By Dan Levy
Feb. 24 (Bloomberg) -- Homes in the foreclosure process sold at an average 28 percent discount last year and may continue to drive down U.S. housing prices as the supply of distressed properties grows, according to RealtyTrac Inc.
A total of 831,574 homes that sold in 2010 had received notices of default, auction or repossession, the Irvine, California-based data seller said today in a statement. Properties in distress accounted for almost 26 percent of all home sales last year, down from 29 percent in 2009.
A “bloated supply of foreclosures and weak demand from homebuyers” are depressing the market, James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement. Residential real-estate prices dropped 4.1 percent in the fourth quarter from a year a earlier, according to the S&P/Case-Shiller index of home values in 20 cities.
“While accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices,” Saccacio said.
Foreclosure filings may rise 20 percent to a peak this year as unemployment remains high and banks resume seizing property after a slowdown to investigate documentation procedures, the company said Jan. 13.
Distressed properties sold at a discount of 27 percent in 2009 and 22 percent the previous year, according to RealtyTrac. The discount reflects the sales price of homes in the foreclosure process compared with those not in distress, the company said.
Foreclosure Sale Price
The average foreclosure sale in 2010 was $172,030, up from $170,775 in 2009 and down from $200,708 in 2008, Daren Blomquist, a RealtyTrac spokesman, said in an e-mail.
Sales of previously owned homes in the U.S. rose in January to the highest level in eight months as investors used all-cash transactions to snap up distressed properties, according to figures from the National Association of Realtors released yesterday. The share represented by foreclosures and short sales climbed to a 12-month high, pushing the median price to the lowest level in almost nine years.
Bank-owned properties sold for an average discount of 36 percent last year, up from 33 percent in 2009, RealtyTrac said. Such homes accounted for 16 percent of all U.S. sales, compared with almost 18 percent in 2009 and 13 percent in 2008. Residences in default or scheduled for auction sold for a discount of 15 percent, down from almost 17 percent in 2009.
Highest Distressed Sales
Nevada had the highest proportion of distressed sales of any U.S. state, with 57 percent of its residential transactions involving homes seized by banks or at risk of foreclosure. Arizona ranked second at 49 percent, and California was third at 44 percent.
Distressed sales accounted for at least a quarter of residential transactions in Florida, Michigan, Georgia, Idaho, Oregon, Illinois, Virginia and Colorado, RealtyTrac said.
Ohio had the highest average price discount for foreclosed homes at almost 43 percent, followed by Kentucky at 40 percent. Tennessee, California, Pennsylvania, Illinois, New Jersey, Michigan, Georgia and Wisconsin all had average distress discounts of at least 35 percent, RealtyTrac said.
The company sells default data from more than 2,200 counties representing 90 percent of the U.S. population.
--Editors: Daniel Taub, Kara Wetzel
Showing posts with label bank. Show all posts
Showing posts with label bank. Show all posts
Monday
A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style
By MICHAEL POWELL
Published: August 30, 2009
The judge waves you into his chambers in the State Supreme Court building in Brooklyn, past the caveat taped to his wall — “Be sure brain in gear before engaging mouth” — and into his inner office, where foreclosure
motions are piled high enough to form a minor Alpine chain.
"I don't want to put a family on the street unless it's legitimate," Justice Arthur M. Schack said.
Every week, the nation’s mightiest banks come to his court seeking to take the homes of New Yorkers who cannot pay their mortgages. And nearly as often, the judge says, they file foreclosure papers speckled with errors.
He plucks out one motion and leafs through: a Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner.
The judge’s lips pucker as if he had inhaled a pickle; he rejected this one.
“I’m a little guy in Brooklyn who doesn’t belong to their country clubs, what can I tell you?” he says, adding a shrug for punctuation. “I won’t accept their comedy of errors.”
The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. While national debate focuses on bank bailouts and federal aid for homeowners that has been slow in coming, the hard reckonings of the foreclosure crisis are being made in courts like his, and Justice Schack’s sympathies are clear.
He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.
His opinions, too, have been greeted by a cry of affront from a bank official or two, who say this judge stands in the way of what is rightfully theirs. HSBC bank appealed a recent ruling, saying he had set a “dangerous precedent” by acting as “both judge and jury,” throwing out cases even when homeowners had not responded to foreclosure motions.
Justice Schack, like a handful of state and federal judges, has taken a magnifying glass to the mortgage industry. In the gilded haste of the past decade, bankers handed out millions of mortgages — with terms good, bad and exotically ugly — then repackaged those loans for sale to investors from Connecticut to Singapore. Sloppiness reigned. So many papers have been lost, signatures misplaced and documents dated inaccurately that it is often not clear which bank owns the mortgage.
Justice Schack’s take is straightforward, and sends a tremor through some bank suites: If a bank cannot prove ownership, it cannot foreclose.
“If you are going to take away someone’s house, everything should be legal and correct,” he said. “I’m a strange guy — I don’t want to put a family on the street unless it’s legitimate.”
Justice Schack has small jowls and big black glasses, a thin mustache and not so many hairs combed across his scalp. He has the impish eyes of the high school social studies teacher he once was, aware that something untoward is probably going on at the back of his classroom.
He is Brooklyn born and bred, with a master’s degree in history and an office loaded with autographed baseballs and photographs of the Brooklyn Dodgers. His written decisions are a free-associative trip through popular, legal and literary culture, with a sideways glance at the business pages.
Confronted with a case in which Deutsche Bank and Goldman Sachs passed a defaulted mortgage back and forth and lost track of the documents, the judge made reference to the film classic “It’s a Wonderful Life” and the evil banker played by Lionel Barrymore.
“Lenders should not lose sight,” Justice Schack wrote in that 2007 case, “that they are dealing with humanity, not with Mr. Potter’s ‘rabble’ and ‘cattle.’ Multibillion-dollar corporations must follow the same rules in the foreclosure actions as the local banks, savings and loan associations or credit unions, or else they have become the Mr. Potters of the 21st century.”
Last year, he chastised Wells Fargo for filing error-filled papers. “The court,” the judge wrote, “reminds Wells Fargo of Cassius’s advice to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’: ‘The fault, dear Brutus, is not in our stars, but in ourselves.’ ”
Then there is a Deutsche Bank case from 2008, the juicy part of which he reads aloud:
“The court wonders if the instant foreclosure action is a corporate ‘Kansas City Shuffle,’ a complex confidence game,” he reads. “In the 2006 film ‘Lucky Number Slevin,’ Mr. Goodkat, a hit man played by Bruce Willis, explains: ‘A Kansas City Shuffle is when everybody looks right, you go left.’ ”
The banks’ reaction? Justice Schack shrugs. “They probably curse at me,” he says, “but no one is interested in some little judge.”
Little drama attends the release of his decisions. Beaten-down homeowners rarely show up to contest foreclosure actions, and the judge scrutinizes the banks’ papers in his chambers. But at legal conferences, judges and lawyers have wondered aloud why more judges do not hold banks to tougher standards.
“To the extent that judges examine these papers, they find exactly the same errors that Judge Schack does,” said Katherine M. Porter, a visiting professor at the School of Law at the University of California, Berkeley, and a national expert in consumer credit law. “His rulings are hardly revolutionary; it’s unusual only because we so rarely hold large corporations to the rules.”
Banks and the cottage industry of mortgage service companies and foreclosure lawyers also pay rather close attention.
Published: August 30, 2009
The judge waves you into his chambers in the State Supreme Court building in Brooklyn, past the caveat taped to his wall — “Be sure brain in gear before engaging mouth” — and into his inner office, where foreclosure
motions are piled high enough to form a minor Alpine chain."I don't want to put a family on the street unless it's legitimate," Justice Arthur M. Schack said.
Every week, the nation’s mightiest banks come to his court seeking to take the homes of New Yorkers who cannot pay their mortgages. And nearly as often, the judge says, they file foreclosure papers speckled with errors.
He plucks out one motion and leafs through: a Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner.
The judge’s lips pucker as if he had inhaled a pickle; he rejected this one.
“I’m a little guy in Brooklyn who doesn’t belong to their country clubs, what can I tell you?” he says, adding a shrug for punctuation. “I won’t accept their comedy of errors.”
The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. While national debate focuses on bank bailouts and federal aid for homeowners that has been slow in coming, the hard reckonings of the foreclosure crisis are being made in courts like his, and Justice Schack’s sympathies are clear.
He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.
His opinions, too, have been greeted by a cry of affront from a bank official or two, who say this judge stands in the way of what is rightfully theirs. HSBC bank appealed a recent ruling, saying he had set a “dangerous precedent” by acting as “both judge and jury,” throwing out cases even when homeowners had not responded to foreclosure motions.
Justice Schack, like a handful of state and federal judges, has taken a magnifying glass to the mortgage industry. In the gilded haste of the past decade, bankers handed out millions of mortgages — with terms good, bad and exotically ugly — then repackaged those loans for sale to investors from Connecticut to Singapore. Sloppiness reigned. So many papers have been lost, signatures misplaced and documents dated inaccurately that it is often not clear which bank owns the mortgage.
Justice Schack’s take is straightforward, and sends a tremor through some bank suites: If a bank cannot prove ownership, it cannot foreclose.
“If you are going to take away someone’s house, everything should be legal and correct,” he said. “I’m a strange guy — I don’t want to put a family on the street unless it’s legitimate.”
Justice Schack has small jowls and big black glasses, a thin mustache and not so many hairs combed across his scalp. He has the impish eyes of the high school social studies teacher he once was, aware that something untoward is probably going on at the back of his classroom.
He is Brooklyn born and bred, with a master’s degree in history and an office loaded with autographed baseballs and photographs of the Brooklyn Dodgers. His written decisions are a free-associative trip through popular, legal and literary culture, with a sideways glance at the business pages.
Confronted with a case in which Deutsche Bank and Goldman Sachs passed a defaulted mortgage back and forth and lost track of the documents, the judge made reference to the film classic “It’s a Wonderful Life” and the evil banker played by Lionel Barrymore.
“Lenders should not lose sight,” Justice Schack wrote in that 2007 case, “that they are dealing with humanity, not with Mr. Potter’s ‘rabble’ and ‘cattle.’ Multibillion-dollar corporations must follow the same rules in the foreclosure actions as the local banks, savings and loan associations or credit unions, or else they have become the Mr. Potters of the 21st century.”
Last year, he chastised Wells Fargo for filing error-filled papers. “The court,” the judge wrote, “reminds Wells Fargo of Cassius’s advice to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’: ‘The fault, dear Brutus, is not in our stars, but in ourselves.’ ”
Then there is a Deutsche Bank case from 2008, the juicy part of which he reads aloud:
“The court wonders if the instant foreclosure action is a corporate ‘Kansas City Shuffle,’ a complex confidence game,” he reads. “In the 2006 film ‘Lucky Number Slevin,’ Mr. Goodkat, a hit man played by Bruce Willis, explains: ‘A Kansas City Shuffle is when everybody looks right, you go left.’ ”
The banks’ reaction? Justice Schack shrugs. “They probably curse at me,” he says, “but no one is interested in some little judge.”
Little drama attends the release of his decisions. Beaten-down homeowners rarely show up to contest foreclosure actions, and the judge scrutinizes the banks’ papers in his chambers. But at legal conferences, judges and lawyers have wondered aloud why more judges do not hold banks to tougher standards.
“To the extent that judges examine these papers, they find exactly the same errors that Judge Schack does,” said Katherine M. Porter, a visiting professor at the School of Law at the University of California, Berkeley, and a national expert in consumer credit law. “His rulings are hardly revolutionary; it’s unusual only because we so rarely hold large corporations to the rules.”
Banks and the cottage industry of mortgage service companies and foreclosure lawyers also pay rather close attention.
Saturday
Short Sale v. Foreclosure
Is it better to negotiate with a short seller or look for a house that is already bank owned?
Q: I am thinking of relocating to Miami Beach, as I've read that there are deals there. Is it better to negotiate with a short seller or look for houses already owned by the bank? And if I go for the latter, how low should my offer be—and will the lender offer me financing?
A: There's no shortage of distressed properties in Miami Beach. RealQuest.com currently lists 442 homes there that are somewhere in the foreclosure process, and 58 that have gone back to the bank. And Fannie Mae just launched a test program that will preapprove short sales, making it easier for buyers like you. However, the program is not available in your area.
But bear in mind that in the case of both short sales and bank-owned homes you are negotiating with lenders rather than sellers. In a short sale, the seller might be desperate to accept any offer to avoid foreclosure, but that doesn't matter if the primary and junior lien holders don't agree to it. With bank-owned properties, you will be dealing with the "real-estate owned" or REO department of the lender who took ownership of the house at the auction. In both cases, you should be prepared to be patient, since lenders are overwhelmed with distress sales these days and may take weeks to respond to your offer. According to a survey of real-estate agents conducted in November by Campbell Communications the average wait time to get an answer from a lender on a short sale is 8.1 weeks, up from 4.5 weeks in a survey conducted earlier in 2008.
It's hard to know whether or not you'll get a better deal on a short sale or a bank-owned home because the situation varies with each property. Some short sales are priced higher because the seller has junior lien holders who won't sign off on the deal unless they're paid something. But some foreclosures are priced higher than corresponding short sales because the bank needs to recover costs for repairs, especially if an angry former owner decided to punch holes in the walls, steal the light fixtures and flush cement down the toilet.
Because the back stories of properties differ, you should begin your quest by finding a buyer broker that specializes in distressed properties (many won't touch them, since deals typically take a long time to close, and commissions tend to be minimal). A good buyer broker will be able to provide a comparative market analysis that shows sales of similar homes, and may also be able to get a sense from other brokers of prices of pending sales. That's important to know because lenders are going to try to hold out for fair market value for the home, even in a declining market, and will insist on an appraisal to justify the sales price to their shareholders. The broker should also investigate how long the property has been on the market, what's owed on it and how many offers it has received.
While it isn't unusual to see both short sales and bank-owned properties listed at prices far below those offered by traditional sellers, don't expect them to sell for much more than 20% below asking price, says Fort Lauderdale, Fla., broker Scott Coloney, who has assembled a "foreclosure response team" of financial and legal partners to facilitate distress sales. In fact, properties in good condition and in desirable locations may even spark bidding wars. "So low-balling is a waste of time," he says.
Moreover, with your bid you'll have to show that you have the cash to buy the property, or a letter from a lender pre-approving you for a loan. That letter can be from the bank that owns the property—and you'll probably be taken more seriously as a bidder if it is—but don't expect the bank to offer you special low financing terms to close the deal.
Write to June Fletcher at fletcher.june@gmail.com
Q: I am thinking of relocating to Miami Beach, as I've read that there are deals there. Is it better to negotiate with a short seller or look for houses already owned by the bank? And if I go for the latter, how low should my offer be—and will the lender offer me financing?
A: There's no shortage of distressed properties in Miami Beach. RealQuest.com currently lists 442 homes there that are somewhere in the foreclosure process, and 58 that have gone back to the bank. And Fannie Mae just launched a test program that will preapprove short sales, making it easier for buyers like you. However, the program is not available in your area.
But bear in mind that in the case of both short sales and bank-owned homes you are negotiating with lenders rather than sellers. In a short sale, the seller might be desperate to accept any offer to avoid foreclosure, but that doesn't matter if the primary and junior lien holders don't agree to it. With bank-owned properties, you will be dealing with the "real-estate owned" or REO department of the lender who took ownership of the house at the auction. In both cases, you should be prepared to be patient, since lenders are overwhelmed with distress sales these days and may take weeks to respond to your offer. According to a survey of real-estate agents conducted in November by Campbell Communications the average wait time to get an answer from a lender on a short sale is 8.1 weeks, up from 4.5 weeks in a survey conducted earlier in 2008.
It's hard to know whether or not you'll get a better deal on a short sale or a bank-owned home because the situation varies with each property. Some short sales are priced higher because the seller has junior lien holders who won't sign off on the deal unless they're paid something. But some foreclosures are priced higher than corresponding short sales because the bank needs to recover costs for repairs, especially if an angry former owner decided to punch holes in the walls, steal the light fixtures and flush cement down the toilet.
Because the back stories of properties differ, you should begin your quest by finding a buyer broker that specializes in distressed properties (many won't touch them, since deals typically take a long time to close, and commissions tend to be minimal). A good buyer broker will be able to provide a comparative market analysis that shows sales of similar homes, and may also be able to get a sense from other brokers of prices of pending sales. That's important to know because lenders are going to try to hold out for fair market value for the home, even in a declining market, and will insist on an appraisal to justify the sales price to their shareholders. The broker should also investigate how long the property has been on the market, what's owed on it and how many offers it has received.
While it isn't unusual to see both short sales and bank-owned properties listed at prices far below those offered by traditional sellers, don't expect them to sell for much more than 20% below asking price, says Fort Lauderdale, Fla., broker Scott Coloney, who has assembled a "foreclosure response team" of financial and legal partners to facilitate distress sales. In fact, properties in good condition and in desirable locations may even spark bidding wars. "So low-balling is a waste of time," he says.
Moreover, with your bid you'll have to show that you have the cash to buy the property, or a letter from a lender pre-approving you for a loan. That letter can be from the bank that owns the property—and you'll probably be taken more seriously as a bidder if it is—but don't expect the bank to offer you special low financing terms to close the deal.
Write to June Fletcher at fletcher.june@gmail.com
Sunday
Foreclosures come up in election
LANSING, Mich.—An Ohio Republican county chairman says a Web site that made it sound as if he planned to use foreclosure lists to challenge voters owes him an apology.Franklin County GOP Chairman Doug Preisse said last week that a reporter for The Michigan Messenger took comments he made to the Columbus (Ohio) Dispatch out of context. Preisse was the second GOP official to take issue with a story published by MichiganMessenger.com saying Republicans were planning to challenge homeowners on foreclosure lists to keep them from voting.The story quoted Macomb County Republican Party Chairman James Carabelli, but Carabelli denies saying that the GOP will have a list of foreclosed homes and will make sure people aren't voting from those addresses.
Friday
US home foreclosures on the rise
The number of US homes in some stage of foreclosure more than doubled between April and June from the previous year.
Figures from research firm RealtyTrac showed that one in every 171 US households was in the process of losing their home - up 121% on last year.
There was better economic news from the Commerce Department, with orders for big-ticket US manufactured items growing 0.8% in June.
But much of the bigger-than-expected rise came from big defence orders.
Meanwhile, sales of new homes fell 0.6% in June, also according to the Commerce Department.
It is the seventh fall in the figure in the past eight months.
It means that new home sales are down by 33.2% from a year ago.
Negative equity
Mortgage defaults by US homeowners have surged as millions of sub-prime loans are reset at higher interest rates, and the drop in house prices has pushed more homes into negative equity.
The housing crisis is causing serious problems for the wider US economy.
Almost 740,000 US homes entered the foreclosure process in the second quarter of 2008, according to RealtyTrac.
This includes receiving a default or bank repossession notice or warning of an impending auction.
The worst hit areas were Nevada, California, Florida and Arizona, which had seen the biggest house price rises during the boom years, and the largest volume of sub-prime lending.
But RealtyTrac said most areas of the country were seeing at least some levels of foreclosure activity.
Outlook
California had the most filings - 202,599 - which was up 198% from the same period a year ago.
Some help to homeowners may be available if the US Congress finally passes the housing bill, which aims to help hundreds and thousands of homeowners trapped in unaffordable mortgages.
The bill, if it became law, would allow these borrowers to refinance their mortgages with cheaper, fixed-rate mortgages backed by the government. It cleared the US House of Representatives this week and is expected to be passed by the Senate and signed by George W. Bush in the next few days.
But many analysts believe the housing market has not yet hit rock bottom, and falling house prices could put millions more at risk of foreclosure.
'Hardly thriving'
While the 0.8% growth in orders for durable goods, which are US manufactured items expected to last at least three years, was the highest since February, analysts cautioned against reading too much into it.
"With orders excluding defence falling at a 4% annualised rate in the second quarter, it is pretty clear manufacturing is hardly thriving," said Ian Shepherdson, chief US economist at High Frequency Economics.
Orders for motor vehicles and parts rose 1.8%, which was the strongest for almost a year.
But the increase was only a fraction of the big declines that have been seen in recent months.
"It says things were better than we generally expected as we look back into the second quarter but I think if you look forward into the third and fourth [quarters] the forward-looking indicators are pointing toward some weakness ahead," said Keith Hembre, chief economist at First American Funds.
Figures from research firm RealtyTrac showed that one in every 171 US households was in the process of losing their home - up 121% on last year.
There was better economic news from the Commerce Department, with orders for big-ticket US manufactured items growing 0.8% in June.
But much of the bigger-than-expected rise came from big defence orders.
Meanwhile, sales of new homes fell 0.6% in June, also according to the Commerce Department.
It is the seventh fall in the figure in the past eight months.
It means that new home sales are down by 33.2% from a year ago.
Negative equity
Mortgage defaults by US homeowners have surged as millions of sub-prime loans are reset at higher interest rates, and the drop in house prices has pushed more homes into negative equity.
The housing crisis is causing serious problems for the wider US economy.
Almost 740,000 US homes entered the foreclosure process in the second quarter of 2008, according to RealtyTrac.
This includes receiving a default or bank repossession notice or warning of an impending auction.
The worst hit areas were Nevada, California, Florida and Arizona, which had seen the biggest house price rises during the boom years, and the largest volume of sub-prime lending.
But RealtyTrac said most areas of the country were seeing at least some levels of foreclosure activity.
Outlook
California had the most filings - 202,599 - which was up 198% from the same period a year ago.
Some help to homeowners may be available if the US Congress finally passes the housing bill, which aims to help hundreds and thousands of homeowners trapped in unaffordable mortgages.
The bill, if it became law, would allow these borrowers to refinance their mortgages with cheaper, fixed-rate mortgages backed by the government. It cleared the US House of Representatives this week and is expected to be passed by the Senate and signed by George W. Bush in the next few days.
But many analysts believe the housing market has not yet hit rock bottom, and falling house prices could put millions more at risk of foreclosure.
'Hardly thriving'
While the 0.8% growth in orders for durable goods, which are US manufactured items expected to last at least three years, was the highest since February, analysts cautioned against reading too much into it.
"With orders excluding defence falling at a 4% annualised rate in the second quarter, it is pretty clear manufacturing is hardly thriving," said Ian Shepherdson, chief US economist at High Frequency Economics.
Orders for motor vehicles and parts rose 1.8%, which was the strongest for almost a year.
But the increase was only a fraction of the big declines that have been seen in recent months.
"It says things were better than we generally expected as we look back into the second quarter but I think if you look forward into the third and fourth [quarters] the forward-looking indicators are pointing toward some weakness ahead," said Keith Hembre, chief economist at First American Funds.
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