40% of underwater borrowers took cash out of homes
CoreLogic: Owners with home equity loans more than twice as likely to be upside downBy Inman News
Inman News™Share ThisHomeowners with home equity loans are more than twice as likely to be "underwater" as those who didn't take cash out of their homes, according to statistics compiled by real estate and loan data aggregator CoreLogic.
CoreLogic estimates that at the end of March, 22.7 percent of homeowners with mortgages -- about 10.9 million borrowers -- owed more on their mortgage than their home was worth. That's down slightly from an estimated 11.1 million underwater borrowers at the end of December.
Falling home prices can put borrowers who have little equity in their homes underwater. By allowing homeowners to convert equity they have in their homes into cash, home equity loans reduce the cushion borrowers have against price declines.
CoreLogic said that 38 percent of borrowers with home equity loans were underwater at the end of March, compared with 18 percent of homeowners who had no home equity loan. More than 40 percent of all underwater homeowners (4.5 million) have home equity loans, CoreLogic said.
As might be expected, CoreLogic found that the presence of a home equity loan also increased the amount of negative equity. Underwater homeowners who had taken out home equity loans owed $83,000 more than their home was worth, on average, compared with $52,000 for those who hadn't taken cash out of their home.
Past studies have shown that the higher a borrower's combined loan-to-value ratio (CLTV), the more likely they are to stop making payments on their loan. In many cases, borrowers will opt for a "strategic default" -- not because they can't afford the monthly payments, but because they don't believe their home will regain its value anytime soon.
CoreLogic found that borrowers with home equity loans were slightly more likely to default at "moderate" levels of negative equity, up to 115 percent CLTV. Beyond that point, the relationship reverses, and default rates were slightly higher among homeowners without home equity loans.
Among all underwater borrowers nationwide, the average amount of negative equity was $65,000. In states with higher-cost housing, the average was considerably higher. In New York, underwater borrowers had an average of $129,000 in negative equity, followed by Massachusetts ($120,000), Connecticut ($111,000), Hawaii ($98,000), and California ($93,000).
At the other end of the scale, underwater borrowers in Ohio had the lowest negative equity -- $31,000, on average -- followed by Indiana ($34,000), and Minnesota ($38,000).
Nevada led all states in the proportion of underwater borrowers -- 63 percent of Silver State homeowners with mortgages owed more than their home was worth -- followed by Arizona (50 percent), Florida (46 percent), Michigan (36 percent), and California (31 percent).
At the metro level, Las Vegas led the nation, with 66 percent of mortgaged properties underwater, followed by Stockton (56 percent), Phoenix and Modesto (55 percent), and Reno (54 percent).
Metropolitan markets located outside of the five states with the highest negative equity shares include Greeley, Colo. (38 percent); Boise (36 percent); and Atlanta (35 percent).
Contact Inman News:
Thursday, June 09, 2011
40% of underwater borrowers took cash out of homes
Wednesday, May 04, 2011
Reagor: Foreclosure activity eased in April
My plan had been not to lead this column with news about foreclosures this week, instead focusing on a more positive indicator or trend in metro Phoenix's real-estate market.
But the foreclosure numbers from April quickly changed my mind. Pre-foreclosures fell to 4,200 last month, their lowest level since December 2007, according to real-estate-research firm Information Market.
In Arizona, pre-foreclosures are notice-of-trustee-sale filings that signal that a lender has started the legal process of taking a home back from a borrower.
In April, foreclosures dropped to 4,500, which is 500 fewer than in March. Foreclosures are legally known as trustee sales.
And the number of active residential notices, or pending foreclosures in metro Phoenix, dropped to 30,790. A year ago, this key market indicator was 30 percent higher.
A few more months of drops in foreclosure activity like April's, and it finally could be safe to say the region's housing market is starting to recover.
- Loan-modification investigation: The Arizona attorney general is asking for a court-ordered injunction to stop two people accused of deceptive loan-modification practices.
The two men, Robert Daniel Hayes and Camerin Charles Hawthorne, offer loan services under the company names Mediation Services and Metropolis Loans, according to the attorney general.
The complaint alleges the men solicited loan-modification customers over the phone and charged them upfront fees of $2,500. A new Arizona law makes it illegal for loan-modification firms to charge fees before trying to modify a mortgage.
The complaint also alleges Mediation Services told customers it was affiliated with CitiMortgage, and they had been preapproved for loan modification.
Attorney General Tom Horne has asked a Maricopa County Superior Court to prohibit the men from continuing the practices.
A hearing for the complaint has been set for May 20.
This is a positive sign. Let's hope that the trend continues.
Tuesday, March 08, 2011
Underwater mortgages rise as home prices fall - Yahoo! News
WASHINGTON – The number of Americans who owe more on their mortgages than their homes are worth rose at the end of last year, preventing many people from selling their homes in an already weak housing market.
CoreLogic says about 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter. That's up from 22.5 percent, or 10.8 million households, in the July-September quarter.
The number of underwater mortgages had fallen in the previous three quarters, but that was mostly because more homes had fallen into foreclosure.
Underwater mortgages typically rise when home prices fall. Home prices in December hit their lowest point since the housing bust in 11 of 20 major U.S. metro areas. In a healthy housing market, about 5 percent of homeowners are underwater.
Tuesday, February 22, 2011
Home prices hit post-bust lows in most big cities - Yahoo! Finance
WASHINGTON (AP) -- Home prices in a majority of major U.S. cities tracked by a private trade group have fallen to their lowest levels since the housing bubble burst, and analysts expect further declines this year.
The Standard & Poor's/Case-Shiller 20-city home price index fell 1 percent in December from November. Prices fell in all but one of the metropolitan markets tracked.
The only city to see a gain was Washington, where hiring by the federal government has helped boost the region's job market.
Eleven of the markets hit their lowest point since the housing bust, in 2006 and 2007: Atlanta, Charlotte, N.C., Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland, Ore., Seattle and Tampa, Fla.
The housing sector is struggling even while the rest of the economy is showing signs of a slow but steady recovery. The latest evidence of this divide came Tuesday when the Conference Board said its Consumer Confidence Index rose in February to its highest point in three years. The index surveys how people feel about hiring and income, and how they see that changing over the next six months.
By contrast, the outlook for housing in 2011 is not promising. Construction of new homes has fallen to a rate of about 600,000 homes built per year. In a healthy economy, builders expect to construct about 1 million homes each year. Homeowner vacancy rates are near record highs and the creation of new households in the United States is at its lowest point in four decades.
"Despite improvements in the overall economy, housing continues to drift lower and weaker," said David M. Blitzer, chairman of the index committee at Standard & Poor's.
The damage from the real estate bubble has spread well beyond the Sun Belt, where new homes cropped up at a frantic pace during the mid-2000s. In many places, prices are expected to keep falling for at least the next six months and several analysts said they expect prices to fall at least another 5 percent.
Some of the worst declines are in cities hit hardest by foreclosures and high unemployment, including Detroit, Phoenix and Tampa. A home that sold for $250,000 in the Motor City in 2000 now sells for roughly $163,150, according to the housing report. Homes in Las Vegas and Cleveland now sell, on average, for less than they of what they did a decade ago. Many people are holding off buying or selling homes because they fear the market hasn't hit bottom yet.
A large number of homes that aren't selling are contributing to a second wave of price declines since the boom years. Many of them have been vacant for months.
In December, prices fell for the sixth straight month and for the eighth time in the past 11 months. Foreclosures are also expected to increase as the year goes forward.
"There's just way too many homes out there relative to demand and we're not going to see that change anytime soon," said Joshua Shapiro, chief U.S. economist for MFR Inc.
The housing recovery is uneven across the United States. Coastal cities in California and the Northeast are faring much better than the Midwest and Southeast. That's mainly because they benefit from expensive and somewhat recession-proof housing markets buoyed by low unemployment and limited new construction.
The Case-Shiller report measures home price increases and decreases relative to prices in January 2000 and gives an updated three-month average for the metropolitan areas it looks at.
Friday, October 08, 2010
BofA Halts All Foreclosures - WSJ.com
Bank of America Corp. is placing a moratorium on all foreclosure proceedings and sales across the U.S. amid political pressure on U.S. banks to examine foreclosure-documentation problems.
The nation's largest bank by assets is the first financial institution to stop all foreclosure actions amid revelations that the banking industry had used "robo-signers," people who sign hundreds of documents a day without reviewing their contents, when foreclosing on homes. Bank of America, J.P. Morgan Chase & Co. and Ally Financial Inc. last week postponed foreclosures in 23 states where a court's approval is required to foreclosure on a home.
This is HUGE news.
Wednesday, March 24, 2010
BofA to start reducing mortgage principal - Yahoo! News
CHARLOTTE, N.C. – Bank of America Corp. is giving some of its most troubled mortgage borrowers relief from the threat of foreclosure.
The bank, the largest mortgage servicer in the country, said Wednesday it will forgive up to 30 percent of some customers' total mortgage balance. The homeowners must be at least 60 days delinquent on their loans and owe more than 120 percent of their homes' value.
The plan is part of an agreement the Charlotte, N.C.-based bank reached 18 months ago with state attorneys general to settle charges over high-risk loans made by Countrywide Financial Corp. The loans were made before Bank of America acquired the mortgage lender in mid-2008. Bank of America has since stopped making those loans.
Although the motivation for Bank of America's announcement was to resolve legal problems, it has the potential of setting a precedent for other banks to also start forgiving principal on loans that are in danger of failing. Bank of America is the nation's largest bank, and it's among the first to take a systematic approach to reducing mortgage principal when home values drop well below the amount owed.
Millions of homes have gone into foreclosure since the housing market collapsed in late 2007. The loans affected by Bank of America's announcement include certain subprime and option adjustable rate mortgages. Option ARMs allow borrowers to start with minimal monthly payments that actually increase the loan's balance.
The borrowers who can take advantage of the Bank of America program must also qualify for the Obama administration's $75 billion mortgage loan modification program.
Bank of America estimates that about 45,000 customers will qualify for its plan.
The offer will cut total reduced principal by about $3 billion. That could lower the bank's earnings, which have already been hurt by consumers' continuing defaults on mortgage and credit card loans. Bank of America was among the hardest hit by the credit crisis and recession.
Even so, "the move helps create the best prospect of avoiding a further downward home price spiral, which would result in even deeper losses" for the bank, said Howard Glaser, a mortgage industry consultant, in an e-mail.
Investors appeared pleased with the news, sending Bank of America shares up 36 cents, or 2.1 percent, to $17.49 in afternoon trading.
According to new plan, which begins in May, Bank of America will first offer to set aside a portion of the principal balance, interest free. That principal can be forgiven over five years, if homeowners don't miss any payments. The maximum decrease in principal will be 30 percent.
The forgiveness allows a homeowner to bring a mortgage balance back down to 100 percent of the home's value, the bank said.
Glaser said the program could lead the Obama administration to launch a similar effort for the entire industry. That, he wrote, would be a "major shift in loan modification efforts."
Lenders including Bank of America have been criticized for not helping enough borrowers to complete the Obama administration's $75 billion loan modification program, which is widely viewed as a disappointment. Only 170,000 homeowners have completed the program so far.
As of last month, Bank of America had completed modifications for about 22,000 homeowners, or about 8 percent of those signed up. That compares with about 12 percent for Wells Fargo & Co. and 11 percent for both JPMorgan Chase & Co. and Citigroup Inc.
The Treasury Department estimates that 1.5 million to 2 million homeowners will complete the program by the end of 2012, about half of the original goal. A report issued late Tuesday by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, says numerous changes to government guidelines "caused confusion and delay" and said the government did not do enough to advertise the program.
___
AP Real Estate Writer Alan Zibel in Washington, D.C., contributed to this report.
Wow, never thought I would see this. How many people will stop making payments now?
Friday, February 12, 2010
LBPOST.com: Foreclosure Up-Tick May Signal Impending Flood
January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10% drop in January,” James J. Saccacio, CEO of RealtyTrac, said in a statement. “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works.
Interesting article. I am not sure why the coming influx of foreclosures is not getting more attention.
Thursday, January 28, 2010
Las Vegas, California Cities Top Foreclosure List in 2009 - BusinessWeek
Las Vegas homeowners had the highest U.S. foreclosure rate last year, and California and Florida cities accounted for 17 of the nation’s 20 worst markets as unemployment extended the housing recession.
The article goes on to say that things are looking to get worse before they get better. A significant increase in foreclosures is expected and if the economy continue to sputter home prices that gained in the past six months will falter again.
Wednesday, January 27, 2010
New home sales fall 7.6% in December
As long as there are distressed properties on the market in any sizable quantity the new home sales figures will be horrible.
Monday, January 25, 2010
December home sales down nearly 17 percent - Yahoo! News
Unfortunately, they do not mention the inventory that is currently being held by as Bank Owned will at some point hit the market and potentially cause the months supply to jump. We know that B of A is already getting ready to release bank owned properties into the Las Vegas market... It is only a matter of time until this happens throughout the country.
Thursday, January 14, 2010
Bank of America to release homes - Business - ReviewJournal.com
I expect this to begin happening in Arizona as well. The "phantom inventory" is just too large for banks to continue holding on to. Eventually something has to give. A large influx of properties will definitely have a drag on the prices. 500 properties a month from one lender is HUGE.
Wednesday, January 13, 2010
Delinquency, Foreclosure Hit One in 7.5
I expect this number to grow as long as the unemployment rate stays high. There are also a lot more sub-prime loans getting ready to reset their rates this year.
About Me
Hunter James Properties, 602-618-6728
