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Short sale approvals pre-default are on the rise

March 1, 2013

MIAMI – March 1, 2013 – Banks are increasingly willing to approve short sales before borrowers go into foreclosure, a bright spot for struggling homeowners hoping to escape an underwater mortgage with the least damage to their finances.

About 27 percent of home sales in Palm Beach, Broward and Miami Dade counties last year were short sales where the lender had not filed foreclosure papers against the homeowner, according to a distressed property report released today by the Irvine, Calif.-based RealtyTrac.

It’s a turnaround from a time when borrowers had to default on their mortgages before persuading their bank to do a short sale, which is where the lender agrees to accept less for the home than what is owed on the mortgage. In South Florida, the average difference between the unpaid mortgage balance and non-foreclosure short sale price last year was $116,505, the RealtyTrac report said.

South Florida Realtor Joanne Epstein said the paradigm shift by banks is a reaction to federal rules that went into effect Nov. 1 allowing homeowners to qualify for a short sale even if they are current on payments. Banks also earn credits to satisfy their obligations under the $25 billion National Mortgage Settlement by approving short sales.

“Some people are so scared to not pay their mortgage because they don’t have bad credit and don’t want bad credit,” said Epstein, who works for the Keyes Company/Ragbir Team. “But they can’t afford to pay anymore and are just throwing out good money.”

The federal rule changes only affect loans backed by Fannie Mae and Freddie Mac.

Under the November changes, borrowers who are current on their mortgage but suffer a hardship such as a death, divorce, or a job change requiring them to move more than 50 miles from their home can be qualified for a short sale by their loan servicers without additional approval from Fannie or Freddie.

The RealtyTrac report notes that the number of South Florida short sales conducted in 2012 before a foreclosure was filed increased 30 percent from the previous year.

Statewide, 33 percent of all home sales last year were short sales completed before a foreclosure was filed. The average difference between the unpaid principal balance and non-foreclosure short sale price was $94,950.

Housing experts say short sales benefit homeowners and lenders. A homeowner suffers a lighter ding to his or her credit than if a foreclosure was completed. Lenders save the cost of a lengthy court proceeding.

An increase in short sales may also lead to a quicker housing recovery, said RealtyTrac Vice President Daren Blomquist. South Florida short sales had a higher average sale price last year – $133,816 – than bank-owned homes, which went for an average of $129,320.

“Allowing these homes to change hands more quickly will put them with new homeowners who have loans they can afford, which means they are more likely to maintain the property,” Blomquist said. “They’ll be more motivated to be responsible homeowners.”

Kevin Kent, a broker-associate with Platinum Properties in Palm Beach County, questions RealtyTrac’s numbers. He said the percentage of non-foreclosure short sales seems high and that many lenders remain stalwart about having homeowners go into default before considering a short sale.

“Until someone misses payments, the lenders aren’t paying a lot of attention,” Kent said.

But banks are more amenable in general to doing short sales because “they get hurt a lot less,” Kent said.

Copyright © 2013 The Palm Beach Post (West Palm Beach, Fla.), Kimberly Miller. Distributed by MCT Information Services.

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U.S. new-home sales jump to highest in 4½ years

February 26, 2013

WASHINGTON (AP) – Feb. 26, 2013 – U.S. new-home sales jumped in January from the previous month to the highest level since July 2008, a sign that the housing recovery is accelerating.

The Commerce Department said Tuesday that new-home sales rose nearly 16 percent in January to a seasonally adjusted annual rate of 437,000. The percentage increase was the largest in nearly 20 years. And December’s sales were revised higher to 378,000 from 369,000.

Steady job creation and near-record-low mortgage rates are spurring more Americans to buy houses. Sales of previously occupied homes rose to the highest level in five years last year.

At the same time, the number of previously occupied homes for sale is at a 13-year low. That shortage creates more demand for new homes. Builders began construction on the most houses and apartments in four years last year.

The supply of new homes for sale was unchanged last month at 150,000. That’s barely above August’s total of 143,000 – the smallest supply of new homes on records dating back to 1963.

At the current sales pace, it would take just 4.1 months to exhaust the number of new homes for sale, the lowest in eight years. Low inventories should encourage more construction.

Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the National Association of Homebuilders.

The increase in home building has helped boost construction hiring. The industry has gained 98,000 jobs since September, the best stretch since the spring of 2006.

Still, the increases in new-home sales are coming from depressed levels. Sales plummeted to a record low in 2011. And sales are still well below the 700,000 annual level that economists consider healthy.

The biggest gain in new-home sales was in the West, where they soared 45.3 percent. The supply of previously occupied homes in that region has fallen sharply. Sales jumped 27.6 percent in the Northeast, 11.1 percent in the Midwest but only 3.2 percent in the South.

A separate report Tuesday showed that home prices accelerated in December. The Standard & Poor’s/Case-Shiller 20-city home price index rose 6.8 percent in December compared with the same month a year earlier. That’s up from November’s 5.5 percent gain over the previous November.

Rising home prices can fuel the housing recovery by encouraging people to buy before prices increase further. They can also bring more sellers off the sidelines.

Higher home values also make homeowners feel wealthier, building confidence and encouraging more spending. And banks are more likely to provide mortgage loans if they are confident that home prices are rising.
AP Logo Copyright © 2013 The Associated Press, Christopher S. Rugaber, AP economics writer.

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4 big short sales hang-ups

February 21, 2013

NEW YORK – Feb. 21, 2013 – Short sales are increasing this year, and these transactions can take up to three times longer than a traditional transaction. A lot can go wrong in that timeframe.

These are the most common delays, according to a recent article by George “Gee” Dunsten, a real estate broker and president of Gee Dunsten Seminars.

Title issues: Be sure to do a title exam at the beginning in order to identify all individuals on the deed and mortgages – and determine all lien holders.

Lack of communication with the lender: Lost documents and misunderstandings commonly cause delays. Make it a habit to follow up with the mortgage servicer twice a week to avoid avoidable problems.

Delaying the start: Some short sales don’t begin until a contract to purchase has been initiated, but this can add up to two extra months to the process. The lender won’t even look at a buyer contract until a seller candidate for a short sale is approved and the market value has been determined, Dunsten says.

Incomplete packages: Make sure you carefully submit all documents completely and accurately. Submitting incomplete packages is another common culprit of delays. All homeowner financial information needs to be kept current and forwarded to the servicer every 30 days, says Dunsten.

Source: “Avoiding the Dirty Dozen Barriers to Short Sale Success,” RISMedia (Feb. 20, 2013)

© Copyright 2013 INFORMATION, INC. Bethesda, MD (301) 215-4688

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Is real estate really on the mend in Florida?

February 18, 2013

ORLANDO, Fla. – Feb. 18, 2013 – Given the improvement in local and state residential real estate demonstrated by last week’s 2012 Florida Realtors statistics, there’s a lot of positive buzz, and possibly a bit of wishful thinking taking place among would-be sellers, Realtors, mortgage brokers, appraisers, developers and contractors.

But a reality check still shows a murky future: Up to a tenth of Florida homes, and almost a fifth of Manatee-Sarasota area homes are in some state of distress, raising concerns that a tsunami of bank sales could increase inventory, depress prices and lengthen closing times for residential sales in 2013 or even longer.

That view is “overly pessimistic,” said Florida Realtors chief economist John Tuccillo. But, he concedes, Florida has “a third of the nation’s ‘shadow inventory,’ a term used to define homes more than 90 days delinquent, or already in foreclosure, and that is very, very high.”

After the misery and displacement of the Great Recession, everyone, including President Obama, wants to believe that a broad-based real estate recovery is well and truly under way. In his State of the Union message, Obama announced that “the housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent and construction is expanding again.” So far, so good.

But then, Obama put his finger right onto the tricky bit when he said, “Even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected. Too many families who have never missed a payment and want to refinance are being told no. That’s holding our entire economy back, and we need to fix it.”

Banks and mortgage lenders – many of whom received federal assistance to the tune of $700 billion in the controversial 2008 Troubled Asset Relief Program (TARP), which was designed to address the subprime mortgage crisis – are simply not lending to would-be buyers.

And maddeningly, sellers, frequently the very same banks themselves, clearly prefer cash buyers to avoid burdensome, messy and uncertain mortgage applications, and all-but-frozen secondary mortgage markets.

In fact, the big banks and other financial institutions that, in the heyday of mortgage madness, shoveled money out the door to “anyone with a heartbeat who could also fog a mirror,” are today part of the obstacle to a sustained real estate recovery, says Jack McCabe, CEO of McCabe Research & Consulting, a Florida-based real estate and economic analyst.

He pointed to the February 2012 joint state-federal settlement with the country’s five largest mortgage servicers Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo, in which roughly $25 billion in relief was earmarked for distressed borrowers and various local and federal jurisdictions.

“Since the lawsuit has been settled, those banks are no longer holding back on foreclosures, which is one reason why real estate inventory levels were limited, and why prices rose in 2012,” said McCabe.

‘Best guess’

“Of the 475,000 completed Florida foreclosures since 2006, banks, realty funds and other financial players still hold an estimated 200,000 housing units,” said McCabe. That is roughly equivalent to the total number of 2012 statewide single-family home sales as reported on Monday by the Florida Realtors.

“There are currently 377,000-plus open foreclosures in Florida state courts, and 80 percent of them will become distressed transactions in the coming two to three years,” McCabe estimated. “The remainder will likely get loan modifications and possibly some relief from the lenders.”

But that is the tip of the iceberg, says McCabe.

“Another 550,000 additional Florida homeowners are 90 days-plus delinquent and thus subject to future foreclosure filing,” he said. “Taken together, there are 1.1 million distressed residential properties in the state.”

Given that the U.S. Census shows Florida has 9 million housing units in total, that means about 11 percent of the state’s housing stock is experiencing some level of distress.

The 11 percent distressed figure sounds “entirely plausible” to Anne Ray, Florida Housing Data Clearing House manager at the Shimberg Center for Housing Studies at the University of Florida, the official repository for state housing data. Ray estimated more than 320,000 open foreclosures statewide, close to McCabe’s figure.

Ray also pointed out that the Manatee-Sarasota MSA, one of the state’s best performers in sales increases, “had a foreclosure rate of 13.77 percent as of September 2012, and a ‘pending’ rate of an additional 3.36 percent.” Taken together, it means more than 17 percent of the area’s homes are in some state of distress.

But Florida Realtors argue that those statewide figures might be double-counted.

According to Sept. 30, 2012, estimates from CoreLogic, a leading provider of real estate and financial data, 562,664 homes have mortgages delinquent by 90 days or more, 389,149 are in foreclosure and 36,284 are REO (Real Estate Owned) loans, property in the possession of a lender as a result of foreclosure, says Florida Realtors research economist Brad O’Connor.

“Loans that are counted in foreclosure and REO estimates can also be counted in the 90-day plus delinquency estimate, so it would be erroneous to add them together to obtain a count of distressed loans,” O’Connor said. “Unfortunately, the statistics we receive from CoreLogic do not provide us with any counts of how many loans are both 90-plus delinquent and in foreclosure/REO status.”

Worlds apart

One reason many banks are not lending is that with undigested and often unsavory inventory in their bellies, many may be at or near the regulatory threshold for the portion of their portfolios dedicated to residential lending, said McCabe.

Charles “Charlie” Brown III, chairman and CEO of Insignia Bank, a Sarasota-based community bank which includes Manatee in its core market, says “there’s a big difference between what the large institutions may be contemplating, and what’s going on at locally owned and operated community banks, where I’m seeing a flood of portfolio lending nationwide.”

“Insignia is making portfolio loans, typically five- to 15-year fixed mortgages, has excess capacity and could double its current mortgage portfolio on top of its total of $113 million, 200-plus loan portfolio,” Brown said.

A portfolio mortgage is one that the bank itself holds to maturity, as opposed to secondary mortgages that are usually sold to government-sponsored enterprises, including mortgage giants Fannie Mae, Freddie Mac and others. That secondary market is where the squeeze, and most of the money and problems are, says Brown. He’s in a position to know, since he recently completed his second two-year term as one of 14 members of the Federal Deposit Insurance Corp.’s Community Bank Advisory Board in Washington, D.C.

Brown said that getting loan approvals in the secondary market where the GSE’s set the base standards is an ever-shifting and increasingly difficult process.

“They are continually tightening, tweaking and revising performance standards,” Brown said. “It’s very difficult to get a ‘conforming’ GSE mortgage and many banks have thrown up their hands altogether. I’m sensing both tension in the GSEs, as well as political pressure.”

But real estate attorney Anne Weintraub of Sarasota’s Band Weintraub says the larger banks are tired of being sued and are starting to cooperate with homeowners.

“They are tired of spending monies on attorneys to fight borrowers and realize owning a home is not ideal,” she said. “Most homes are abandoned, left in a state of disarray and the volume of abandoned homes is so enormous some banks don’t even realize they own the homes.”

In either scenario, banks can be both lenders and sellers, and typically hire the appraiser.

“Until the banks get the foreclosures off their books, they are sellers who want to get the best possible prices,” McCabe said. “Due to the legal wrangling, foreclosure sales in 2012 were basically ‘on the shelf’ while banks saw prices increasing, so now, after the settlement in a ‘perceived recovering market,’ I’d expect foreclosure filings and bank sales to accelerate this year and next.”

Bank-retained private appraisers also can be part of the problem, he contends, if their low valuation compared to the contract sales price inhibits lending.

Uncertainty surrounds issues

Additional flies in the recovery ointment are state and federal issues that may have adverse impacts on sustainable realty recovery.

In Tallahassee last week, a bill designed to speed up the foreclosure process passed the Florida House Civil Justice Subcommittee on a 10-3 vote. Foreclosure monitoring service RealtyTrac reported that “House Bill 87 allows third-party lienholders to start foreclosure proceeding and rushes final judgment of foreclosure if a homeowner doesn’t file a defense. The bill aims to streamline and expedite the foreclosure process.” RealtyTrac termed the bill a controversial piece of legislation in Florida – the state that leads the nation in foreclosure filings.

Immediately, more than a half-dozen law firms and attorneys aligned to defeat the bill, including St. Petersburg’s Matt Weidner, Mark Stopa and Charles Gallagher, a member of Florida Consumer Justice Advocates, a self-funded consumer lobbying group.

“Our fear is the current due-process rights of homeowners are being further diluted by the provisions of HB 87 and if passed, this bill would further handicap homeowners from defending their foreclosure and provide banks with little judicial resistance from the speedy foreclosure of their homes,” said Gallagher.

Tuccillo, the Florida Realtors’ chief economist, says the bill has “its pros and cons, and while I’m not a raving fan of HB 87, I would like to see it passed.” He called the slow judicial process a primary contributing factor to the huge build-up of the state’s shadow inventory.

“It’s been a long, long time” that banks have held onto the troubled mortgages, and “it’s time to get all this garbage out of the way,” he said.

In Washington, the Consumer Financial Protection Bureau – the agency that holds primary responsibility for regulating consumer protection with regards to financial products and services in the United States – is viewed by some as part of the problem.

The CFPB, in its attempt to protect consumers, is creating a “bigger mess” as compliance and risk escalate with every new rule they put out, Charlie Brown says. CFPB sends out revised guidelines “almost every 30 days that are scaring off mortgage lenders due to litigation and compliance risk.” The situation with the secondary market and the CFPB is “extremely difficult, and very much worries me,” said Brown.

It could get uglier.

“About 40 percent of Floridian mortgage holders who are current on payments are nonetheless underwater,” meaning that their current mortgage balance is greater that the market value of their property, says McCabe. That portends an expanding horizon of potentially distressed properties coming onto the market.

Veteran Florida real estate analyst Lewis Goodkin agrees.

“There used to be a stigma attached to foreclosures, but no more,” Goodkin said. “I know people making good money, professionals, whose homes are underwater and they have decided to simply stop making payments and put the money into the bank instead.

“In one case, fully 21 months after not getting payments, the bank finally foreclosed. When banks unload property, they are so leery of mortgage availability that they only take cash offers, which means they sold at prices 20 percent lower than they normally could have,” he said.

Those buyers are either large specialized Wall Street funds that have been snapping up distressed property, or foreign buyers.

“Over half of the (2012) transactions in the Miami market were cash-only deals, which means that a normal person with a steady job is unable to compete, or even to buy at all,” Goodkin said.

So what do the numbers mean?

“Bottom line is that, if you only pay attention to Realtor data, everything looks great,” summarized McCabe. “However, if you remove the blinders and consider underlying financial market activity and data, there’s still trouble in paradise and it’ll take another two to three years to achieve a normal healthy real estate market.”

Goodkin echoes that time frame.

“It’s not a very dynamic situation and we’re not out of the woods yet, and probably won’t see a normally functioning market until mid-2014, unless we have a depression, God forbid,” he said.

Realtors and hopeful sellers and buyers who cheered 2012’s rose-tinted Florida housing report as an indicator of better things to come in the short term are “smoking Hopium,” said McCabe, adding tongue-in-cheek that he “trademarked the term” for the duration of the Great Recession.

© 2013 The Bradenton Herald (Bradenton, Fla.), Stephen Frater, The Bradenton Herald. Distributed by MCT Information Services

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4 Reasons You Should Vote Yes On Amendment 4

October 8, 2012

Published October 1, 2012 | By dflynn

#1 – It protects YOU from rising property taxes

Did you know that under Florida property tax law, your property tax bill can go up, even if the value of your home goes down? It’s true. Every year your home’s taxable value is re-assessed. That value can increase by as much as 3% every year, and that affects how much you pay in property taxes, even if your millage rate doesn’t change.

But what if the real value of your home stays the same, or even goes down? Shouldn’t your assessed value go in the same direction? Not as the law is written. Even if your home’s value goes down, your assessed value can still increase by up to three percent. That’s right – your millage rate can stay the same or even go down – and your property tax bill will still go up.

It’s called recapture, and it’s an unfair tax trap that Amendment 4 will allow the legislature to do away with if supported by the people of Florida. It’s just the right thing to do, and it’s one way we can help many Floridians keep more of their precious assets.

#2 – It helps small businesses and renters

Do you own a small business? Do you have a second property that you rent out to a family or local business? Are you a renter? Then you know all about the taxes you pay without a homestead exemption. (Yes renters, you pay it too – your landlords pass it on in your rent.) Under current laws, your assessed property value can go up by as much as 10% each year!

Amendment 4 helps non-homestead property owners by lowering that cap to 5% rather than 10%. The result will be lower property taxes over time, and a more predictable property tax environment for businesses.

That’s great for Floridians who are already getting their assets taxed off, and it can help attract more investment in vacant properties that were sold off during the recession. That will help boost property values and attract more jobs and prosperity to our state at a time when we need more of both.

#3 – It will encourage first-time home-buyers

Maybe you’re looking to buy your first home on your own or with your spouse. Or maybe you and your family had to sell your old home and rent for a while because your mortgage and property taxes got too costly in the recession. Or maybe you lost your job and needed to downsize.

After a few very tough years here, Florida’s housing market is a much friendlier place for first-time home-buyers. But SPRS is the threatening condition that could keep all of that from happening. After all, nobody who has dealt with a recession like the one Florida has faced would want to buy a new home, only to get their assets taxed off – again.

So Amendment 4 takes a key step to address SPRS here as well. Under Amendment 4, any Floridian who has never had a homestead exemption, or who has not claimed an exemption in the last three years can receive an additional homestead exemption of half your home’s value up to $150,000 or half the median home price in the county you live. And that property tax exemption can stay in place for up to five years. This will mean serious tax relief for any Floridians looking to get on their without having to worry about getting their assets taxed off.

#4 – It will create jobs and stimulate the economy

According to a Taxwatch study, Amendment 4 will create nearly 20,000 new jobs, over 315,000 home sales more than would have otherwise occurred AND add nearly $5.3 billion dollars to the personal income of Florida residents. What more do you need to know?

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Housing survey shows link between consumer attitudes, experience

November 5, 2011

WASHINGTON – Nov. 4, 2011 – Fannie Mae’s third quarter National Housing Survey provides in-depth findings on attitudes of consumers who know of people in their area or neighborhood that have defaulted on their mortgage. This latest survey shows that those exposed to default have similar attitudes about buying a home as those who do not know people that have defaulted.

However, the survey also finds greater pessimism about the economy and personal finances among consumers who know defaulters.

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Florida’s existing home and condo sales up in September

November 3, 2011

ORLANDO, Fla. – Oct. 20, 2011 – Florida’s existing home and existing condo sales continued their upswing in September, according to the latest housing data released by Florida Realtors®. Existing home sales increased 10 percent last month with a total of 15,036 homes sold statewide compared to 13,723 homes sold in September 2010, according to Florida Realtors.

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Bank of America offers up to $20,000 to entice short sales

October 20, 2011

By Mark Puente, Times Staff Writer
In Print: Saturday, October 8, 2011

Bank of America is offering up to $20,000 to select Florida homeowners willing to agree to a short sale instead of entering foreclosure.

To sweeten the deal further, the nation’s largest lender will consider waiving the deficiency on the loan, which allows homeowners to sell the house for less then they owe without having to make up the difference to the bank. It can save homeowners thousands of dollars.

Not every Bank of America customer in Florida will be eligible for the program, which pays a minimum cash incentive of $5,000. It’s targeted toward home­owners who cannot afford their mortgages.

To quality, the short sales must be submitted for bank approval by Nov. 30 and must close by Aug. 31. Sales already under contract are not eligible; neither are properties outside of Florida.

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Q3, 2011: Cumberland Trace Townhomes of Largo update

October 1, 2011

In Q3 of 2011 there were 2 sales in Cumberland Trace of Largo:

  1. 13304 Thoroughbred Loop sold for $72,000
  2. 13309 Thoroughbred Loop sold for $73,000

As of 10/03/2011 there are 4 townhomes for sale in Cumberland Trace of Largo:

  1. 13123 Thoroughbred Loop is Active at a current list price of $74,000
  2. 8038 Thoroughbred Loop is Pending with a current list price of $77,900
  3. 8013 Appaloosa Dr. is Active with Contract with a list price of $84,900
  4. 13058 Thoroughbred Loop is Active with Contract listed at $90,000

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UF: Rise in Florida’s consumer confidence

September 30, 2011

GAINESVILLE, Fla. – Sept. 28, 2011 – Florida’s consumer confidence index rose this month to 64, up three points from a revised mark of 61 in August. However, confidence still remains low, according to the University of Florida (UF) survey.

Of the five components used by UF researchers to measure overall confidence, four edged upward. Expectations that personal finances would rise in the coming year went up five points to 78, and consumer anticipation that the U.S. economy will improve in the coming year rose by one point to 52. There was also a four-point increase to 66 in the overall expectation that the country will see economic gains during the next five years. Confidence that now is a good time to purchase retail big-ticket items, such as laptops and cars, rose six points to 74.

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