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A Bright Spot In Shasta County’s Housing Market

An article in today’s Redding Record Searchlight had some good news about Shasta County’s Housing Market.

Bargain hunters and first-time home buyers taking advantage of increased affordability helped drive October sales in Shasta County.

Year-over-year home sales increased for the second straight month, while the median sales price for a house in Shasta County dropped for the fifth consecutive month.

“Right now, you have some real opportunities for first-time buyers – low interest rates and good loan programs, if they qualify,” Shasta Association of Realtors President Greg Lloyd said Monday.

DataQuick Information Systems reported that 168 homes were sold in Shasta County in October, unchanged from September and an 11.3 percent increase over October 2007.

The median sales price in October for new and used homes was $212,000, slightly down from $212,750 in September and an 11.5 percent decline from $239,500 a year ago.

The Shasta Association of Realtors reported 178 homes sold in October, one more than in September and a 24 percent jump from October 2007. The Realtors’ group relies on members to report sales. DataQuick pulls numbers from the county.

More telling is that nearly seven of every 10 homes sold in October were houses that went for $250,000 and less, according to the Shasta Association of Realtors.

“I think we are seeing that we may be getting close to the bottom,” said Brad Garbutt, a Shasta Association of Realtors board member. “The fact the rate of prices dropping has slowed, and the number of buyers is up shows us the market might be hitting bottom.”

Lower interest rates, which started falling last week, also have spurred interest among buyers.

On Monday, the rate for a 30-year Federal Housing Administration loan stood at 5.5 percent, said Tom Semb of Amerigroup Loan Center in Redding.

“Some people are getting the news,” Semb said of lower rates. “We are certainly seeing some of our business pick up.”

But Garbutt cautioned that until the flood of foreclosures and bank-owned properties stops, the market isn’t going to turn.

About four out of every 10 used homes sold in October had been foreclosed on at some point in the prior 12 months, DataQuick reported.

“The whole key is stopping foreclosures,” Garbutt said. “We will not dig ourselves out of this until we stop the tide of foreclosures – it’s keeping prices down, keeping the market down and keeps everybody pessimistic.”

Loan Modification Programs: What’s Your Bank Offering?

Most of the major banks have revealed plans to help troubled homeowners by modifying their loans. These loan modification programs have been created to help a wide range of borrowers and each bank has its own guidelines.

Click on the links below to see a detailed chart of the various modification programs available for each bank. Each chart contains information such as eligibility requirements, who to contact to apply, and costs associated with the program.

Bank of America

Citi

Countrywide

EMC

Fannie Mae

Federal Government Programs

Freddie Mac

Hope For Homeowners

HUD

IndyMac Bank

JPMorgan Chase

Washington Mutual

California Foreclosures Starting To Cool Down?

Foreclosureradar.com released its California Foreclosure Report for October 2008. Notice of default filings were up by 2.8% but dropped 42.3 when compared to this month last year. The statewide findings are very similar to what we found for Shasta County foreclosures.

Foreclosure sales dropped by 39.1 percent from the prior month, due to significant increases in cancellations and postponements, the company said.

Under California law, scheduled foreclosure sales can be postponed for a period of up to one year, until they are either canceled or sold. According to ForeclosureRadar, cancellations, where the home is taken out of foreclosure, increased by 78 percent in October, resulting in nearly 20 percent of foreclosure sales scheduled for the month being called off.

Notice of Default filings, which start the foreclosure process, continue to be significantly impacted by CA State Senate Bill 1137, as lenders work through the new requirements the law imposes, ForeclosureRadar said. Based on the company’s data, however, Notices of Trustee Sale rebounded after a significant drop the prior month.

A summary of ForeclosureRadar’s findings include:

– Notice of Default filings increased slightly in October, up 2.8 percent from September, to a total of 16,810 filings. Year over year, Notice of Default filings are down 42.3 percent.

– Notices of Trustee Sale, which schedule the auction date and time, increased by 32.9 percent in October, to 25,408 filings. Despite the significant increase, this level of filings remains well below average levels earlier this year, as September levels were clearly impacted by CA State Senate Bill 1137.

– Properties taken to sale at auction declined by 39.1 percent from September, to 14,042 sales, with a combined loan balance of $6.39 Billion. This represents a 28.8 percent increase from the prior year.

– Lenders took back 94 percent of the properties taken to auction, with a combined loan value of $9.19 Billion. Third party purchases declined 24 percent from the prior month, but increased 25 percent (as a percentage of all foreclosure sales), due to the decline in sales activity.

“It is important to note that the significant decline in October foreclosure sales cannot be directly attributed to CA State Senate Bill 1137,” said Sean O’Toole, founder of ForeclosureRadar. “There were nearly 60,000 properties scheduled for sale at the beginning of October over which the law had no affect. The drop in foreclosure sales, therefore, can only be reasonably attributed to changes introduced by the lenders themselves and not in response to SB 1137.”

The increase in cancellations was led primarily by Countrywide, ForeclosureRadar stated, which saw a 460 percent increase in cancellations from the prior month, and a 48 percent decline in the number of properties they sold at auction. In early October, Bank of America, which acquired Countrywide earlier this year, announced an aggressive loan modification program for Countrywide borrowers who financed their homes with subprime or pay option adjustable rate mortgages (ARMs).

Other lenders in California had similar drops in foreclosure sales, though more often due to postponement, rather than cancellation, ForeclosureRadar reported. Statewide, the percentage of foreclosure sales that had postponed at least once, increased from 36 percent of sales to 58 percent of sales, with the average length of postponement increasing from 24 days to 42 days.

“It would be a mistake to conclude that the declines in foreclosure activity indicate that the foreclosure crisis is over,” O’Toole warned. “While lenders now appear to be embracing the concept of foreclosure moratoriums and loan modifications, neither typically address the core issue of negative equity. Most loan modifications focus on lowering payments to affordable levels by using unsustainably low interest rates, not unlike the ‘teaser rates’ that many have blamed for the current crisis.”

Based on ForeclosureRadar’s October data, average discounts offered by lenders on the outstanding loan balance at foreclosure auction declined slightly from prior months, and averaged 36.1 percent statewide, with 33 percent of properties taken to auction being offered at discounts of 50 percent or more.

Shasta County Sees A Slight Increase In Foreclosure Filings For The Month Of October

Foreclosure filings in Shasta County increased 32% over the previous month. There were 78 notices of default filed with the Shasta County Recorder’s office in the month of October, compared to September’s low of 59.

When we compared this month last year we saw 22% fewer filings. In October 2007 there were 95 notices of default filed and we only had 78 in October of 2008.

Last month we speculated that the cause for the major drop from Augusts high of 206 foreclosure notices was due to State Senate Bill 1137. SB 1137 forces banks to take certain steps before filing foreclosure. We expected a bigger jump in default notices this month as lenders get back on track from the delays caused by SB 1137, but it appears the bill is having a lasting effect and is working.

Earlier this month Countrywide, Bank of America, JPMorgan Chase, and now Citi, revealed plans to keep homeowners in their homes by doing major loan modifications, these programs are scheduled to start in December. Loan modifications in the past have not been that effective; however the banks are starting to realize this and are making significant drops in principal and interest for qualified homeowners. We feel this will have an effect and the foreclosure filings will flatten out over the next few months and start to decline in the first quarter of next year.

Governor Schwarzenegger Proposes a 90 Freeze on Foreclosures In California

California Governor Arnold Schwarzenegger unveiled an aggressive proposal yesterday that he says will bring down foreclosure rates in the state by helping both borrowers and lenders modify existing home loans in ways that benefit both parties, and at the heart of his plan is a state-wide 90-day halt on foreclosure proceedings. Earlier today, Schwarzenegger called a special session of the state legislature to immediately address his foreclosure relief plan, as well as other economy and budget issues.

“The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes – and I am presenting a plan to do just that,” said Governor Schwarzenegger. “Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy.”

Schwarzenegger’s plan encourages loan modifications with incentives for lenders and servicers. Initially, the program calls for a 90-day stay of foreclosure for each owner-occupied home subject to a first mortgage on which a Notice of Default (NOD) has already been filed. But, it also provides for a “Safe Harbor” under which lenders will be exempt from the 90-day moratorium if they provide evidence to the state’s head banking official that they have an aggressive modification program already in place. The Governor’s office defines an “aggressive modification program” as one “designed to keep borrowers in their homes where doing so will ultimately bring investors a better return than simply foreclosing and selling at a loss.”

Study’s Show Small Loan Modifications Failing

Interesting article today on DSNews.com. According to a study by Credit Suisse & Moody’s a lot of loan modifications are failing and borrowers are becoming deliquent within 8 months.

One third of all subprime loans modified in the third quarter of 2007 were delinquent again within 10 months, according to a Credit Suisse report. A study by Moody’s ratings agency showed similar results. Looking at subprime adjustable-rate mortgages (ARMs) modified in the first half of 2007, the agency found that by March 2008, only a third were still current or had been fully paid, and two-thirds had fallen back into default.

Last month, the HOPE NOW Alliance reported that its members had made 98,000 loan modifications in September alone – a monthly record for modification workouts. While the industry is pressing forward with trying to preserve homeowners’ American dreams by offering modifications instead of proceeding with foreclosure, these studies show that there are still challenges to lenders’ loss mitigation efforts.

Consumer groups argue that part of the re-default problem is lenders’ reluctance to make the sorts of changes that will really improve a homeowner’s chances, a report in Time magazine said. Many think of a loan modification as lowering interest rates or reducing the overall loan balance. However, one of the most widely used adjustments is to simply spread missed payments over the remaining life of the loan, which has the contrary effect of raising, instead of lowering, the homeowner’s monthly payment. According to the nonprofit Center for Responsible Lending (CRL), nearly half of the loan modifications reported by HOPE NOW have left homeowners with the same or higher monthly payments, Time reported.

Going back to that Credit Suisse study, researchers found that 44 percent of loans with increased monthly payments became at least 60 days delinquent within eight months. On the other hand, reducing interest rates or principal had a much better chance of working. According to data from Credit Suisse, only 15 percent of loans that had received an interest-rate reduction and 23 percent in which the principal balance had been reduced were more than 60 days delinquent after eight months.

With approximately 3.5 million U.S. homeowners currently behind on their mortgage payments, lenders face pressure from every side to find a workable solution to stave off foreclosure. Long-term modifications that bring mortgages into the range of “affordable” allow homeowners to stay in their homes, lenders and investors to recover more capital than they would see from a foreclosure in today’s market, and mean that fewer vacant, foreclosed properties hit the marketplace. Many would argue that’s a “win” on every side.