U.S. foreclosure activity in the first quarter of 2007 was up 35 percent from the first quarter of 2006, according to the RealtyTrac U.S. Foreclosure Market Report released today. The report documents a total of 437,498 foreclosure filings, which include default notices, auction notices and bank repossessions, during the quarter and a quarterly foreclosure rate of one foreclosure filing for every 264 households — the highest quarterly foreclosure rate since RealtyTrac began issuing its report more than two years ago.

Nevada reported the highest state foreclosure rate during the quarter, with one foreclosure filing for every 75 households — 3.5 times the national average. Colorado and Georgia rounded out the top three state foreclosure rates, followed by Michigan, California, Florida, Arizona, Ohio, Texas and New Jersey.

Detroit's first-quarter foreclosure rate of one foreclosure filing for every 51 households was highest among the nation's 100 largest metropolitan areas and and more than five times the national average. Other cities with foreclosure rates among the top 10 included Las Vegas, Riverside-San Bernardino, Calif., Sacramento, Calif., Stockton, Calif., Atlanta, Denver, Bakersfield, Calif., Fort Worth, Texas, and Dallas.

View full report.

With more and more sellers unloading their homes for less than what they owe on their mortgages, now is a good time for investors to start negotiating “short sales” with lenders. Real estate investors can find good deals as long as you are aware of the extra time and work required to make it happen.
 
Your chances of success with the seller's mortgage lender improve if your communication with them is organized and complete. Your first contact with the lender's “loss mitigation department” is crucial in making a good impression.
 
The first thing you need to get from the owner is what's called a “release” or “authorization to release information,” which is a letter signed by the seller that allows the mortgage lender to talk with you about the seller's mortgage. Laws prevent lenders from releasing mortgage information without the homeowners’ written consent.

Next, when you talk with the lender's loss mitigator, you'll want to find out three things:

   • Will the lender agree to a short sale;
   • What additional  information they'll need to complete the process;
   •  Request the “payoff quote schedule,” which is what the lender thinks they are owed.

Loss mitigators sometimes receive bonuses based on how many defaulted loans they can clear up, so they're more likely to pay attention to your sale if you can show them you're taking care of as many details and objections as possible.

The lender, on the other hand, will be considering many factors in deciding whether to approve a short sale, including:

  • Whether the seller is deserving of a break, due to financial hardship caused by unforeseen circumstances such as layoffs, divorce or illness;
   • Whether it would be cheaper to simply repossess the house, make any necessary repairs  and sell it through a real estate agent or broker;
   • How many other properties the mortgage lender currently has in default.

Additionally, the lender may require what's called a "hardship letter," which explains the seller's financial difficulties in writing. The lender may also require owner payroll stubs, copies of medical bills, checking account statements, financial statements, two years of tax returns, a signed purchase contract and other appropriate evidence from the seller. The lender will also look at the seller's credit reports to verify the seller's financial predicament. This will all take extra time.
 
While buying a home on a short sale can be frustrating and time consuming, your hard work can pay off in a home that's worth considerably more than you paid for it. For more detailed information, read Make Money in Short Sale Foreclosures, by Chantal Howell Carey and Bill Cary (Wiley, New Jersey), 2006, $29.95, 267 pages.

At RealtyTrac we want to arm you with all the information you’ll need to successfully achieve your real estate goals.

With 149,150 foreclosure filings reported nationwide in March, U.S. foreclosure activity was up 7 percent from the previous month and 47 percent from a year ago, according to RealtyTrac's foreclosure market report that was released yesterday.

The March total — which includes default notices, auction sale notices and bank repossessions — was the highest monthly total since RealtyTrac began issuing its report in January 2005 and resulted in a foreclosure rate of one foreclosure filing for every 775 U.S. households.

Nevada documented the highest state foreclosure rate for the month, one foreclosure filing for every 183 households. Colorado's foreclosure rate ranked second highest, followed by California's foreclosure rate, which leapfrogged into third place thanks to a 36 percent jump in foreclosure activity.

California also documented the most foreclosure filings of any state, 31,434, and California cities accounted for six out of the top 10 metro foreclosure rates.

View full report.

Greed and deceit.

It’s a recurring theme in the real estate industry; mostly visible in the financial sector, although one would have to be a fool to believe it didn’t take place in every aspect of the real estate transaction. And let’s not forget all the news stories out there about mortgage and foreclosure scams these days.

After President Reagan deregulated the banking industry back in the 1980s, it was Charles Keating, Jr. of Lincoln Savings fame (and his ilk) who was profiteering at the expense of homeowners and investors. His was the public face of the savings and loan debacle as the nation suffered from excessive job losses, a historically high level of foreclosures and exorbitant interest rates.

By comparison, in the present situation there is plenty of blame to go around — lenders probably not disclosing everything they should have, and borrowers not reading everything they should have before signing on the dotted line — in the end it’s still the lenders that people are cursing at in a rather loud voice nowadays.

Although these two events took place during different real estate cycles and economies, comeuppance was similarly swift for both.

For Keating, it was iron bars, an identification number and a pinstriped suit tailored for him by the U.S. government. For all of today’s lenders who threw caution to the wind looking to cash in from the real estate frenzy of the past six years, the price they’re paying is bankruptcy, corporate dissolution or sale, or at least eliminating their subprime divisions.

Meanwhile, for the workers at these institutions it means layoffs, unfortunately, while for homeowners who were convinced to take out these risky loans — either in a purchase money transaction or a refinance situation — it potentially means foreclosure.

Every industry analyst and observer worth his or her weight saw it coming — New Century Financial’s filing for Chapter 11 bankruptcy protection last week, that is. In all, an estimated 3,200 employees lost their jobs when it was announced.

New Century is just the latest of many lenders in the subprime market that are now either filing for reorganization under Chapter 11 or trying to sell their subprime operations and laying off employees — like at Option One Mortgage.

The extent of the problem has reached such dramatic proportions that a coalition of consumer groups has called on federal lawmakers to place a six-month moratorium on foreclosures resulting from subprime mortgages. The argument for their proposed moratorium: that the resulting foreclosures are unfairly and disproportionately affecting Latino and African American homeowners.

Also, a well-known online news source for the mortgage industry has published a new online journal called “The Mortgage Graveyard” detailing the struggles and failures of mortgage companies dating back to 1999.

What does all this mean for members of RealtyTrac as far as the continuing pipeline of foreclosures is concerned? Even if the federal government were to give in and turn off the spigot for subprime foreclosures for the next six months, the impact felt would most likely not be significant enough to make a real difference.

Even though an estimated 19 percent of all loans originated in 2005 and 2006 were subprime ARMs (according to a December 2006 report published by the Center for Responsible Lending), there are still plenty of homeowners in the marketplace who are undergoing other distressing financial circumstances leading to foreclosure such as divorce, job loss or other situations.

Nonetheless, members of RealtyTrac — legitimate investors and potential homebuyers with the best of intentions — still remain in a prime position to help save these people from what otherwise could be one of the most catastrophic times of their lives.