclose on homes only to end up listing and selling them for less that what they could have made prior to the foreclosure.

Marjie, You hit the nail on the head! Eloquently stated. Unfortunately it will only get worse before it gets better. There were some horrible decisions made and unfortunately the same people are using the same decision making planes to make it worse.

But people DO need a home, and their jobs and lives dictate we have to muck through it to get them homes. Thanks for the insightful heads up.. We see it.

I'm still waiting for the rest of the first wave of foreclosures to be "For Sale" Until working Americans own all these homes the melt down will not be over.

Kim Knapp

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We have all talked about it, but how will the market react?  I think or hope much better than previously.  We will either have a double dip or the market will handle it positively.  It is impossible to predict as one cannot predict human behavior over millions of people.  Interesting times ahead.  Be so very cautious........

shorts take so long because of a hope a higher offer would come in ...ineptness of the agents , 50yr  low rates and banking staff... or... conspiracy of the new world order to own all means of wealth and create only a few owners and the masses as renters?? just rich and poor ...no middle class.