It seems that every day now, we see more and more properties for sale that are listed as REO (Bank Owned Foreclosures), and/or Short Sales.

Our team, has always run numbers as a means to better understand our markets. We researched the EBRD multiple listings service, following a conversation that we had last night. We were not surprised as to which cities had a higher percentage of REOs.

However, we did not expect the number for the entire San Francisco East Bay area to be this high, 21%. That means that roughly one in five houses that are for sale, are Bank Owned in the East Bay area. The interesting factor is that this number does not include “Short Sales.”

When lenders allow a home to be sold for less than the amount still owing on the mortgage loan, that’s called a pre-closure “Short Sale!”

I think you can see where this is going once you add “short sales” into the mix as well. The competition for many houses for sale in the market are from banks.

Here’s our spreadsheet tracking cities in the San Francisco East Bay Area for Months Supply and REOs. Months supply is the ratio of inventory to sales. It tells us how many months the stock of homes for sale would last, if sales continued at their current rate.

For those living in other parts of the country, we’d love to hear what’s happening in your market. We’ve already heard from one Las Vegas agent, that 20.8% of their listings are REOs or short sales.

Labels: Bay Area Real Estate, Foreclosure, Housing Inventory, Months Supply, REO, Short Sale

Losing your house to foreclosure, involved in a "Short Sale?" Not only do you lose your house, your credit and have to deal with all the stress that goes with it, but any debt forgiven by the lender is considered taxable to the IRS. Seems a bit unfair to someone with a financial challenge ahead of them.

"A bill that would give homeowners facing foreclosure a tax break when lenders forgive part of their debt would make up for lost revenue by collecting more capital gains taxes on the sales of some second homes claimed as primary residences."

"HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, would eliminate a provision of the tax code that allows the IRS to tax debt that's forgiven as part of a foreclosure or loan modification as income."

"NAR said the bill would restore "fundamental fairness for homeowners in financial and economic distress" by eliminating taxes on the "phantom income" generated by foreclosures and workouts."

View the entire article HERE. (Inman News)

"To make up for the bill's $1.97 billion impact on tax revenue over the next decade, it would also tighten the rules for counting a second home, vacation or rental property as a primary residence for tax purposes. Under current law, up to $250,000 (or $500,000 if married filing jointly) of the gain on sale proceeds from the sale of a primary residence are exempt from capital gains taxes."

Labels: Bay Area Real Estate, Foreclosure, Inman News, IRS, NAR, Short Sale, Tax Relief

"By rushing into the mortgage business big-time, homebuilders helped fuel the housing crisis. Now they're hurting—and so is Wall Street." by Mara Der Hovanesian, BusinessWeek. Go to the Story.

"Traditional mortgage companies and banks unleashed a barrage of loans, many to borrowers with iffy credit histories who didn't bother to read the fine print about upwardly mobile interest rates. Wall Street egged on the often-reckless underwriting by buying vast quantities of home loans for repackaging as securities. Now that the boom has fizzled and foreclosure rates are rising, the important role of large homebuilders as lenders is also coming into sharper focus."

"Even as the housing supply began to exceed demand last year, builders kept sales brisk by pushing adjustable-rate, interest-only, and other risky loans."

STEALING FROM THE FUTURE
Now it's payback time. It is likely to take two to three years, by various estimates, for the excess supply to be soaked up. The boom stole sales from the future as people bought houses earlier than they might have a few years ago. From the same issue of BusinessWeek, by Peter Coy. Go to the Full Story.

Labels: Bay Area Real Estate, BusinessWeek, Foreclosure, Home Builders, Interest Rate, Mortgage Lenders, Real Estate Cycles, Subprime Loans, Wall Street

Labels: Bay Area Real Estate, Foreclosure, Real Estate Cycles

"California Foreclosure Activity Hits Three-Year High," as reported by DataQuick Real estate news.

"Second quarter California foreclosure activity rose at the fastest pace in at least 14 years, the result of waning home price appreciation."

A Reckoning With Risk. "Will adjustable-rate loans lead to record foreclosures? Here's an article found in August's edition of U. S. News & World Report.

Buying real estate for a song is alluring, but there are pitfalls that could spell disaster.

"Nationwide interest has spawned an industry of foreclosure mavens as well as countless Web sites, infomercials, how-to books and seminars."

I had the oppostunity to attend one such seminar on Forecloures and Short Sales that was offered by Finanicial Title Company last week and wanted to share some insights.

"Such auctions may have piqued the interest of novice investors anticipating a rise in interest rates and the inability of some owners to meet their financial obligations.

"Yet while there is a tantalizing possibility of getting a deal, people who are intimately familiar with foreclosure auctions — lawyers, mortgage bankers, brokers and former auction regulars — advise steering clear of them."

"Success is not impossible, but to even set foot in the ring you must put in hours of due diligence and overcome myriad obstacles, including competing against auctiongoers who have mastered the art of the bid."

"You really have sharks at these sales," said Bruce Bronster, a partner in the Manhattan office of Dreier L.L.P. — his litigation group has handled more than 3,000 foreclosures. "You're a guppy. And you're going up against very seasoned and sophisticated guys."

This is from an article entitled; "Foreclosure Auctions: Bidder Beware," by Stephanie Rosenbloom of the New York Times.

"You don't know exactly what you're getting," said Melissa Cohn, the president of the Manhattan Mortgage Company. "That's the biggest risk."

For a better understanding of the foreclosure process, here are some links to review, compliments of Financial Title Company;

Foreclosure Timeline - California

Short Sales - Real Estate Preforeclosure
"The forclosure rate is soaring in most areas of the country presenting incredible opportunities for preclosure real estate investors! There are a number of ways the informed real estate investor can profit from homes facing foreclosure and one of the most lucrative is the pre-foreclosure.... SHORT SALE!" What is a Short Sale? Read the entire article HERE.

Trustee Sales - High Risk - High Payoff?
Keep in mind some of the risks and do your homework.

Post Foreclosure - REO Many properties are not sold at the trustee sale. If the minumum bid is not met, the bank becomes the owner of the property, REO (real estate owned).

Top Three Foreclosure Scams and One That Isn't

To Find a Bank's REO/Loss Mitigation Departments Phone Numbers; www.scotsmanguide.com

Labels: DataQuick, Foreclosure, Real Estate Cycles, Short Sale, Trustee Sale, U S News

Nightmare Mortgages
"They promise the American Dream: A home of your own -- with ultra-low rates and payments anyone can afford. Now, the trap has sprung." - Mara Der Hovenesian, BusinessWeek Magazine.

"For cash-strapped homeowners, it was a pitch they couldn't refuse: Refinance your mortgage at a bargain rate and cut your payments in half. New home buyers, stretching to afford something in a super-heated market, didn't even need to produce documentation, much less a downpayment."

"The option adjustable rate mortgage (ARM) might be the riskiest and most complicated home loan product ever created. With its temptingly low minimum payments, the option ARM brought a whole new group of buyers into the housing market, extending the boom longer than it could have otherwise lasted, especially in the hottest markets. Suddenly, almost anyone could afford a home -- or so they thought. The option ARM's low payments are only temporary. And the less a borrower chooses to pay now, the more is tacked onto the balance."

The bill is coming due.

"Most of the pain will be born by ordinary people. And it's already happening." This is the message brought to us indepth in an excellet article found in BusinessWeek's September 11, 2006 issue. View it in its' entirety HERE.

More evidence of a coming problem; "Real estate foreclosures rise 18% nationwide." as reported by RealtyTrac.

To view additional BusinessWeek articles on mortgages;
Struggling to keep up with your mortgage?
Mortgage Lenders: Who's Most At Risk?

LoanIQ(TM) allows you to instantly identify high-risk loans and reduce overall loan default exposure. Quickly and accurately fast-track low-risk loans and escalate loans with a higher risk of loss to quality control and due diligence.

And finally, here's your resource for mortgage calculators; www.mortgages.interest.com

Labels: Bay Area Real Estate, Foreclosure, Freddie Mac, Mortgage Lenders, Real Estate Cycles, RealtyTrac

"As delinquency rates rise, red flags are flying over some aggressive finance outfits," as stated by Mara Der Hovanesian, of BusinessWeek.

"For months doomsayers have been predicting that the slowing housing market, along with rising interest rates, would lead to mortgage foreclosures and bank losses. That hasn't happened yet, but delinquency rates have started to rise. What's worse, instead of cutting back on the exotic mortgages they've leaned on throughout the boom, many lenders are charging ahead on such high-risk loans full tilt. "Mortgage lending standards show little sign of tightening," says Frederick Cannon, bank analyst with New York's Keefe Bruyette & Woods Inc. investment bank. "[Lenders] should have dialed back the aggressive loans by now."

"The much-feared troubles may finally be arriving. Delinquency rates jumped more than 7%, to 4.7% in the fourth quarter of 2005, from the year before, according to the Mortgage Bankers Assn. Home buyers are becoming over-extended. In California, where seven of the 10 most expensive U.S. cities are located, one in five buyers already spends more than half of pretax household income on housing -- much more than the 30% recommended by the Housing & Urban Development Dept."

"Despite the lenders' precautions, some borrowers will receive a rude shock starting this year. Repayment terms on about $1.3 trillion of adjustable-rate loans will increase in 2006 and 2007, forcing some borrowers to pay up to 150% more per month. "In the hands of an unsophisticated borrower, [these loans are] dangerous," says Robert W. Visini, vice-president for marketing at San Francisco mortgage tracker LoanPerformance (FAF).

"About 10% of U.S. households now face a great risk of running into credit problems, according to research done by Meredith Whitney, senior financial institutions analyst for CIBC World Markets Inc. (BCM ). If borrowers start to default on their loans, their lenders could themselves face mounting problems."

"Real estate rates at highest level in nearly 4 years," according to Frank Nothaft, Freddie Mac, as reported by Inman News.

"Mortgage rates this week climbed for the fourth straight week to highs not seen since the summer of 2002, according to surveys conducted by Freddie Mac and Bankrate.com."

"In Freddie Mac's survey, the 30-year fixed-rate mortgage rose to an average 6.53 percent for the week ended today, with an average 0.6 point, up from last week's average of 6.49 percent. The 30-year fixed has not been higher since the week ending July 12, 2002, when it averaged 6.54 percent.

Foreclosures Soar 63 Percent over Last Year
RISMEDIA, April 19, 2006—RealtyTrac(TM) (www.realtytrac.com), the leading online marketplace for foreclosure properties, today released its March 2006 U.S. Foreclosure Market Report, which shows 101,597 properties nationwide entered some stage of foreclosure in March, a 13 percent decrease from the previous month but a 63 percent increase from March 2005.

Labels: Bay Area Real Estate, Foreclosure, Freddie Mac, Housing Market, Mortgage Lenders, Real Estate Cycles, RealtyTrac