Realtor Coaching & Training: Realtor
One of our favorite monthly reads is the California Association of Realtors monthly magazine.
They do an excellent job balancing current trends with future looking content.
Speaking of content and balance…
We have been asked to recommend several California based Harris Real Estate University students for an upcoming story.
The topic of the article will be on time management and balance.
If you think this is a fit for you…drop me a quick email and I will put you in touch:
Tim@HarrisRealEstateUniveristy.com
Popularity: 2% [?]
Everyone in the real estate industry should be all for loan modifications.
There should be a new NAR rule that requires every Realtor to at the very least understand how loan mods work. How many more homeowners will YOU help when you know how to do loan mods?
ANYTHING that keeps homeowners from becoming renters is good news for the real estate industry.
Any way you look at it a foreclosure is a ‘bad thing’.
Yes, I know that HREU is the nations leading source for agents to learn how to list REOs…and without foreclosures there will be no REOs.
However, one of the core values of Harris Real Estate University is to be of service to others. A foreclosure does more damage that just creating a financial loss. The cost in terms of human suffering is extreme. More divorces, more suicides come as a direct result of financial suffering and never before have so many suffered.
For the sake of our country everyone in the real estate industry must do whatever they can to help others. Learn how to do loan mods. Some agents are offering legal, ethical loan mods while others have become their markets resource for information on loan mods. Watch the FREE Agent Loan Mod Secrets video to learn how to get started with loan mods. Consider modding your own loan…save yourself money now…then, consider offering loan mods to everyone you know.
Popularity: 1% [?]
In our never ending quest to have the smartest Realtor coaching students..
Here is the info you need for tomorrow’s FREE Event:
EVENT: Super Star Interview
DATE & TIME: Friday, November 6th at 9:00am Pacific
FORMAT: Simulcast! (Attend via Phone or Webcast — it’s your choice)
TO ATTEND THIS EVENT, CLICK THIS LINK NOW…
http://instantTeleseminar.com/?eventid=9768747
…..tomorro
w’s Superstar interview will be a real brain stretcher for many of us.
Why?
Well, Jeff Nielson isn’t a Realtor…isn’t even in the real estate business. (matter of fact, he isn’t even American!)
So why did we select Jeff to be a HREU Superstar?
Simple, this guy is wicked smart and he is going to share with you what may be coming next not just for housing but, the entire economy.
In all fairness, some of what he is going to say will seem a little scary..for some of you…a lot scary.
Long time HREU Students have been preparing for this market for years. You can easily find our students because they are the agents who are listing and selling short sales and REOs….in your market, chances are the top agents are HREU Students. Agents who are in many cases doing better in this market…because of this market…than any other time in their careers.
Here is a brief Bio for Jeff:
Jeff Nielson is a Canadian, who studied economics for four years at the University of British Columbia, before going on to earn his law degree at that same institution in 1989.
He began seriously studying the precious metals sector in the middle of this decade, and subsequently created a web-site – Bullion Bulls Canada - along with two other partners. He is currently the site’s writer and editor.
Their objective is to educate people about precious metals, and the excellent investment opportunities associated with this sector. Along with its focus on precious metals, the site provides extensive, general economic commentary – to explain the strong economic fundamentals which are currently driving this sector.
Popularity: 3% [?]
HREU 12 Week Communication Plan for Active Listings
LISTEN TO FREE 60 MINUTE AUDIO REPLAY WHERE TIM AND JULIE WILL COACH YOU ON HOW TO USE THIS PLAN
Secret: Great communication creates happy clients, repeat and referral business. Lack of communication or poor communication destroys repeat and referral business and can cost you the listing.
Goal: Practice Over-Communicating, under promising and over delivering and you’ll help more people in less time, make more money and have smoother transactions. Follow this simple communication plan to enhance your conversations, give you talking points and get faster and better price reductions when necessary.
Day One:
a) Confirm with client that the sign is in the yard.
b) Confirm with client that all phone #’s on the sign work.
c) Confirm with client that the MLS photo has been taken or has been scheduled.
d) Confirm with client the lock box is installed and test the key. Make sure seller has other keys.
e) Verify with seller that showing instructions are accurate.
f) Review with seller how feedback works, when they will receive it and how they’d like it: email / voicemail / appt to talk every Friday, etc.
g) Send a Thank You card to seller.
h) Use Social Networking Tools to promote new listing.
Secret: The first week is critical; many sellers get ‘seller’s remorse’ and have second thoughts…don’t give them any reason to take the listing back. Do what you say you’re going to do, and strive to over-communicate with them!
Within the First Week:
a) Send copy of MLS page, ask client to check for accuracy; make necessary changes. Do same for Realtor.com, etc.
b) Ask seller if they have any questions about the process or what happens next.
c) Ask seller if they have any work being completed or need referrals for handymen, etc.
d) Make sure your 1800homehotline number is working properly and have seller test it out.
e) Confirm brochures are completed and installed on sign.
f) Give seller 50 brochures so they can fill the box when it’s empty. Drop them off personally.
g) Install brochure holders inside for showings.
h) Give feedback on any early showings.
i) Ask if seller has any questions about the process.
j) Schedule open houses, office tours, broker opens, etc.
Secret: Remember that if sellers don’t’ hear from you, they assume you’re not doing anything for them. Call frequently and with something of value each time.
Within the Second Week:
a) Report to seller (via phone, not email!) any new sales that have happened around the neighborhood: what did they sell for, how many price reductions did it take, how many days on the market, etc.
b) Report to seller any activities completed from your Listing Plan of Action (items promised at the listing appointment).
c) Remind seller to be turning on lights, preparing home prior to each showing, etc.
d) Ask if seller has any questions about the process.
e) Talk about what Feedback really means.
f) Send copies of all listing documents to seller. Call to confirm they received.
g) Send copies of all marketing to sellers, including website printouts. Realtor.com, your website or blog, etc.
h) If you have a blog, post a video tour of the home there. Send to seller. Call to make sure they’ve seen it.
Within the Third Week:
a) Inform seller of total number of showings so far.
b) Review feedback from all showings and open houses.
c) Report to seller any new Listings which are now new competition and what their prices are. Preview if necessary.
d) Report to seller any new Sold comps.
e) Call your Center of Influence and Past Clients, let them know about your new listing and see who they know who would love to buy it. Tell seller you made these calls and what the results were.
f) Revisit Seller’s motivation.
g) Address any condition issues from feedback. Create plan to remedy or reduce price, possibly give credit to buyer to remedy.
h) Let seller know that if there is not an offer by next week, that you will do a new CMA and it may be time to ‘revisit the price’.
i) Ask if seller has any questions.
j) Ask for referral for anyone seller knows who needs to buy or sell.
Within the Fourth Week: CRITICAL 30 DAY MARK!
a) Review with seller the number of showings so far.
b) Review with seller the number of inquiries so far: 800# calls, web inquiries, calls from agents, etc.
c) Review with seller a summary of all feedback from showings and open houses.
d) Present to seller any new listings which are now competitors.
e) Present to seller any sold comps in detail.
f) Ask seller to correct items related to negative feedback.
g) Prepare, present and review with seller a NEW CMA.
h) ***Refer to Price Reduction Scripts***
i) Reduce Price as follows: If lots of showings, no offers, reduce by 5% minimum. If no or low showings, reduce by 10% minimum. Back this up with comps. Show seller that lesser priced homes are selling before they are. Remember…the 1st price reduction is the easiest to get so make it a significant one and wait no longer than 30 days to achieve this.
j) When you do price reductiomn paperwork, also get an extension signed if necessary.
k) Remind the seller that you remain 100% committed to getthing them the most amout of money in the least time, with the fewest hassles to them.
l) Get price reduction signed, change in MLS, etc.
m) Send thank you card to them thanking them for being smart and reacting to market conditions.
n) Let sellers know your plan is to call all previous showings and let them know of the new price, to call all previous ‘leads’ and let them know the same.
- o) Send letter to seller with new MLS printout showing changed description and price.
Secret: Price reductions are easier when they are clear that you’ve been working very hard to sell the home. If their perception is you haven’t done much, don’t expect a reduction. Remember the law of reciprocity!
Within Week Number 5
a) Review with the Seller the number of showings since the price reduction.
b) Review with Seller what you have done since the price reduction; number of calls / agents you’ve called, realtor meetings you’ve announced new price at, etc.
c) Review with seller the feedback from showings and open houses.
d) Review seller’s motivation; see if anything has changed.
e) Remind seller to keep turning on all lights and preparing home for showings.
f) Send seller article from local paper regarding the housing market, which supports your pricing conversations with seller. (Difficulty for buyers getting financing, falling prices, etc.)
g) Review with seller all activities completed from your Listing Plan of Action.
h) Ask if seller has any questions regarding the process.
i) Reiterate your 100% commitment to getting it sold as quickly as possible with fewest hassles to them, netting them most money possible.
j) Send seller copies of any marketing of their home.
k) Make sure brochure box is being filled regularly.
l) Put on free sites if you haven’t already, like Craig’s List, etc.
m) Talk about listing on Twitter, Facebook, social media sites.
Within Week Number 6
a) Review number of showings, calls, open houses, sign calls, 800# calls, etc.
b) Review and discuss any feedback from open houses and showings.
c) Discuss correction of any negative feedback items.
d) Review any solds, new listings, etc. Discuss Days on Market for each.
e) Review all activity completed to this point from your listing plan of action.
f) Discuss average days on market for seller’s neighborhood…they might be right on track, they may still be behind the curve. Adjust expectations if necessary.
g) Call all listing agents with competing listings; inquire about their showing activity, any buyers they may have for your listing, etc. Tell seller you did this and what results were.
h) Preview all competing homes and tell seller what your findings were.
i) Do new open house using a minimum of 10 directional signs. Announce on Realtor.com, your blog, website, etc.
j) Give seller feedback on open house.
k) Send letter to seller about ‘keeping home prepared for showings’ –or- ‘How to prepare for the home inspection’. Follow up that they received.
Within Week Number 7 : Ramping up for another reduction at 60 days.
a) Review number of showings, calls, 800# inquiries, open houses, marketing, etc.
b) Review and discuss all feedback.
c) Review with sellers any solds, new listings, etc.
d) Review what’s been done on the Listing Plan of Action with seller.
e) Review any changes in the market with seller: loan changes, special financing programs, what builders are doing to compete, etc. Market review.
f) Revisit seller’s motivation.
g) Send all marketing to seller including anything from the internet.
h) Let seller know if no showings by this weekend, time to revisit price, you’ll do a new CMA and present your findings.
i) Go preview what HAS sold and WHY. Discuss with seller.
Within Week Number 8: 60 day mark.
a) Do new open house using a minimum of 10 directional signs.
b) Follow up on 100% of old leads; call agents who have shown the property, your own inquiries, old open house leads, new open house leads…exhaust all possibilities prior to asking for new price reduction.
c) Review all feedback with seller.
d) Reiterate your 100% commitment to them and the sale.
e) Review their motivation.
f) Take sellers to preview what has sold so they can see what’s selling and why, and for what price. (Nicknamed by our Grad students as the ‘Seller’s Reality Tour’).
g) REDUCE PRICE. ***Use Price Reduction Scripts***
h) Call all previous showings to discuss price reduction and get new showings.
i) Refresh MLS and all marketing to reflect new price and change description. Take new pictures if old pictures show age of listing. (Don’t have snowy pics in the middle of summer, etc.)
Weeks 9, 10, 11, 12 and beyond: LATHER, RINSE, REPEAT!!!
Secret: It’s price, price, price from this point on, assuming you have corrected any negative condition issues and the seller is cooperating with showings, etc. Price overcomes everything; condition, location, etc. Price it right and it will sell in any market.
Secret: If seller refuses to reduce price due to needing a certain dollar amount to purchase next home, help them find a different loan program that may work for them with a smaller down payment.
Secret: All discussions are easier with sellers when you’ve had great communication along the way. They just want to know you care about them and that you’re working hard to accomplish
Popularity: 3% [?]
Being a Certified Short Sale Specialist is more important NOW than ever…..
As we reported over 2 years ago the number of homeowners choosing to de-leverage their own ‘toxic asset’ would only increase. In the past there was significant moral and social stigma associated with someone ‘walking away’ or doing a strategic default. Now, that has all changed.
For agents who were lead to believe that being a Certified Short Sale Specialist was optional…you need to rethink that mindset.
Its become very clear that there will be no ‘V’ shaped recovery…and certianly no fast recovery for housing. As you will read in this article, in some parts of the country it will take 10+ years for homes to return to peak bubble prices. With that in mind, millions of homeowners are considering a strategic default.
Disclaimer: We are not here to be the ‘moral’s police’. This is a very important and personal decision. As a Realtor, we don’t think its ethical for you to be advising your sellers to participate in strategic defaults.
Clearly, homeowners are coming to the decision to ‘walk-away’ on their own.
Where do you, a real estate professional fit in?
Simple, a Short Sale is by far a better alternative vs a foreclosure or a deed in lieu of foreclosure. The initial credit hit is roughly the same. But, the lasting effects of a Short Sale vs a Foreclosure are dramatically different. For example, according the FHA guidelines someone can qualify for a new FHA backed mortgage 24 months after a Short Sale. Much longer vs a Foreclosure.
Agents, learn how to become a Certified Short Sale Specialist. There is no question that knowing how to do a Short Sale….how to list it, sell it and get it closed in less than 45 days…IS the opportunity in this market. In come markets 75% of all homeowners are upside down…if they want to sell and avoid foreclosure they will need the services of an Short Sale Listing Specialist. When would NOW be the right time for you to learn how to do Short Sales….Watch the FREE Agent Short Sale Secrets video now…then grab your FREE Agent Short Sale Secrets book. Do this NOW.
Here are excerpts of the article from SeattleTimes.com
Scott Conroy pays the mortgage every month on his one-bedroom condominium in San Diego, even though it’s worth 33 percent less than what he owes and it may take more than a decade to break even.
Homeowners like Conroy who can afford their payments are weighing whether to sell and pay the difference, stick it out until housing prices recover or walk away.
In the U.S., 26 percent of borrowers owe more than their home is worth, said Karen Weaver, global head of securitization research for Deutsche Bank Securities. In parts of California, Florida and Nevada, it’s as high as 75 percent.
Realtors, did you catch that…..in some markets 75% of all homeowners are upside down! Staggering.
So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian, a credit-checking company, and Oliver Wyman, a New York consulting firm. Two-thirds of those who walked away defaulted on their primary residences.
“You’re looking at an extremely long horizon in order to see a return of home values to where they were at their peak,” said Stan Humphries, chief economist for Zillow.com, the Seattle real-estate data service. “It could be 15 to 20 years in some markets.”
Trickle for now
Strategic defaulters represent about 4 percent of all homeowners underwater. That trickle could become a flood as the likelihood recedes that home prices will soon return to their peak values, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac, an online seller of real-estate data.
Re-read that. Proof positive that this trend is just getting started. Learn how to become a HREU Certified Short Sale Specialist. Watch the FREE Short Sale video and grab your FREE Short Sale book NOW.
In San Diego, home values are down about 40 percent since March 2006, according to the S&P/Case-Shiller monthly index. Prices have rebounded for three consecutive months, returning to the October 2002 level, before the start of the housing boom.
Nationwide, home values are what they were in September 2003, according to the Case-Shiller index as of July.
“You have to ask yourself: ‘Are you just renting the home from the bank?’ ” said Michael Joe, a foreclosure expert at the Legal Aid Center of Southern Nevada. “Would it be cheaper to walk away and rent across the street?”
Conroy, 32, and his wife purchased their home for $385,000 in March 2006, a month before marrying. The property was reassessed this summer for $250,000.
Conroy said he and his wife are trying to save, knowing they may have to move to a bigger place within 18 months to start a family.
“We’ve given up on this dream of having equity in our home. We don’t expect to walk away with cash in hand; we expect to pay.”
More homeowners may opt to take a hit to their credit score rather than come up with cash to cover the loss, especially in California and the nine other U.S. states where the legal repercussions of foreclosures are less than in other parts of the country, said Sharga.
Ten states are so-called non-recourse, prohibiting deficiency judgments after most home foreclosures: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon and Washington, according to the Boston-based National Consumer Law Center. The bank can repossess your home in those states, not other assets, to settle the debt.
In California, a second-mortgage holder may try to pursue a delinquent borrower to repay through litigation, said Rick Brooks, a financial adviser with the San Diego-based wealth-advisory firm Blankinship & Foster. Banks generally prefer not to sue because it can easily cost $60,000 or more, said Debra Guzov, co-founder of the New York law firm Guzov Ofsink.
In a short sale, the borrower finds a buyer for the home at an acceptable price and the bank agrees to forgive the difference, said Greg McBride, senior financial analyst with Bankrate.com.
In a deed-in-lieu of foreclosure, the bank sells the home after a similar debt negotiation.
Tax break
A 2007 law exempts from tax up to $2 million of debt forgiven in a foreclosure or similar proceeding for a primary residence, according to Internal Revenue Service spokesman Eric Smith. The tax break extends to 2012.
The lender’s willingness to negotiate varies and depends on the loan balance, condition of the property, location and resale opportunities, said Alberta Hultman, CEO of USFN, an association of mortgage-banking attorneys based in Tustin, Calif.
Short sales or deeds-in-lieu of foreclosures are considered the same as a foreclosure on your credit score, said Craig Watts, spokesman for FICO Corp., owner of the credit-scoring formula most widely used by U.S. lenders.
A foreclosure remains on a credit report for seven years. Credit scores can begin to rebound in as little as two years if bills are paid on time, according to FICO.
Popularity: 3% [?]
Breaking News: Must Watch CNBC Video about Mortgage Loan Delinquncies…
We have said this many times before on this blog….CNBC’s Diana Olick is one of the best voices in the media when it comes to housing. Her reports cut through the B.S. and tell the truth…
Here is a video about the massive…historic..increase in Loan Delinquncies:
Remember, one of the best ways to be of service to others and make money as a Realtor….in this market…is being a Short Sale Specialist. Watch the FREE Agent Short Sale Secrets video and grab your FREE Agent Short Sale Secrets book.
Popularity: 1% [?]
We originally published this article in May….
…..with what is happening now in the real estate markets…and what is about to happen…
I am sure you will agree, its time to revisit this post:
This is one of those posts that I Know will generate negative comments from our readers.
And I am OK with that.
We are criticized all the time for sharing info like this with our students..here is an example.
True Story: I received an email over the weekend from a Real Estate Coaching company whom many of you would consider a competitor of ours. The coach (who is a friend of mine so I wont use his name) was very critical of our blog…and the fact that we don’t pump the usual ‘Its a great time to buy a house’ propaganda.
“Tim, why do you post so much doom and gloom?”
Important Message For ALL Realtors: Its NOT too late for you to become a REO Listing Agent. Its estimate that there will be as many as 7,000,000 bank controlled REO home sales over the next 24 months. Learn how to cash-in on this REO listings explosion. Watch the FREE Agent REO Secrets video and then grab your FREE Agent REO Secrets book.
He didn’t understand why we post articles like this one….
SO, for our competitors, our students and our future students…here is why we share info with you that may cause some of you to be alarmed and even angered with us.
We do it because no one else seems to have the courage to tell agents the truth about what may happen next in our respective real estate markets.
YOU SIMPLY MUST BE PREPARED FOR WHAT MAY BE COMING NEXT. Watch the HREU Real Estate State Of The Union Video NOW: After you have watched the video read the rest of this post….
It would be vastly easier for us to tell you to ‘get back to the basics’ or ‘its all about how you think’. But, that would be a lie.
Selling homes, being a Realtor is an honorable profession.
You are helping people solve a problem and accomplish an emotional and financial goal. Your job (as a Realtor) is to become a great sales person and an even better business person. When you are prepared for the worst but, hopeful for the best..you have an advantage. Once you have that mindset you will do a better job serving your real estate clients.
(Just posted: Breaking Real Estate News: Housing Come Back or False Hope?)
Here is the question we ask all of our Graduate Coaching students that I want you to ask yourself now: (Warning: reading what comes next may cause anxiety and doubt….but, if you read the whole thing you will find inspiration and strength).
Ask yourself…..
“What if I knew with 100% certainty that the real estate markets were going to get worse…far worse….in the next 6 months…what 3 things would I be doing differently NOW?”
Don’t be afraid of that question…take it seriously. If you KNEW that housing sales were going to plummet what 3 things would you be doing NOW…
If you knew for sure that the darkest days for real estate were still ahead of us…what would you be doing now?
IDEAS: Price reductions, taking FAR more listings, stronger focus on pre-qualifying, master Short Sale listings (finally), become a REO listing agent, follow a schedule?….what would you do if you knew FOR SURE real estate sales were going to decline further? Heres a thought, how about getting the education that you know you must have to learn the skills that this market demands. Make you own list. That is your plan of action for NOW.
Realtors, learn how to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets video and then grab you FREE Short Sale Secrets book NOW
Bottom line, Realtors are the only true hope for homeowners….this market is about agents with the skill set to serve and the mindset to be of service.
Next super tough revealing question….
“What are you doing now that you would stop doing if you knew that home sales were going to become far more challenging”
IDEAS: Maybe you would stop waiting for the phone to ring (and make it ring), you would stop waiting for the sellers to ask for a price reduction and start listing homes with pre-planned and agreed upon price changes, maybe you would stop mailing stuff to homeowners in hope that some day…they will call. What 3 things would you STOP doing now if you knew for sure that the real estate markets were going to become much worse?
Maybe now you get it.
If you are prepared for the worst…and the worst never happens…you are in better position.
We don’t want the real estate markets to slide any further. Its truly horrible what is happening to our country. Nothing would make us happier than telling all of you that the worst days for the real estate markets are behind us. Until that day happens we promise to tell you the truth, the whole truth and nothing but the truth. If that offends some of you (and we know it does) we sincerely apologize.
Please don’t be afraid of whats next.
The fact is that if you are still in the real estate business (especially after the epic national washout of thousands of Realtors that took place over the last 2 years) you have already proven that you have the chops to make it through the end of this historic ‘correction’. Be mentally, emotionally and financially prepared for this correction to take another 3-5 years.
HREU Students (and future students) if you need any help…request a Free Coaching Call.
Here is the article from The New York Times.
As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.
In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.
With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.
“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”
Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.
“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”
Important Message For ALL Realtors: Its NOT too late for you to become a REO Listing Agent. Its estimate that there will be as many as 7,000,000 bank controlled REO home sales over the next 24 months. Learn how to cash-in on this REO listings explosion. Watch the FREE Agent REO Secrets video and then grab your FREE Agent REO Secrets book.
Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis.
Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.
Robert and Kay Richards live in the center of this trend. In 2006, they took a 30-year, fixed-rate mortgage — a prime loan — borrowing $172,000 to buy a prefabricated house. They erected the building on land they owned in the northern Minnesota town of Babbitt, clearing the terrain of pine trees with their own hands.
Mr. Richards worked as a truck driver, hauling timber from a nearby mill. His wife oversaw the books. Together, they brought in about $70,000 a year — enough to make their monthly mortgage payments of $1,300 while raising their two boys, now 11 and 16.
But their truck driving business collapsed last year when the mill closed. Mr. Richards has since worked occasional stints for local trucking companies. His wife has failed to find clerical work.
“Every month that goes by, you get a little further behind,” Mr. Richards said.
Last June, they missed their first payment, and they have since slipped $10,000 into arrears. They are trying to persuade their bank to cut their payments ahead of a foreclosure sale.
Realtors, learn how to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets video and then grab you FREE Short Sale Secrets book NOW
From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.
During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000.
Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.
Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. The Treasury Department says the program will spare as many as four million homeowners from foreclosure.
But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at “more than 10,000 but fewer than 55,000.”
Learn how to mod your own home loan now. Watch the FREE Agent Loan Mod Secrets video now. Lower your own house payment now..save yourself $100s per month and $1000s per year. Next, start your own Loan Mod Business. Make money helping others save money! Watch the FREE Agent Loan Mod Secrets video NOW.
In the first two months of the year alone, another 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.
“I don’t think there’s any chance of government measures making more than a small dent,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.
Last year, foreclosures expanded sharply as the economy shed an average of 256,000 jobs each month. Since then, the job market has deteriorated further, with an average of 665,000 jobs vanishing each month.
Each foreclosure costs lenders $50,000, according to data cited in a 2006 study by the Federal Reserve Bank of Chicago, so an additional two million foreclosures could mean $100 billion in lender losses.
The government’s recent stress tests of banks concluded that the nation’s 19 largest could be forced to write off as much as a fresh $600 billion by the end of 2010, bringing their total losses to $1 trillion. The Federal Reserve concluded that these banks needed to raise another $75 billion.
Many economists pronounce that assessment reasonable, while cautioning that it could become inadequate if foreclosures continue to accelerate.
“The margin for error is not that big,” said Brian Bethune, chief United States financial economist for HIS Global Insight. “It’s kind of like, ‘Let’s keep our fingers crossed that we’ve seen the worst.’ ”
Among prime borrowers, foreclosure rates have been growing fastest in states with particularly high unemployment. In California, for example, the unemployment rate rose to 11.2 percent from 6.4 percent for the year that ended in March, while the foreclosure rate for prime mortgages nearly tripled, reaching 1.81 percent.
Even states seemingly removed from the real estate bubble are seeing foreclosures accelerate as the recession grinds on.
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In Minnesota, three of every five people seeking foreclosure counseling now have a prime loan, according to the nonprofit Minnesota Home Ownership Center.
In Woodbury, Minn., Rick and Christine Sellman are struggling to persuade their bank to reduce their $2,200 monthly mortgage on their five-bedroom home.
Mr. Sellman, a construction worker, found some work putting in asphalt driveways last summer, but he is now receiving unemployment. Ms. Sellman’s scrapbooking businesses shut down last summer. Since then, they have slipped $19,000 behind on their mortgage.
“We were always up on our house payments,” Ms. Sellman said. “You work so hard to keep what you have, and because of circumstances beyond our control now, there’s nothing we can do about it.”
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