Foreclosure Investing – Page 4

California State Bill 1137 Halts Default Notices

Foreclosureradar.com released their California Foreclosure Report for September, 2008 which shows a substantial decline in default notices. The report claims that the reason for the sharp decline is the California State Senate Bill 1137, which went into effect September 8, 2008. The bill requires lenders to make more of an effort to work with homeowners that are facing foreclosure and make sure they are aware of all their options. Lenders in California will have to wait 30 days after contacting the homeowner or fulfill the required steps before filing the foreclosure notice.

According to the report SB 1137 has affected the amount of default notices, which fell 61.8 percent during the month, and notices of trustee sale, which fell 47.3 percent. The bill did not directly impact foreclosure sales; however, they still fell 12.4 percent.

“California State Senate Bill 1137 has rendered analysis of current activity against prior foreclosure levels useless in understanding market conditions,” said Sean O’Toole, founder of ForeclosureRadar. “What is important to watch now, is how quickly lenders and trustees adjust to the new law. While it is unlikely foreclosures will return to previous levels, given the new requirements; we expect SB 1137 to have no long term impact beyond delaying the foreclosure process for homeowners, and slowing the overall recovery.”

Report Findings:

In September 16,352 notices of default were filed in California, down from 42,790 in August, s decrease of 61.8 percent from August 2008, and a decrease of 36.4 percent from a year earlier.
Notice of Trustee Sale filings decreased 47.3 percent from August, to a total of 19,116 filings. Despite the significant decline, filings increased 33.9 percent from September 2007.
Properties sold at auction increased by 163.2 percent from September ’07 to 23,409 sales in September ’08 with a combined loan balance of $9.75 billion. That is a 12.4 percent drop from August 2008.
Lenders took back 95 percent of properties taken to auction, with a combined loan value of $9.19 billion.
Average discounts offered by lenders on the outstanding loan balance at foreclosure auctions averaged 37.4 percent statewide, with 36 percent of the properties taken to auction being offered at a discount of 50 percent or more.

State Senate Bill 1137 was designed to reduce foreclosure rates by encouraging loan modifications as an alternative to foreclosure. However because most lenders operate under federal law they cannot be forced to modify the existing loans.

“Given the significant negative equity now occurring in most California foreclosures, modifying loans to affordable levels either requires large principal balance reductions, or extending the unsustainable teaser rates that created the foreclosure crisis in the first place,” continued O’Toole. “Wide scale adoption of large principal balance reductions also pose significant risks, as they are likely to encourage non-defaulting homeowners to default in the hopes of securing similar reductions. As such, either type of loan modification is likely to result in increased default, and/or foreclosure activity in the future, a consequence clearly not intended.”

I think he is right, why shouldn’t we all get principal reductions, I would consider a hit to my credit to get 20 or 30 percent taken of my principal balance. Joking aside, this will most likely cause a delay in foreclosure filings but we do not expect it to prevent very many foreclosures.

September Foreclosure Filings Drop 71% in Shasta County

Foreclosure filings in Shasta County dropped significantly compared to the previous month. There were only 59 Notices of Default filed compared the previous months number of 206.

When we compared this month last year we saw a 34% fewer filings. September 2007 there were 89 notices of default file and only 59 in September 2008.

This significant drop could be a result of lenders being more motivated to work with borrowers and resolving the loan delinquency before it gets to foreclosure. This could be a good sign however we are expecting next month’s number to be well above a hundred but below Augusts high of 206.

July Foreclosure Filings in Shasta County

Shasta County Foreclosure filings in July increased slightly from previous month. There were a total of 166 Notice of Default’s filed. That number is up from the 162 filings in June 08 and is a 54% increase from this time last year.

54 % increase in Notice of Default Filings compared to July 2007!

There were a total of 108 notices filed in July ’07 and 166 notices filed in ‘08

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RealtyTrac Reports Foreclosures Up In July

Josh Deknoblough RealtyTrac an online marketplace for foreclosure properties, released their July 2008 U.S. Foreclosure Market Report today. Foreclosure filings, default notices, auction sale notices and bank repossessions were reported on 272,171 U.S. properties during the month, an 8 percent increase from the previous month and a 55 percent increase from July 2007. The report also shows one in every 464 U.S. households received a foreclosure filing during the month.

“Bank repossessions, or REOs, continued to be the fastest growing segment of foreclosure activity in July, posting a 184 percent year-over-year increase compared to a 53 percent year-over-year increase in default notices and an 11 percent year-over-year increase in auction notices,” said James J. Saccacio, chief executive officer of RealtyTrac. “The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale. RealtyTrac now has more than three quarters of a million properties in its active REO database, a number that represents approximately 17 percent of the inventory of existing homes for sale reported in June by the National Association of Realtors.”

Nevada, California, Florida post top state foreclosure rates.

Nevada continued to document the nation’s highest state foreclosure rate in July, with one in every 106 households receiving a foreclosure filing during the month. Foreclosure activity in Nevada was up 15 percent from the previous month and 97 percent from July 2007, pushing the total number of properties with foreclosure filings to over 10,000. Bank repossessions in Nevada were up 384 percent on a year-over-year basis, while default notices were up 59 percent and auction notices were up 31 percent.

One in every 182 California properties received a foreclosure filing in July, the nation’s second highest state foreclosure rate, while one in every 186 Florida properties received a foreclosure filing, the nation’s third highest state foreclosure rate.

RealtyTrac’s full report click here.

Buying Bank Owned Properties

I’m sure you have seen the late night infomercials and heard stories about people making a lot of money from buying foreclosed homes. Generally they tell you how easy it is and that you can buy these properties from the bank for pennies on the dollar. It is true you can make a lot of money investing in foreclosures; however it is never as easy as the stories make it sound.

Most people do not know where or how to get started and often times get discouraged before they even buy their first property. We are going to start out with the basics on how properties become bank owned and how you can find them.

In California which is a deed of trust state there are a generally only two ways that lenders can get the property back from a borrower.

Deed in lieu of foreclosure – This is when a borrower will give the property back to the lender to satisfy a loan in default and to stop foreclosure proceedings. This is a lot less common then the property being foreclosed. There are several advantages for both borrower and lender. The main advantage to the lender is they get the property back much sooner than foreclosing and the borrower will avoid the public embarrassment of a foreclosure.

Auction – if a property goes up for foreclosure sale and no one is willing to pay the minimum bid then title will be transferred to the beneficiary (lender) and the property is now REO. It is not un-common for properties to not sell at auction. In most states to bid you are required to have certified funds, such as cashier’s checks or cash. The recent trend is borrowers will owe more than the home is worth. The minimum bid is typically close to what the foreclosing liens balance is plus fees & backed interest. So there are not as many deals at auction as you would think.

Once the lender is in control of the property they will work with an asset manager to get the property sold ASAP.

How does the lender establish a listing price?

The asset manager will hire a local appraiser or a BPO agent to give them their opinion of value. The asset manager will often order a second opinion of value to reaffirm the first. While they are doing that they will be looking for a local agent to market the property for sale. Sometimes this process can take a couple of weeks or even months.

Insider Secret: Most of the lenders will post a list of their REO properties on their website. See our list of lender websites to find REO properties before they are listed.

As soon as the asset manager has arrived at the listing price and contracted with a local agent to list the property, it will be posted on the local MLS. This is the point where most investors will find out about the properties and it can get pretty competitive depending on how good the deal is. The trick is to find out about these properties as soon as they are listed if not before.

Insider Secret: With our VIP Buyer Service you can receive these listings as soon as they hit the market. We will send all REO properties straight to your email inbox within minutes of being posted to the MLS. Sign up here!

Now you have a basic understanding of how to find bank owned properties. In the next posting we will discuss what to do when you find a screaming deal and how to make it an even better one.

We encourage your comments and questions.