A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.

Driven by rising unemployment, such loans accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.

At the same time, the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record-high for the ninth straight quarter.

The Mortgage Bankers Association’s report Thursday suggests the housing market and broader recovery could be thwarted by the continuing surge in home loan defaults, especially as the unemployment rate keeps rising. Lost jobs, rather than the shady loans made during the housing boom, are now the main reason homeowners fall behind on their mortgages.

After three years of plunging prices, the housing market started to rebound this summer. While optimists hope the worst is over, pessimists say there are simply too many foreclosed properties that have yet to be dumped on the market and expect further price declines.

About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if a quarter of those borrowers are able to stay in their homes, “there’s a lot of potential inventory coming into the market next year,” said Jay Brinkmann, chief economist with the Mortgage Bankers Association.

Those foreclosures will push home prices downward, especially in the hardest-hit California and Florida cities, places that are also coping with soaring unemployment, he said.

The record-high foreclosure numbers are being driven by borrowers with traditional fixed-rate mortgages, rather than the high-risk subprime loans with adjustable rates that triggered the mortgage crisis.

Subprime loans with adjustable rates have fallen to 16 percent of new foreclosures from 35 percent a year earlier.

Loans backed by the Federal Housing Administration also show increasing signs of trouble. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure.

Among states, the worst of the trouble is still concentrated in California, Nevada, Arizona and Florida, which accounted for 44 percent of new foreclosures in the country. Nearly 13 percent of all loans in Florida were in foreclosure, the highest in the U.S., followed by Nevada at more than 9 percent.

By Alan Zibel, AP Real Estate Writer

www.SellMyHouse.com

Bank Owned · Foreclosures · short sale · stop foreclosure

Here’s a thought regarding the issue of resolving the current foreclosure nightmare that our country is going thru. Last week we heard how the government is now going to lease their REO houses back out for the time being….huh? Now the government is in the landlord business too?

There are a lot of very smart people around the country who have ideas on what will need to happen in order to save the banking system from complete collapse. Here’s mine.

Why don’t these banks just sell these houses via a short sale and give the new buyers a mortgage? For purposes of making this discussion simple, I’ll leave out all the tax and capital requirements that bank industry insiders with throw out at me and focus on the external benefits that this type of policy would create.

First, a short sale by definition is when the bank agrees to take a  smaller payoff from a sale than what is owed on the balance of the mortgage. If you purchased your house after 2005 or 2006, chances are you owe more now than it is worth, especially if you are in the hardest hit states like Florida, California, Arizona, Nevada, and Michigan. In a few of those markets it is likely you house has dropped in value by almost 50%. There are literally millions of homeowners in this situation right now.

For many, instead of walking away they have chosen to try and work with the bank thru a company like www.sellmyhouse.com to find a buyer and complete a short sale. It is by far a much better option for the seller, bank, community, and the property than letting it sit vacant for a year or two.

With that said, we sure could use more coopertion from the banks. The red tape involved can drive even the most patient people into madness.

Here are some of our recommendations these banks should consider:

1. Quit gouging your clients. Dont raise their interest rates to 29% when they are having a hard time paying 8%. Give me a break. We cant go to the government to get a loan like you did. Work with us and we’ll reward you for it when times get better!
2. You will never convince me that a foreclosure is ever better for the bank than a short sale…EVER. I am an investor at heart. I’ll pay more for something that doesnt have mold growing in it…wouldnt we all? Work with Realtors to get a reasonable short sale offer and then give that buyer a mortgage if they meet reasonable credit and financial expectations. Waiting for a low ball offer from an investor is great for the investor..but wont fix the current problem. We need a retails buyer eventually as well to make money. A good economy will bring that.
3. This would help stabilize housing prices. The fear of the unknown is a huge confidence killer to new buyers. You’d be selling these at actual retail current market value levels instead of rock bottom foreclosure prices. A retail buyer will pay more than an investor wont they? Of course, there is no profit built into that transaction. Now comps would be based on true retail prices which would begin to repair the problem.
4. We’d begin reducing inventory levels. Simple supply and demand economics. There banks are holding tremendous volumes of future foreclosure properties right now. When they hit the open market prices will collapse again. We have to widdle that number back down to reasonable levels in order for the banks to stabilize and begin lending normally again.
5. You take a non performing note and turn it into a performing note. Isnt that what all the analysts are worried about? Sure, the bank is going to take a loss from the loan amount a few years ago, but they make money lending money. That loss is accounted for the year is defaults. Get it back on the books which will strengthen the banks financials for their investors.
6. How about plain old fashion good will? Wouldnt a bank that adopted this policy be seen as the good guy instead of the greedy money hungry bad guy? Wouldnt that also bring them new business? 

Our Realtor network continues to be in the middle of this issue due to the sheer number of short sale clients that contact us on a daily basis. We do not have a choice but to work thru the problem until a solution presents itself that makes sense.

Jason K Roberts

Chief Operations Director

386-597-7742 

www.SellMyHouse.com

Bank Owned · short sale · stop foreclosure