Wave of Foreclosures Coming

WARNING: Reading this blog post may cause anxiety.

We have been warning you for well over a year that the worst part of the housing correction was going to happen…June/ July 2009.

(Reality check: what month is it?)

No HREU student should be surprised by what you are about to read. HREU students have been preparing for the next leg down in the housing markets. They have been learning how to THRIVE in this market….

If this is new information for you…if you are not prepared…you still have time. But, please (PLEASE) understand that the next wave of foreclosures is going to be significantly worse than anything we have experienced thus far…..resulting in more overall home value loss…..and the dragging out of the recession/ depression…It is VERY realistic to believe that the homes will continue to lose value in most of the country for another 1-2 years before leveling off. Once the ‘bottom’ is reached the markets will take years to regain the home value losses.

The best analogy is that we have been in the eye of the storm for 6-7 months. Many agents/ brokers/ real estate ‘gurus’/ the press have been telling you that the real estate markets have reached bottom and the clouds are clearing.

If you have made the mistake and bought into the ‘housing bottom is here’ hype and as a result not prepared know this:

1) You now have been warned so its up to you to take action.

2) If you decide to keep your head in the sand and actually believe that your market is immune what you really are doing is making the decision to fail.

3) There IS still time. If you decide to truly learn/ do what this market demands you will succeed. You will thrive.

Here is the article:

Mortgage defaults have surged to record levels amid rising unemployment and falling home prices. Lenders are expected to move quickly to clear up backlogs as moratoriums on foreclosures expire.

Reporting from Washington — Just as the nation’s housing market has begun showing signs of stabilizing, another wave of foreclosures is poised to strike, possibly as early as this summer, inflicting new punishment on families, communities and the still-troubled national economy.

Amid rising unemployment and falling home prices, mortgage defaults have surged to record levels this year. Until recently, many banks have put off launching foreclosure action on the troubled properties, in part because they had signed up for the Obama administration’s home-stability plan, which required them to consider the alternative of modifying loans to make it easier for borrowers to make payments.

Realtors, its NOT too late for YOU to become a REO Listing Agent. Clearly, we are about the experience a massive increase in the number of foreclosures. That means more REO listings. Take action now and become a REO Listing Agent. Watch the FREE Agent REO Secrets video then download the FREE Agent REO Secrets book!

Just how big the foreclosure wave will be is unclear. But loan defaults are up sharply. And with many government and banks’ self-imposed foreclosure moratoriums expiring, the biggest lenders indicate that they are likely to move more aggressively to clear up a backlog of troubled mortgages.

Nationally, home sales have been steadying, thanks largely to an abundance of cheap foreclosed properties, government incentives and record low mortgage rates. Housing construction starts have flattened out, helping to bring supply into balance with demand. The rate of housing price declines has slowed as well, even turning up in some communities.

But rising foreclosures will depress home values, pushing more homeowners underwater. Mark Zandi of Moody’s Economy.com estimates that 15.4 million homeowners — or about 1 in 5 of those with first mortgages — owe more on their homes than they are worth.

Also, consumer confidence is already exceedingly low, and another jolt to the housing market could further crimp spending, which has been pummeled by the deep recession and persistent weakness in the job market. The latest unemployment rate, for June, rose to 9.5%, and many analysts predict that it will keep rising until the middle of next year.

The rapid pace of layoffs is of particular concern. Employers shed nearly a half-million jobs in June. Homeowners who are out of work have little chance of having their mortgages modified. That puts many homeowners on a collision course with banks that are preparing to take a more aggressive stance.

“Absolutely,” Chase Bank spokesman Tom Kelly said when asked about an impending surge in foreclosures. Since April 6, Chase has approved modifying 138,000 loans under Obama’s program. But an undisclosed number of other Chase borrowers didn’t meet modification eligibility, and many of those homeowners face possible foreclosure.

Separate from that group, Kelly said, Chase is proceeding to deal with an additional 80,000 borrowers in default whose foreclosure process had been voluntarily halted by the lender starting late last year.

Bank of America, the nation’s largest servicer of home mortgages, also did not release the volume of likely foreclosures. The bank said it had extended offers to modify loans to more than 45,000 borrowers under the Obama plan. Bank of America spokesman Dan Frahm said the company was projecting a “slow increase” in the number of monthly foreclosures, potentially reaching 30% above previous normal levels.

Much will depend on how quickly lenders can push the process along. It generally takes three months to a year from the time a borrower receives a notice of default to a foreclosure sale, in which case the lender usually takes title to the property.

Government and company reports show that the number of completed foreclosures nationwide slowed sharply late last year and into early this year, largely because of various moratoriums in effect during much of the first quarter.

But anecdotal reports indicate that foreclosure sales have started to climb again in the second quarter. And the pipeline is clearly getting fuller.

In the first quarter, some 1.8 million homeowners nationwide fell behind on their loans by 60 to 90 days, a 15% increase from the prior quarter, according to Moody’s Economy.com. The research firm said that loan defaults rose sharply as well, to 844,000 in the first three months of this year.

California accounts for an outsized share of mortgage loan defaults. A stunning 135,431 homeowners in the state were hit with notices of default in the first quarter, an increase of 11% from the earlier peak in the second quarter of 2008, according to real estate information service MDA DataQuick. Foreclosure sales in the state have been moderating after averaging a high of 26,500 a month last summer.

The Obama administration is racing to avert as many foreclosures as possible. So far, more than 240,000 distressed borrowers have been approved on a trial basis under the Home Affordable Modification Program, in which their loans are being reworked so monthly payments are targeted at 31% of their gross income, said Seth Wheeler, a senior advisor to Treasury Secretary Timothy F. Geithner.

Wheeler said the program’s goal was to prevent as many as 4 million borrowers from losing their houses over the next 3 1/2 years. And in August, Treasury officials hope to bolster those efforts with guidelines that could encourage banks to allow more borrowers to sell their properties in a short sale, in which the lender averts a foreclosure by accepting less than the balance of the mortgage.

“We’re very unlikely to implement another moratorium,” Wheeler said. But he noted that Treasury would closely monitor how many foreclosed homes were dumped onto the market, suggesting that officials could take other steps to prevent a flood of lender-owned properties.

Few people would venture a guess on the magnitude of foreclosure increases. Part of that will be driven by the job market and the financial condition of so-called prime borrowers and homeowners holding adjustable-rate mortgages, both of which are showing more stress.

Even as defaults among subprime borrowers have trended lower this year, newly initiated foreclosures involving prime mortgage loans saw a significant increase in the first quarter, jumping 21.5% from the fourth quarter, according to a government report of loan data from national banks and federally regulated thrifts.

Source: LATimes.com

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