The increase underscores the degree to which the mortgage crisis has spread to more affluent neighborhoods.
Prices for homes either in foreclosure or sold by banks rose in the second quarter, according to a real estate group, underscoring competition in the market for distressed properties and the degree to which the mortgage crisis has spread to more affluent neighborhoods.
FOR THE RECORD:
Homes in foreclosure: A chart accompanying an article in some editions of the Sept. 30 Business section contained errors in illustrating the rise in the average price of homes sold during or after foreclosure in Southern California, the state and the nation. The chart listed prices for 2009 and 2010 but failed to note that the time frame was the second quarter of each year. The data, credited to Bloomberg, were compiled by RealtyTrac of Irvine. And the numbers presented for 2009 were incorrectly transcribed from RealtyTrac’s original data. A corrected version of the chart appears on Page B2 of the Business section. —
In the second quarter, 248,534 U.S. properties were sold by banks or by owners who had fallen into foreclosure, RealtyTrac of Irvine said. That was an increase of 4.9% from the previous quarter, but a 20.1% decline from the same quarter last year, when discounted bank-owned homes flooded the market.
The average price for these properties was $174,198, RealtyTrac said, up 1.6% from the previous quarter and 6.1% from the same quarter last year.
“We are seeing the tail end of the foreclosure crisis caused by bad loans,” said Rick Sharga, senior vice president of RealtyTrac. “We are seeing the beginning of the wave of foreclosures caused by unemployment, which means you are seeing, in a lot of cases, a more expensive property in foreclosure than you would see, say, based on a subprime loan.”
The price increase was more pronounced in California, according to RealtyTrac. The average price was $256,833 for homes sold by banks or by homeowners who had at least received a notice of default from their lenders. That was an increase of 4.2% from the previous quarter and 17.5% from the same quarter last year.
The sales tracked by RealtyTrac included only properties sold to third parties, either investors or consumers, and not sales of properties sold back to lenders at trustee sales or through other transactions.
Overall home sales during the three-month period captured by the report were boosted by a popular federal tax credit for buyers. Since then, sales of U.S. homes have weakened considerably, and many experts are predicting a decline in home valuations.
“It is tempered a little bit by the fact that it covers the period of the tax credit, and everything looked fine, and since then the market has dropped off,” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “We need to watch this a little more and what it shows under the slower market conditions.”
Banks have been repossessing homes at a record clip this year, pushing properties through foreclosure that had been delayed by several moratoriums last year as well as the Obama administration’s efforts to help troubled borrowers. In recent weeks, the practices of banks taking back homes through foreclosure have increasingly become a concern.
Wall Street titan JPMorgan Chase said Wednesday that it was delaying foreclosure proceedings after it discovered that some employees signed affidavits about loan documents on the basis of file reviews done by other people instead of personally reviewing those files.
The New York bank said it was working with independent counsel to review documents in foreclosure proceedings and has requested that the courts not enter judgments in pending matters until it has completed the review. Those foreclosures only apply to properties in so-called judicial foreclosure states, which require a court order for a foreclosure. The vast majority of foreclosures in California are conducted without a court order.
The JPMorgan Chase foreclosure delay follows a similar move by Ally Financial Inc. last week, when its GMAC Mortgage unit suspended evictions and foreclosures in 23 states while it conducted a review of its processes.
The Detroit company, formerly known as GMAC Inc., didn’t suspend evictions in California because almost all foreclosures in the state by it and other lenders don’t require a court order. Nevertheless, Atty. Gen. Jerry Brown has told the company to halt foreclosures unless it could prove it was observing the state’s laws.
The conforming jumbo loan limits, which allow homeowners in certain areas of the country to get government-backed loans of up to $729,750, have been extended for another year, according to the Mortgage Bankers Association.
Last night, H.R. 3081 passed the Senate and House – it contains provisions that extend the existing loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (including FHA loans and reverse mortgage products, or HECMs) through September 30, 2011.
Additionally, it provides $20 billion in loan commitment authority for FHA’s General and Special Risk Insurance Fund.
“Extending the existing limits is essential to helping borrowers continue to have access to affordable long-term, fixed-rate mortgage credit in today’s struggling economy,” said Robert E. Story, Jr., Chairman of the Mortgage Bankers Association, in a release.
“The current limits have been a key component of keeping the mortgage market functioning, helping keep mortgage interest rates low for consumers who want to purchase a home or refinance an existing mortgage.
Without such an extension, larger loans would have fall into the jumbo loan category, resulting in interest rates a percentage point or more higher than conforming loans.
The traditional conforming loan limit is currently set at $417,000 for one-unit residential mortgages.
Conforming jumbo loan amounts ($417,001 to $729,750) price at a slight premium to conforming loan amounts, but well below jumbo loans amounts.
(FreeRateUpdate.com) – Although the current low mortgage interest rates have helped numerous homeowners torefinance into better terms, many have not be able to take advantage of these deals. Tighter lending guidelines have left many homeowners with no where to turn for help. In an effort to help save homeownership for many Americans, Representative Dennis Cardoza of California has proposed a home refinance bill that could allow almost everyone to refinance.
H.R. 6218 is called The Housing Opportunity and Mortgage Equity Act of 2010 (HOME). It is designed to offer refinances directly to homeowners who need help. As other foreclosure prevention programs have failed to prevent further defaults, this bill can possibly reduce foreclosures drastically and reward those who have continued to make their monthly mortgage payments even through economic struggles. With reduced mortgage payments, consumers will have more available cash to spend each month thus stimulating a dragging economy. In addition, this type of refinance can help eliminate strategic defaults and loan modifications.
Following are some of the details of the bill:
-A qualified mortgage is one that is current or in default as long as it is the borrower’s primary residence and is owned or guaranteed by Fannie Mae or Freddie Mac, This residence can be a single family dwelling, one to four family dwelling, condominium or a share in a cooperative ownership housing association.
-Any penalties for prepayment or refinancing and penalties due to default or delinquency would be waived or forgiven.
-The term of the new refinance could be no longer than 40 years.
-The servicer cannot charge the borrower any fees for refinancing.
-Fees for title insurance coverage will be reasonable in comparison with fees for the same coverage available. Any fees associated with the refinance would be rolled into the mortgage.
-The enterprise (Fannie Mae and Freddie Mac) will pay the servicer a fee not to exceed $1,000 for each qualified mortgage that is refinanced.
-There will be no appraisal required.
Although lenders believe that they will lose too much money if this bill is adopted, it can probably be the best solution given to date to halt the endless foreclosure issue. It will be interesting to see how this bill develops, what will be added and what will be taken away or even if it will pass. According to Congressman Cardoza’s website, there are about 30 million mortgages guaranteed by Fannie Mae and Freddie Mac. The savings from this program could be tremendous and have been estimated by Morgan Stanley and JP Morgan Chase to be an annual reduction of approximately $50 billion in mortgage payments. While the success of the available current programs is still questionable, this proposed bill which allows almost everyone to refinance could be the answer to accelerating the economy.