Short Sale Blog

Good news on the national front regarding mortgage payment delinquencies - but, as usual, the Seattle area and Washington state seem to be lagging behind the national trends.

According to a new report by TransUnion, as published in the Silicon Valley Mercury News, the percentage of homeowners who are 60 or more days delinquent on their mortgage payments dropped in the first quarter of 2012. The nation-wide delinquency rate is now at its lowest level since 2009.

But that drop is small. The national delinquency rate was 5.78% for the first three months of this year - down from 6.19% a year ago. Before the housing crash, the delinquency rate was about 2%, and it peaked at nearly 7% in late 2009.

Throughout this housing crisis, though, Washington state seems to lag behind national trends. As the national delinquency rate declines, there are only eight states where the delinquency rate is still increasing: we in Washington are one of those eight.

The regions that were hit hardest and earliest by the financial crisis and high foreclosure rates are showing very strong signs of recovery. A report published this week by HousingWire, using figures published by Move Inc., lists the regions that show the “top turnarounds.” These are the towns showing the highest level of housing market recovery, as reflected by declining inventory and increasing house prices. Those top turnaround towns include Phoenix-Mesa in Arizona; Orlando, Florida; and Oakland and San Jose in California - all of which have already been hit hard by foreclosures.

We are confident that Washington state and the Seattle real estate market will also follow those same trends and see recovery in the housing market. We just seem to continue to be a year or two behind the national trend.

As delinquency rates are still on the rise here, homeowners who are struggling to make their mortgage payments will continue to look for solutions such as short sales, in order to avoid foreclosure and the negative affects that mortgage payment delinquency will have on their credit rating.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Two different groups that compile data on the housing market have released reports this week that indicate that short sales have now surpassed foreclosure sales in America.

Lender Processing Services (LPS), as reported by Bloomberg on Tuesday, indicates that in January, short sales accounted for 23.9% of home purchases. By comparison, 19.7% of sales were foreclosures that month. A year ago, only 16.3% of home sales were short sales, and 24.9% were foreclosures.

And Realtor Mag reports similar numbers released by RealtyTrac, which indicate that short sales increased by 33% from January 2011 to January 2012. Short sales increased over that period in 32 states.

These numbers reflect the reality that a short sale is often the best solution for both homeowner and lender, when the homeowner finds himself or herself “under water” - where they owe more on the mortgage than their home is currently worth, and are struggling to make their monthly mortgage payments.

Daren Blomquist, vice president at RealtyTrac, told Realtor Mag that he believes that 2012 could be a record year for short sales. With short sales on the upswing, and lenders working at shortening their response time for short sale requests, we think so too!

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

The Standard&Poor’s/Case-Shiller Home Price index published this month shows that home prices have declined nationwide by 4.1% over the previous year - but that Seattle home prices have fared over 50% worse than the national average.

The S&P/Case-Shiller Home Price is the leading measure of US home prices. It is published monthly by Standard&Poor’s, using a three-month moving average, with a two-month time lag, so the figures published this week reflect home prices up to July 2011.

S&P’s 20-city composite index shows that, although home prices rose by 0.9% in the month from June to July 2011, they are down by 4.1% compared to July 2010. The June-July increase, as well as small home price increases in the previous three months, reflect a normal seasonal upswing. However, S&P’s Chairman of the Index Committee, David Blitzer, told DSNews that the rate of the July increase was a better-than-usual price increase.

The bad news in the numbers comes for the Seattle area, though. Seattle home prices were down by 6.4% over the previous year - a performance more than 50% worse than the 4.1% drop seen nationally. And the month-over-month increase from June to July for Seattle was a negligible 0.1%.

Only two of the 20 cities used in the index showed price increases for the year. These recent drops bring home prices back down to where they were in 2003 - what some are referring to as “the lost decade in the housing market.” Prices are now down 32% from their peak in 2005, and nearly $7 trillion have been lost in homeowners’ equity through the period.

Stan Humphries, chief economist for the online mortgage marketplace Zillow, told DSNews that he expects only a weak performance from the housing market through the remainder of the year.

Many analysts tie the recent home price increases to the recent drop in foreclosure filings. As we reported to you earlier this month, foreclosure processing times have reached record highs. Since foreclosures tend to sell at lower-than-market prices, the effect of less foreclosure sales is to raise average sales prices for an area. As discussed in an analysis by Bloomberg, investigations into banks’ foreclosure practices which have slowed foreclosure filings may have also helped to slow the drop in home prices (the 4.1% drop was not as high as analysts had predicted a year ago).

However, as banks catch up on their paperwork and bring up the pace of foreclosure filings, home prices may experience increased downward pressure. The Bloomberg article notes that foreclosure filings surged by 33% in August compared to the previous month - a sign that the foreclosure process may be speeding up again.

And that home prices may continue their slide downward.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

A report released this week by Lender Processing Services indicates that the delays for lenders to process foreclosures have reached record highs.

As of the end of June, this year, there were 4.1 million home loans across the nation that were either greater than 90 days delinquent, or in some stage of foreclosure.

Of the 2.2 million loans that are in some stage of foreclosure, the average homeowner has not made a payment on that loan in a record 599 days.

And of the 1.9 million loans that were 90 or more days delinquent, 42% of the homeowners had not made a payment on over a year, and the average delinquency was more than 13 months - also a record.

The rate of foreclosure starts is three times the rate of foreclosure sales - which means that the number of homes in some stage of foreclosure is growing.

This backlog, due to lender delays in both initiating and processing foreclosures, does not bode well for the future of the housing market. The high number of homes that have not yet entered foreclosure means that the foreclosure numbers right now are artificially low. And it means that, once lenders catch up on their paperwork, these homes will move into foreclosure and the foreclosure rate will then become even higher.

However, the backlog does present an opportunity for delinquent homeowners who have not yet been foreclosed upon. These processing delays essentially buy them time to find other alternatives for settling their debts - such as negotiating a short sale.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

California is one of the states that has been most affected by the housing bust and foreclosure crisis. Over the past year, close to one half of home sales state-wide are sales of distressed properties. In some parts of California, the numbers are even worse: last month, in Madera County, 86% of home sales contracts accepted were for distressed-property sales.

A new move by members of the California Association of Realtors (CAR), as reported by DSNews today, may help to streamline short sales for homeowners across the country.

California, like Washington, is a state that implements non-judicial foreclosure. This means that lenders can pursue foreclosure without going through the courts. Foreclosure is initiated by mailing a defaulting borrower a notice of foreclosure.

CAR recognizes that short sales are important to clearing out the inventory of distressed properties, and that short sales will continue to be important in the coming years. But they are concerned that some of the requirements that lenders have in processing short sales may hold up future transactions. So CAR has sent letters to many of the major lenders, including JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo, with recommendations for streamlining the short sale process. These recommendations include:

• asking lenders to disclose whether or not they actually own the original loan
• asking lenders to disclose who has the finally authority to approve a short sale (e.g. the lender or the investor or some third party)
• requesting that lenders implement a standard process to pre-approve a request for a short sales before a property is listed for sale
• asking that lenders increase the amount that junior lenders may receive from a short sale, as second mortgages often hold up short sale approvals.

Although this request is coming from CAR in California, if the lenders approve CAR’s requests, this will help to further speed up the short sale process across the country. The number of short sales continues to grow nationwide. Short sales now account for 25% of residential property sales - up three times from two years ago.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

A press release published this week by foreclosure-listing firm RealtyTrac indicates that, while foreclosure rates have dropped across the nation, Seattle showed the greatest rise in foreclosures of the 20 most-populated metropolitan areas in the country.

The report compared the foreclosure rate for the first six months of 2011 with the foreclosure rate a year ago, for the first six months of 2010. It looked at data from all of the nation’s 211 metropolitan areas that have populations of more than 200,000.

178 of the 211 metro areas, or 84%, showed a decrease in foreclosure rate compared to mid-2010. Cities in California, Nevada, and Arizona accounted for the majority of high foreclosure rates.

Although the foreclosure rate is dropping nationwide, the RealtyTrac study does not take this as a sign of improved economic conditions. Rather, they attribute the drops in foreclosure rate to hold-ups in the system.

According to the statement: “These dramatic decreases indicate the foreclosure pipeline continues to be clogged in many local markets across the country, sometimes by a glut of already-foreclosed properties that are not selling quickly, sometimes by a mountain of improperly filed foreclosures that are blocking the inflow of new foreclosure filings — and sometimes by both.”

The news for Seattle is disturbing, however. The report looked specifically at the 20 largest metropolitan areas in the country. Of them, 19 showed drops in foreclosure rate. The only exception within the 20 largest cities was Seattle, where the foreclosure rate jumped by 10% compared to the same period a year earlier.

One in every 98 Seattle homes received a foreclosure filing in the first six months of 2011. Seattle had the 97th highest foreclosure rate in the nation in the first half of 2010. But in the first half of 2011, Seattle’s ranking rose to 57th-highest.

High foreclosure rates, and more homes ending up as bank-owned REO inventory, will continue to keep home prices low. Two recent studies predicted that further house drops, of up to 25%, may be on the horizon. And recent estimates are that the current shadow inventory of foreclosed homes will take three years or more to clear.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

We reported to you last year that the FHFA’s second-quarter report showed that the number of short sales had increased by 250% over the same period a year earlier.

Well, that trend shows no signs of slowing down!

The number of completed short sales for 2010, at 107,953, was nearly a 200% increase over the number completed in 2009. And the FHFA’s Foreclosure Prevention and Refinance Report for April 2011 suggests that 2011 will be just as strong - with 35,406 short sales already completed as of April.

These rising numbers are especially significant if you take them as percentages of total Foreclosure Prevention Actions (FPAs). FPAs can be divided into two types:

• “Home Retention Actions” which include loan modifications, repayment plans, and forbearance plans
• “Home Forfeiture Actions” which include short sales and deeds-in-lieu

The total number of FPAs processed through the nation’s largest investors, Freddie Mac and Fannie Mae. has actually gone down over the past year, from 82,227 in the month of April 2010, compared to to 57,996 in April 2011. However, the reason that that number has gone down so much (that’s 30% in just one year) is entirely due to the drop in Home Retention Actions.

While Home Retention Actions went down, from 73,052 to 47,347, the number of Home Forfeiture Actions actually went up. As a percentage of the total, short sales went up from 11% (8,741 of 82,227) to 17% 9,701 of 57,996) of all FPA’s, just within the past year.

While many homeowners know that a short sale is the best and fastest way to recover from a mortgage that they can no longer afford, or from a negative-equity situation, loan servicers used to be reluctant to approve short sales. However, servicers and investors are also discovering that short sales are often in their best interest as well, as they may recover more on their loans than they would from pursuing costly and lengthy foreclosures. Several loan servicers have even started to proactively offer cash incentives to encourage their borrowers to pursue a short sale - and that will be the subject of our next blog post.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

According to information released by Lender Processing Services, and summarized by the HousingWire this week, the number of “troubled home loans” - those either 30 or more days delinquent or in foreclosure - increased from March to April of this year by 2.4%, although it is still 16.4% lower than for the same period one year ago.

The total number of properties that are either delinquent or in foreclosure nationwide is 6,388,000 - representing nearly 8% of all home mortgages nationwide. Of them, 2,184,00 are in foreclosure. Of the remaining 4,204,000 that are at least 30 days delinquent, a total of 1,961,000 are more than 90 days delinquent but not yet in foreclosure.

With over 2 million properties in foreclosure, and nearly 2 million more over 90 says delinquent and therefore nearing foreclosure, this will represent a potential shadow inventory of about 4 million homes.

Estimates earlier this year indicated that the current shadow inventory could take 41 months to clear. A large shadow inventory, homes that have yet to hit the market, means that the supply is high and prices remain low: bad news for homeowners who are already struggling to pay their mortgages or who are in (or close to) a negative equity situation.

The median sales price for existing homes dropped by 5.2% from February 2010 to February 2011. This most recent increase in delinquency rates, and its implications for a large REO inventory for years to come, suggests that we still have a long wait before home prices begin to recover.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

This week, the Washington State legislature passed the new House Bill 1362, also known as the Foreclosure Fairness Act. The bill, sponsored by Democratic state Rep. Tina Orwall (Des Moines) is aimed at reducing the high rate of foreclosures in Washington State. The bill was passed by the Senate at the end of March, but with amendments, so it had to return to the House, where it was passed on Wednesday.

Recent data released by RealtyTrac indicate that Washington State had the 11th highest number of foreclosures in the country for February 2011. One third of these were in King County, with Snohomish and Pierce Counties together accounting for another third.

According to HB 1362, section 1a, "The rate of home foreclosures continues to rise to unprecedented levels, both for prime and subprime loans, and a new wave of foreclosures has occurred due to rising unemployment, job loss, and higher adjustable loan payments.”

This represents a significant rise in the foreclosure rate for the state; two years ago, Washington ranked only 25th nation-wide. Over 77,000 families state-wide have lost their homes in that time period, and 43,000 more families are expected to lose their homes in 2011.

The Foreclosure Fairness Act has been drafted with the intention of slowing the foreclosure rate in Washington State by providing homeowners with information and alternatives. There has been a growing recognition that the current American foreclosure system is “broken,” with many struggling homeowners stymied about their options due to problems communicating with their loan servicers: long telephone waits, lost paperwork, not getting to speak to right people. The new bill will bring homeowners and servicers face to face, in the company of a third party to facilitate negotiations.

Rep. Orwall told the Seattle Medium that “one of the keys to restore Washington’s economy is to stabilize the housing market through a proactive and effective strategy that helps families keep their homes. Mediation is an important new tool to ensure that all options have been explored before moving to foreclosure.”

The new bill will require that lenders provide homeowners with a notice of how much of a payment (including any fees) is required to reinstate a deed of trust before recording notice of foreclosure sale, and also that they explain that mediation is an option. It will allow for the provision of a professional housing counsellor (i.e. a disinterested third party) early in the process, to help with communication, in order to try to avoid issuance of a foreclosure notice in the first place.

If the homeowner and servicer cannot come to an agreement, the bill then provides for foreclosure mediation: help from the third party in looking at alternatives, such as short sales. Foreclosure mediation has already dropped the foreclosure rate in other states.

The bill also provides for a mechanism for funding the new housing counsellors. Financial institutions which issue more than 250 notices of default in the preceding year will be required to pay a $250 fee on each notice of default. The fee will also help to fund outreach campaigns as well as the costs of enforcement of the new regulations.

“Foreclosure may sound like someone else’s problem, but when it’s happening en masse, like it’s happening right now, it’s all of our problems,” commented Sen. Adam Kline to The State Column, noting that a high rate of foreclosure “tears the connecting threads out of our neighborhoods.”

Foreclosure mediation, aimed at finding alternatives to foreclosure, will not only help individual homeowners. Reducing the foreclosure rate statewide will also help the housing market as a whole, speeding the recovery of home prices and eliminating the problem of negative home equity that currently plagues one third of Seattle area homeowners.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

There were more residential mortgages registered as either delinquent or in foreclosure in January than there were in December. This disturbing news comes from new data released last week by Lender Processing Services (LPS) and reported by DSnews.com.

The number of non-current home loans had declined month by month through the end of 2010. But the LPS data indicate that this trend has reversed: there more residential mortgages either delinquent of in foreclosure at the end of January than there had been for the month of December. A total of 6.92 million residential mortgages were classified as non-current in January, compared to 6.87 million in the previous month.

The LPS report indicates that the national delinquency rate - or the percentage of home loans that are more than 30 days past due - rose in January by 0.8%, to 8.90%.

Of the 6.92 million mortgages within the “non-current” category as of last month, 2.20 million of those are already in the process of foreclosure. Nearly that number again, 2.16 million, are in the 90+ day delinquent category, and so are hovering precariously upon the brink of foreclosure. Recent streamlining of the HAFA short sale process may provide alternatives to foreclosure for some homeowners, but many of these homes will end up in the growing REO inventory that is likely to keep home prices suppressed for years to come.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/