State foreclosures for August up 126%
Nathan Hurst / The Detroit News
The number of Michigan homes taken by foreclosure was up 126.86 percent in August over the same month last year.
In total, 15,565 foreclosure filings were made in the state last month. The state's foreclosure rate of one for every 288 households ranks sixth in the nation, according to data being released today by RealtyTrac, an Irvine, Calif., firm that tracks such transactions across the country.
Michigan placed behind Nevada, California, Florida, Georgia and Ohio. The bulk of the state's filings were in Metro Detroit counties.
In Wayne County, there were 9,615 foreclosure filings in August, one for every 87 households, ranking the county fourth among the nation's metro areas. This was up from 8,683 such filings in July, a 10.7 percent increase, and 3,068 filings in August 2006, a 213 percent increase.
In Oakland County, there were 864 filings last month, one for every 601 households, down from 1,105 in July, a 21.8 percent drop, but up from 726 in August of last year, a 19 percent increase.
In Macomb County, there were 1,506 filings, one for every 230 households, up from 1,348 in July, an 11.7 percent increase, and up from 584 in August of last year, a 157.9 percent increase.
In Livingston County, there were 167 filings, one for every 422 households, up from only 8 in July, a massive 1,987.5 percent increase, and up from 61 in August of last year, a 173.8 percent increase.
Tuesday, September 18, 2007
House prices tumble 18%
House prices tumble 18%
Glut, foreclosures push Metro values down from '04 peak
Nathan Hurst / The Detroit News
WARREN
A glut of homes on the market combined with a sharp rise in foreclosure sales have driven Metro Detroit home prices down 17.7 percent since their peak three years ago, according to new data.
The region's median home price -- half the homes sold for less, and half sold for more -- fell from $188,275 in August 2004 to $154,919 in August 2007, according to data from Realcomp Inc., Metro Detroit's largest multiple listing service.
In Wayne County, the drop has been a staggering 35.6 percent.
Experts say that until the supply of homes for sale is significantly reduced, prices will continue to drop.
"The low prices are changing attitudes on both sides of the market," said Steve Cole, an agent at Weir Manuel Realtors in Birmingham. "Sellers are being very unrealistic about what they're expecting to sell for; everyone thinks their house is the exception to the rule. Buyers are also expecting to have an offer at half the asking price accepted."
The impact of falling home prices is widespread. For homeowners without equity, it can mean being "upside down" on their mortgages, owing more than their home is worth. For home sellers in that position, it means bringing cash to the closing just to pay off the loan. For sellers who saw their homes as retirement nest eggs, it means a lower return on their investment. And dwindling values means many homeowners can no longer borrow against their equity for major home repairs or purchases.
The low prices have created an upside: For those in the market for a house, there are plenty of good deals in every price range in every community.
Home investment shrinks
Count John and Dana Declark of Warren among those who have seen their home investment shrink. Back in 1984, the Declarks bought their modest three-bedroom home not only to provide a roof over their family's heads, but also as a retirement nest egg.
One day, they planned to turn their property into enough cash to build their dream home in Lapeer County.
Just a few years ago, the value of their home seemed to grow by the day. Today, the Declarks have their house up for sale for $162,900 -- more than $10,000 less than its estimated worth just three years ago.
"We decided now is the time," Dana Declark said. "Values are going down, people are losing their jobs. Looking at how many houses are for sale around here, we figured it's now or later, when it could be worse."
State leads price decline
Michigan, with its economy battered by the downturn in the auto industry, has led the way in the decline of home prices. The housing slowdown that started here in 2005 hit the rest of the nation this year, and now median prices are falling in markets across the country. The latest Standard & Poor's/Case-Schilling housing price report showed the national median home price in the second quarter of this year was down more than 3 percent from the same period in 2006.
A rash of foreclosure sales in Metro Detroit in the past year has skewed the sales prices downward, explained Francine Green, director of marketing for Realcomp. Foreclosed homes usually sell for much less than their typical market value, she noted.
Nonetheless, foreclosure sales drag down the value of other homes in a given neighborhood, as assessments are largely based on how much similar properties in an area sold for.
In Wayne County, 305 homes that were sold in August, or 18.4 percent of the county's total, were foreclosure sales, the Realcomp report said. That compares with 10.2 percent in August 2006.
It ultimately will take a critical mass of homeowners willing to sell low to significantly reduce the supply of homes for sale, which would then start driving prices back up.
"The only way this gets solved is by having a lot of people taking a huge hit in their home prices," said Don Grimes, a senior economic research specialist at the University of Michigan. "Until people make that decision, it'll just keep dragging on and on."
Mortgage exceeds worth
For Mary McKenzie of Detroit, the slump in home values has cut into her greatest source of personal wealth.
The 64-year-old elementary school secretary bought her southwest Detroit home in 1974 and worked diligently with her husband to pay off the mortgage. When she needed money to pay off mounting medical bills for her family, she leveraged some of the house's equity to provide the extra cash she needed.
But falling prices in her neighborhood have put her in a situation that's become common: She now owes more on her mortgage than her house is worth.
McKenzie owes nearly $59,000, but similar homes for sale in her neighborhood have asking prices for well below $50,000. With payments on her adjustable-rate mortgage set to jump for a third time next year, she's now considering walking away from the place she's called home for more than 30 years.
"The house was a financial foundation," McKenzie said. "Now, I feel like that's been taken away from me. I couldn't get anywhere near enough money to pay it off if I tried to sell it."
A buyer's market
While home sellers suffer, times couldn't be better for home buyers, who have their pick of hundreds of houses at bargain prices, in virtually every community in Metro Detroit.
"There are factors coming together that are really good for people looking for an opportunity," Grimes said. "If the house prices come down enough, people who are forced to be renters now can actually afford to buy them. "
Jesse Yates has joined the hunt. The 28-year-old marketing consultant from Rochester Hills is looking for a condominium in Detroit -- one that's closer to his office and nightlife spots. A self-described bargain shopper, Yates said he's looking at used condos rather than new, because he feels he'll have a better chance of negotiating a good deal.
"I'm on the right side of the bargaining table," Yates said. "People are practically begging you to buy their place. I'm feeling pretty good that whatever I end up buying will be a good deal."
Couple's return is timely
Alan and Lauren Ducharme of New York City are betting low prices will yield them a big home with a small price tag in Brighton, where they're returning to be closer to family. The Ducharmes, who telecommute with East Coast technology firms, weren't planning on returning to Michigan for a few more years, but decided it was the right time for a good deal.
Looking around their target neighborhoods in Brighton, the couple is confident they'll be able to shave $15,000 to $20,000 off asking prices simply by waiting.
"We've been keeping our eyes on a few homes and seeing how long they're lingering," Alan Ducharme said. "We're betting that if we wait until the right time, we can drive a hard bargain. They'll get sick of that 'For Sale' sign eventually."
The one downside right now for home buyers is the credit crunch that has lenders tightening their requirements for mortgages. But those with good credit and a small down payment shouldn't have any problems getting a loan.
Prices will continue to drop
Bargains for buyers will be prevalent through at least the end of the year, according to the National Association of Realtors, which estimates that average home prices nationwide will drop another 1.7 percent by January.
Grimes said the Metro Detroit housing market likely will have its low point sometime in the next two or three years. In the meantime, he suggests homeowners put the current situation in perspective.
"We've seen sharper (home price) declines in other parts of the country -- California, Florida, D.C.," he said. "And the fact is that nobody's fallen back to (1990s) levels. That would have really hurt."
Glut, foreclosures push Metro values down from '04 peak
Nathan Hurst / The Detroit News
WARREN
A glut of homes on the market combined with a sharp rise in foreclosure sales have driven Metro Detroit home prices down 17.7 percent since their peak three years ago, according to new data.
The region's median home price -- half the homes sold for less, and half sold for more -- fell from $188,275 in August 2004 to $154,919 in August 2007, according to data from Realcomp Inc., Metro Detroit's largest multiple listing service.
In Wayne County, the drop has been a staggering 35.6 percent.
Experts say that until the supply of homes for sale is significantly reduced, prices will continue to drop.
"The low prices are changing attitudes on both sides of the market," said Steve Cole, an agent at Weir Manuel Realtors in Birmingham. "Sellers are being very unrealistic about what they're expecting to sell for; everyone thinks their house is the exception to the rule. Buyers are also expecting to have an offer at half the asking price accepted."
The impact of falling home prices is widespread. For homeowners without equity, it can mean being "upside down" on their mortgages, owing more than their home is worth. For home sellers in that position, it means bringing cash to the closing just to pay off the loan. For sellers who saw their homes as retirement nest eggs, it means a lower return on their investment. And dwindling values means many homeowners can no longer borrow against their equity for major home repairs or purchases.
The low prices have created an upside: For those in the market for a house, there are plenty of good deals in every price range in every community.
Home investment shrinks
Count John and Dana Declark of Warren among those who have seen their home investment shrink. Back in 1984, the Declarks bought their modest three-bedroom home not only to provide a roof over their family's heads, but also as a retirement nest egg.
One day, they planned to turn their property into enough cash to build their dream home in Lapeer County.
Just a few years ago, the value of their home seemed to grow by the day. Today, the Declarks have their house up for sale for $162,900 -- more than $10,000 less than its estimated worth just three years ago.
"We decided now is the time," Dana Declark said. "Values are going down, people are losing their jobs. Looking at how many houses are for sale around here, we figured it's now or later, when it could be worse."
State leads price decline
Michigan, with its economy battered by the downturn in the auto industry, has led the way in the decline of home prices. The housing slowdown that started here in 2005 hit the rest of the nation this year, and now median prices are falling in markets across the country. The latest Standard & Poor's/Case-Schilling housing price report showed the national median home price in the second quarter of this year was down more than 3 percent from the same period in 2006.
A rash of foreclosure sales in Metro Detroit in the past year has skewed the sales prices downward, explained Francine Green, director of marketing for Realcomp. Foreclosed homes usually sell for much less than their typical market value, she noted.
Nonetheless, foreclosure sales drag down the value of other homes in a given neighborhood, as assessments are largely based on how much similar properties in an area sold for.
In Wayne County, 305 homes that were sold in August, or 18.4 percent of the county's total, were foreclosure sales, the Realcomp report said. That compares with 10.2 percent in August 2006.
It ultimately will take a critical mass of homeowners willing to sell low to significantly reduce the supply of homes for sale, which would then start driving prices back up.
"The only way this gets solved is by having a lot of people taking a huge hit in their home prices," said Don Grimes, a senior economic research specialist at the University of Michigan. "Until people make that decision, it'll just keep dragging on and on."
Mortgage exceeds worth
For Mary McKenzie of Detroit, the slump in home values has cut into her greatest source of personal wealth.
The 64-year-old elementary school secretary bought her southwest Detroit home in 1974 and worked diligently with her husband to pay off the mortgage. When she needed money to pay off mounting medical bills for her family, she leveraged some of the house's equity to provide the extra cash she needed.
But falling prices in her neighborhood have put her in a situation that's become common: She now owes more on her mortgage than her house is worth.
McKenzie owes nearly $59,000, but similar homes for sale in her neighborhood have asking prices for well below $50,000. With payments on her adjustable-rate mortgage set to jump for a third time next year, she's now considering walking away from the place she's called home for more than 30 years.
"The house was a financial foundation," McKenzie said. "Now, I feel like that's been taken away from me. I couldn't get anywhere near enough money to pay it off if I tried to sell it."
A buyer's market
While home sellers suffer, times couldn't be better for home buyers, who have their pick of hundreds of houses at bargain prices, in virtually every community in Metro Detroit.
"There are factors coming together that are really good for people looking for an opportunity," Grimes said. "If the house prices come down enough, people who are forced to be renters now can actually afford to buy them. "
Jesse Yates has joined the hunt. The 28-year-old marketing consultant from Rochester Hills is looking for a condominium in Detroit -- one that's closer to his office and nightlife spots. A self-described bargain shopper, Yates said he's looking at used condos rather than new, because he feels he'll have a better chance of negotiating a good deal.
"I'm on the right side of the bargaining table," Yates said. "People are practically begging you to buy their place. I'm feeling pretty good that whatever I end up buying will be a good deal."
Couple's return is timely
Alan and Lauren Ducharme of New York City are betting low prices will yield them a big home with a small price tag in Brighton, where they're returning to be closer to family. The Ducharmes, who telecommute with East Coast technology firms, weren't planning on returning to Michigan for a few more years, but decided it was the right time for a good deal.
Looking around their target neighborhoods in Brighton, the couple is confident they'll be able to shave $15,000 to $20,000 off asking prices simply by waiting.
"We've been keeping our eyes on a few homes and seeing how long they're lingering," Alan Ducharme said. "We're betting that if we wait until the right time, we can drive a hard bargain. They'll get sick of that 'For Sale' sign eventually."
The one downside right now for home buyers is the credit crunch that has lenders tightening their requirements for mortgages. But those with good credit and a small down payment shouldn't have any problems getting a loan.
Prices will continue to drop
Bargains for buyers will be prevalent through at least the end of the year, according to the National Association of Realtors, which estimates that average home prices nationwide will drop another 1.7 percent by January.
Grimes said the Metro Detroit housing market likely will have its low point sometime in the next two or three years. In the meantime, he suggests homeowners put the current situation in perspective.
"We've seen sharper (home price) declines in other parts of the country -- California, Florida, D.C.," he said. "And the fact is that nobody's fallen back to (1990s) levels. That would have really hurt."
Wednesday, September 12, 2007
Foreclosures hit another record high
Foreclosures hit another record high
Associated Press
Michigan foreclosure rate ranks 3rd in nation
Report: Countrywide has begun layoffs
Lenders to offer loan aid
New data reveals severity of home sales slump
Pontiac Town Hall meeting focuses on foreclosures
Toll Bros. warns of double-digit drop in home building revenue
Livingston home sales fall while area climbs
Mortgages rates drop , good news for homebuyers
Building slump grows in SE Mich.
Existing home sales at slowest pace in more than 4 years
Increasingly rare large tracts sell fast despite ailing economy
Stocks retreat after Fed warns of more housing weakness Biz-Metro-real-estate
Related Articles and Links
WASHINGTON -- The number of homeowners receiving foreclosure notices hit a record high in the spring, driven by problems with subprime mortgages.
The Mortgage Bankers Association reported today that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.
The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.
Associated Press
Michigan foreclosure rate ranks 3rd in nation
Report: Countrywide has begun layoffs
Lenders to offer loan aid
New data reveals severity of home sales slump
Pontiac Town Hall meeting focuses on foreclosures
Toll Bros. warns of double-digit drop in home building revenue
Livingston home sales fall while area climbs
Mortgages rates drop , good news for homebuyers
Building slump grows in SE Mich.
Existing home sales at slowest pace in more than 4 years
Increasingly rare large tracts sell fast despite ailing economy
Stocks retreat after Fed warns of more housing weakness Biz-Metro-real-estate
Related Articles and Links
WASHINGTON -- The number of homeowners receiving foreclosure notices hit a record high in the spring, driven by problems with subprime mortgages.
The Mortgage Bankers Association reported today that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.
The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.
Foreclosure, tax bill a 1-2 punch
Foreclosure, tax bill a 1-2 punch
September 9, 2007
BY SUSAN TOMPOR
The last thing somebody who couldn't pay the mortgage would expect is a tax document in the mail that proclaims they magically got an extra $20,000 in income they never touched.
But that's exactly the tortured tax picture that faces many troubled homeowners in Michigan and elsewhere.
Thousands of families could face an unexpected tax hit if they went through foreclosure, worked out some unusual deals with the bank to refinance or sold homes for less than the outstanding debt.
"This really adds insult to injury where someone is in a situation where they get hit with a tax bill on top of having to lose their house or refinance at a lower value," said U.S. Sen. Debbie Stabenow.
The Michigan Democrat told me during a phone interview that she'd like to see this unfair tax rule change by year-end. On Aug. 31, President George W. Bush gave his support to Stabenow's mortgage relief act as part of his package to assist homeowners.
It's one of those tax rules that not many people know about because home values have typically gone up, not down. Yet, it's a tax issue that now could have great impact on families throughout the country. It would be even more significant in Michigan where consumers are coping with a recession -- on top of a fallout in house prices.
Say a homeowner loses a job in Michigan, needs to move and has to sell the house for $80,000 instead of the $100,000 owed on the mortgage. If the bank forgives $20,000, as is possible in some cases, it's going to generate a 1099 tax form that has to be reported as income.
For many families, an extra $20,000 on that 1099 could mean that they've got to dish out an extra $3,000 or $5,000 or more in federal income taxes.
"The general rule is that cancellation of debt is taxable income," said Bob D. Scharin, RIA senior tax analyst from Thomson Tax & Accounting.
Or take another possibility. The family can no longer make the mortgage payments. So the family negotiates with the bank and attempts to do what's called a short sale -- or sell the property for less than the debt owed on the mortgage. The bank may forgive part of the loan. Again, though, we're looking at another tax hit.
Or how about a homeowner who is able to pay the mortgage at the initial adjustable rate? But then the rate readjusts upward significantly -- and suddenly the mortgage payment is unaffordable.
Say the homeowner would like to refinance.
But there's a snag. Some homes -- especially in some pockets of Michigan -- now are being valued below the original mortgage three, four or five years ago. So the house might be valued at $100,000 instead of $120,000.
And the homeowner might not have enough equity in the house to deal with the difference.
If the bank steps in and refinances the house at say $100,000 instead of $120,000, well, the homeowner still would run up against that tax hit.
"It's typically not a gift. It's considered income -- just like when you win a prize," said Gary Riedlinger, tax research manager for Yeo & Yeo PC in Saginaw.
Except nobody feels like a Lotto winner.
In some cases, consumers are able to avoid the tax hit.
"The one big exception is bankruptcy," said James Jenkins, president of Jenkins & Co., a tax firm in Southfield.
If the debt is discharged in bankruptcy, the tax isn't owed. Another option: Taxpayers could file a complicated tax form, Form 982, to show that they were insolvent -- or had more debts than assets.
"How's the average guy going to possibly know the rules on this?" Jenkins asked, noting that an experienced tax preparer could save some consumers money and avoid much of the tax.
But Jenkins agreed that the rules should be changed to help families during this mortgage mess.
"Sad to say, it's going to be a very common problem," Jenkins said. "You're not ending their misery if they're going to end up with a big, fat tax bill."
Stabenow told me that she's willing to make this a temporary change, possibly for a year or two, in order to get bipartisan support.
She also is willing to limit the tax change to the homeowner's primary residence.
Stabenow noted that many middle-class families have borrowed money to get into a house in a better school district -- and improve their situation.
"They have no control on the broader economy in Michigan," she said.
Stabenow said the banks support this idea because they don't make money foreclosing on homes.
Richard DeKaser, chief economist for National City Corp. in Cleveland, said lenders would have more flexibility in renegotiating terms and avoiding some foreclosures if some proposals went through, including a temporary freeze on the tax burden -- as Bush and Stabenow are proposing.
Changing the tax rules -- even just for a year or two -- won't get rid of the For Sale signs in everyone's neighborhood or cut off the wave of foreclosures. But Stabenow's plan certainly is a sensible, solid step toward fixing an unforeseen problem for many families.
September 9, 2007
BY SUSAN TOMPOR
The last thing somebody who couldn't pay the mortgage would expect is a tax document in the mail that proclaims they magically got an extra $20,000 in income they never touched.
But that's exactly the tortured tax picture that faces many troubled homeowners in Michigan and elsewhere.
Thousands of families could face an unexpected tax hit if they went through foreclosure, worked out some unusual deals with the bank to refinance or sold homes for less than the outstanding debt.
"This really adds insult to injury where someone is in a situation where they get hit with a tax bill on top of having to lose their house or refinance at a lower value," said U.S. Sen. Debbie Stabenow.
The Michigan Democrat told me during a phone interview that she'd like to see this unfair tax rule change by year-end. On Aug. 31, President George W. Bush gave his support to Stabenow's mortgage relief act as part of his package to assist homeowners.
It's one of those tax rules that not many people know about because home values have typically gone up, not down. Yet, it's a tax issue that now could have great impact on families throughout the country. It would be even more significant in Michigan where consumers are coping with a recession -- on top of a fallout in house prices.
Say a homeowner loses a job in Michigan, needs to move and has to sell the house for $80,000 instead of the $100,000 owed on the mortgage. If the bank forgives $20,000, as is possible in some cases, it's going to generate a 1099 tax form that has to be reported as income.
For many families, an extra $20,000 on that 1099 could mean that they've got to dish out an extra $3,000 or $5,000 or more in federal income taxes.
"The general rule is that cancellation of debt is taxable income," said Bob D. Scharin, RIA senior tax analyst from Thomson Tax & Accounting.
Or take another possibility. The family can no longer make the mortgage payments. So the family negotiates with the bank and attempts to do what's called a short sale -- or sell the property for less than the debt owed on the mortgage. The bank may forgive part of the loan. Again, though, we're looking at another tax hit.
Or how about a homeowner who is able to pay the mortgage at the initial adjustable rate? But then the rate readjusts upward significantly -- and suddenly the mortgage payment is unaffordable.
Say the homeowner would like to refinance.
But there's a snag. Some homes -- especially in some pockets of Michigan -- now are being valued below the original mortgage three, four or five years ago. So the house might be valued at $100,000 instead of $120,000.
And the homeowner might not have enough equity in the house to deal with the difference.
If the bank steps in and refinances the house at say $100,000 instead of $120,000, well, the homeowner still would run up against that tax hit.
"It's typically not a gift. It's considered income -- just like when you win a prize," said Gary Riedlinger, tax research manager for Yeo & Yeo PC in Saginaw.
Except nobody feels like a Lotto winner.
In some cases, consumers are able to avoid the tax hit.
"The one big exception is bankruptcy," said James Jenkins, president of Jenkins & Co., a tax firm in Southfield.
If the debt is discharged in bankruptcy, the tax isn't owed. Another option: Taxpayers could file a complicated tax form, Form 982, to show that they were insolvent -- or had more debts than assets.
"How's the average guy going to possibly know the rules on this?" Jenkins asked, noting that an experienced tax preparer could save some consumers money and avoid much of the tax.
But Jenkins agreed that the rules should be changed to help families during this mortgage mess.
"Sad to say, it's going to be a very common problem," Jenkins said. "You're not ending their misery if they're going to end up with a big, fat tax bill."
Stabenow told me that she's willing to make this a temporary change, possibly for a year or two, in order to get bipartisan support.
She also is willing to limit the tax change to the homeowner's primary residence.
Stabenow noted that many middle-class families have borrowed money to get into a house in a better school district -- and improve their situation.
"They have no control on the broader economy in Michigan," she said.
Stabenow said the banks support this idea because they don't make money foreclosing on homes.
Richard DeKaser, chief economist for National City Corp. in Cleveland, said lenders would have more flexibility in renegotiating terms and avoiding some foreclosures if some proposals went through, including a temporary freeze on the tax burden -- as Bush and Stabenow are proposing.
Changing the tax rules -- even just for a year or two -- won't get rid of the For Sale signs in everyone's neighborhood or cut off the wave of foreclosures. But Stabenow's plan certainly is a sensible, solid step toward fixing an unforeseen problem for many families.
Mortgages eating up incomes
Mortgages eating up incomes
September 12, 2007
BY RUBY L. BAILEY and SUZETTE HACKNEY
When Chris Gowman's employer was sold in 2001, he was offered a $4,000-a-month pension.
The former ANR Pipeline worker took it, but ever since, he's had to spend half of it to cover the mortgages on his homes in Roseville and Harbor Springs.
"I'm not living the high life by any stretch," said Gowman, 58, who drives a 1991 Oldsmobile 88. "I have to live a very frugal life to survive."
Gowman is among the 26.4% of Michiganders who spent 35% or more of their income on a mortgage in 2006, according to U.S. Census Bureau estimates released today.
Nationally, the number was higher: 28% of mortgage holders spent what some would call too-healthy chunks of their income to put a roof over their heads.
Experts say they think many in Michigan are like Gowman -- homeowners whose mortgages consumed larger portions of their income as their wages shrank.
And with many likely to have at least one credit card and a car note, householders' total debt could eat much more of their incomes. That leaves the most cash-strapped at risk of losing their homes, said Pava Leyrer, president of the Lansing-based Michigan Mortgage Brokers Association.
"If their hours are cut or they experience a job loss, they have to choose one debt or another," Leyrer said. "Just because you're told yes" for a mortgage "doesn't mean you should take it."
Michigan outpaces nation
The drive to own a home remains strong in Michigan. The state's homeownership rates outpaced the nation's from 2000 to 2006. And at 75%, metro Detroit had one of the highest rates among the 20 largest metro areas.
But in Detroit, an estimated 46% of residents spent 35% or more of their income on mortgages in 2006. About a third or more of residents of Dearborn, Pontiac, Shelby Township, Southfield, Warren and West Bloomfield also spent that much.
In poorer communities, the high percentages could spell trouble, though "it doesn't send up the same red flag in an affluent suburb," said Greg McBride, senior financial analyst for Bankrate.com. "Thirty-one percent of income in a high-income neighborhood leaves a lot remaining."
The Detroit area's building boom of the late 1990s and early 2000s likely contributed to the large income chunks going to mortgages, said Kurt Metzger, a demographer and researcher for the United Way for Southeast Michigan.
Lenders relaxed rules of thumb, including that mortgage debt make up no more than 28% of the buyer's income.
"There's that great American Dream when people jump into these opportunities where they're spending a large percentage of their income on housing," Metzger said. "But that's when they're making money." Those with jobs and little or no debt can likely handle paying as much as 50% of their income for a mortgage, experts said.
"The big question is, 'What are the other debts that people are carrying?' " said Russell Martin, a Chicago-based mortgage broker who has Michigan clients. "Unless somebody is living really extravagantly, they should be able to afford 35% for their mortgage."
Finding an exit route
Financially stretched homeowners should first try to trim expenses -- cut the cell phone bill and stop dining out -- and perhaps get a second job, experts suggested. And, like Gowman, drive an older, paid-for car. If the risk of foreclosure looms, try to refinance to a better interest rate or sell if the payments get to be too much.
"They've got to find an exit route," said Keith Ernst, senior policy counselor for the Center for Responsible Lending in Durham, N.C.
But in Michigan, where property values are dropping and homes are sitting for months on the market, it could be tough.
"That's the troubling part," Ernst said. "The way out isn't clearly marked."
September 12, 2007
BY RUBY L. BAILEY and SUZETTE HACKNEY
When Chris Gowman's employer was sold in 2001, he was offered a $4,000-a-month pension.
The former ANR Pipeline worker took it, but ever since, he's had to spend half of it to cover the mortgages on his homes in Roseville and Harbor Springs.
"I'm not living the high life by any stretch," said Gowman, 58, who drives a 1991 Oldsmobile 88. "I have to live a very frugal life to survive."
Gowman is among the 26.4% of Michiganders who spent 35% or more of their income on a mortgage in 2006, according to U.S. Census Bureau estimates released today.
Nationally, the number was higher: 28% of mortgage holders spent what some would call too-healthy chunks of their income to put a roof over their heads.
Experts say they think many in Michigan are like Gowman -- homeowners whose mortgages consumed larger portions of their income as their wages shrank.
And with many likely to have at least one credit card and a car note, householders' total debt could eat much more of their incomes. That leaves the most cash-strapped at risk of losing their homes, said Pava Leyrer, president of the Lansing-based Michigan Mortgage Brokers Association.
"If their hours are cut or they experience a job loss, they have to choose one debt or another," Leyrer said. "Just because you're told yes" for a mortgage "doesn't mean you should take it."
Michigan outpaces nation
The drive to own a home remains strong in Michigan. The state's homeownership rates outpaced the nation's from 2000 to 2006. And at 75%, metro Detroit had one of the highest rates among the 20 largest metro areas.
But in Detroit, an estimated 46% of residents spent 35% or more of their income on mortgages in 2006. About a third or more of residents of Dearborn, Pontiac, Shelby Township, Southfield, Warren and West Bloomfield also spent that much.
In poorer communities, the high percentages could spell trouble, though "it doesn't send up the same red flag in an affluent suburb," said Greg McBride, senior financial analyst for Bankrate.com. "Thirty-one percent of income in a high-income neighborhood leaves a lot remaining."
The Detroit area's building boom of the late 1990s and early 2000s likely contributed to the large income chunks going to mortgages, said Kurt Metzger, a demographer and researcher for the United Way for Southeast Michigan.
Lenders relaxed rules of thumb, including that mortgage debt make up no more than 28% of the buyer's income.
"There's that great American Dream when people jump into these opportunities where they're spending a large percentage of their income on housing," Metzger said. "But that's when they're making money." Those with jobs and little or no debt can likely handle paying as much as 50% of their income for a mortgage, experts said.
"The big question is, 'What are the other debts that people are carrying?' " said Russell Martin, a Chicago-based mortgage broker who has Michigan clients. "Unless somebody is living really extravagantly, they should be able to afford 35% for their mortgage."
Finding an exit route
Financially stretched homeowners should first try to trim expenses -- cut the cell phone bill and stop dining out -- and perhaps get a second job, experts suggested. And, like Gowman, drive an older, paid-for car. If the risk of foreclosure looms, try to refinance to a better interest rate or sell if the payments get to be too much.
"They've got to find an exit route," said Keith Ernst, senior policy counselor for the Center for Responsible Lending in Durham, N.C.
But in Michigan, where property values are dropping and homes are sitting for months on the market, it could be tough.
"That's the troubling part," Ernst said. "The way out isn't clearly marked."
Do's and dont's for fending off foreclosure
Do's and dont's for fending off foreclosure
Monday September 10, 6:00 am ET
Justin Harelik
Dear Bankruptcy Adviser,
I just received a notice of default letter from my mortgage lender that says my house will go to auction sale in four months. Can house still be sold by owner?
Dear Sue,
It appears that you are right in the beginning of the foreclosure process, but as long as the house is still in your name you can save it. While you need to be careful, you also need to act quickly. Four months can seem like a long time but it can go by in a flash. So let's get right down to what your options are.
7 possible do's when foreclosure looms:
1. Sell the property.
2. Work out a deal.
3. Refinance with a subprime lender.
4. File Chapter 7 bankruptcy.
5. File Chapter 13 bankruptcy.
6. Short sale/deed in lieu of foreclosure.
7. Walk away from the house.
1. Sell the property: If you can find a buyer before the house is auctioned, you can sell it and keep whatever equity still exists.
2. Work out a deal: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.
3. Refinance with a subprime lender: Your credit is poor right now because of the mortgage delinquencies. This means most or all of the traditional banks will not work with you. However, if there is equity in the property, you may be able to find a lender who will refinance you -- at a higher-than-normal rate. These are called subprime loans, and they're increasingly common: About 20 percent of mortgages today are subprime.
4. File Chapter 7 bankruptcy: If you can't get caught up in time, you will not be able to keep the house -- but you'll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.
5. File Chapter 13 bankruptcy: If you can afford to make the future mortgage payments and the delinquent payments, too, file for a Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.
6. Short sale/deed in lieu of foreclosure: A short sale takes place when the bank allows you to sell your property even though their mortgage won't be paid. Be careful -- the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. When might a bank agree to either of these? Lenders spend close to or more than $30,000 to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.
7. Walk away from the house: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You'd be wise to speak to an attorney before taking this step.
Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.
Here are two options NOT to consider. In other words, they're scams.
2 don'ts when foreclosure looms:
1. Signing over your property title to another company: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.
2. High-interest second mortgage: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70 percent of the equity available. The interest rate could be as high as 18 percent and the fees can be exorbitant. They are hoping that you'll blow the money and default -- which allows them to take the property from you.
Sue, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.
Monday September 10, 6:00 am ET
Justin Harelik
Dear Bankruptcy Adviser,
I just received a notice of default letter from my mortgage lender that says my house will go to auction sale in four months. Can house still be sold by owner?
Dear Sue,
It appears that you are right in the beginning of the foreclosure process, but as long as the house is still in your name you can save it. While you need to be careful, you also need to act quickly. Four months can seem like a long time but it can go by in a flash. So let's get right down to what your options are.
7 possible do's when foreclosure looms:
1. Sell the property.
2. Work out a deal.
3. Refinance with a subprime lender.
4. File Chapter 7 bankruptcy.
5. File Chapter 13 bankruptcy.
6. Short sale/deed in lieu of foreclosure.
7. Walk away from the house.
1. Sell the property: If you can find a buyer before the house is auctioned, you can sell it and keep whatever equity still exists.
2. Work out a deal: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.
3. Refinance with a subprime lender: Your credit is poor right now because of the mortgage delinquencies. This means most or all of the traditional banks will not work with you. However, if there is equity in the property, you may be able to find a lender who will refinance you -- at a higher-than-normal rate. These are called subprime loans, and they're increasingly common: About 20 percent of mortgages today are subprime.
4. File Chapter 7 bankruptcy: If you can't get caught up in time, you will not be able to keep the house -- but you'll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.
5. File Chapter 13 bankruptcy: If you can afford to make the future mortgage payments and the delinquent payments, too, file for a Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.
6. Short sale/deed in lieu of foreclosure: A short sale takes place when the bank allows you to sell your property even though their mortgage won't be paid. Be careful -- the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. When might a bank agree to either of these? Lenders spend close to or more than $30,000 to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.
7. Walk away from the house: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You'd be wise to speak to an attorney before taking this step.
Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.
Here are two options NOT to consider. In other words, they're scams.
2 don'ts when foreclosure looms:
1. Signing over your property title to another company: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.
2. High-interest second mortgage: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70 percent of the equity available. The interest rate could be as high as 18 percent and the fees can be exorbitant. They are hoping that you'll blow the money and default -- which allows them to take the property from you.
Sue, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.
Tuesday, August 21, 2007
Short Sale, If Allowed, Could Avoid Foreclosure
Short Sale, If Allowed, Could Avoid Foreclosure
By Benny L. Kass
Saturday, August 18, 2007; Page F12
Q: We are in financial trouble. Our house will not sell for enough money to pay off the mortgage, let alone a real estate commission. Our real estate agent suggested that we do a "short sale." What is this?
A: A short sale is an arrangement with your lender in which it allows you to sell the property for less than you owe. This is a method of disposing of your home without having the lender foreclose on you.
Why would a lender permit this? First, you should understand that not all lenders do. The decision depends on a number of factors: Where is your house? How much loss will the lender suffer? What is the possibility that an investor would buy the property at a foreclosure sale? Each lender has its own requirements, so I can provide only general information. You will have to consult your lender to determine what it needs to move forward with a short sale.
Let's take this example: You bought the house last year for $500,000, foolishly taking advantage of the mortgage broker's sales pitch and obtaining a 100 percent loan. You lost your job and cannot afford to continue with the monthly mortgage payments. The house will probably sell for only $475,000. You are, unfortunately, what lenders call "upside down."
Your first calls should be to your financial and legal advisers -- not the lender. You don't want to contact the lender until you fully understand the risks involved and are sure you want to do this.
Under federal law, when a debt is forgiven, it can be treated as ordinary income on which tax must be paid. Thus, if your lender allows you to sell the property for $475,000, less a 2 percent commission, you will have a deficit of $34,500. According to many tax professionals, you will have to pay income tax on this amount of forgiven debt, even though you did not receive the money.
Furthermore, make sure that, even should the lender approve the short sale, you will not be obligated to make up this difference, which is called a deficiency. Unfortunately, most lenders will not put their agreement in writing, so your legal advisers will have to satisfy themselves -- and you -- on this matter. In fact, many lenders have been known to use this "forgiveness of debt" issue to dissuade their borrowers from pursuing a short sale.
After you are satisfied that you understand the concept and are prepared to move forward, then you should contact your lender. Ask to speak to the manager of the short-sale department. Typically, a lender has a "loss remediation" department that handles these matters.
Your lender will need a letter of authorization for a lawyer or real estate agent to work on your behalf. Privacy laws prohibit lenders from discussing personal and financial information with a third party without such written permission. This letter will include your name, property address and loan number.
You, or your agent, should then prepare a comprehensive letter explaining why you are requesting the short sale. Emphasize your hardship, without turning it into a sob story. A market analysis showing what houses in your area are selling for will also help. Finally, spell out your request in detail: the price you are asking the lender to approve, the commission the real estate agent can accept and the closing costs associated with the settlement. Keep in mind that in many jurisdictions, there is a recordation and transfer tax, which is typically split between buyer and seller.
Your proposal should be as specific as possible. You don't want to learn at settlement that you still have to come up with a lot of cash because your lender did not authorize certain out-of-pocket expenses.
You should also request from your lender your outstanding mortgage balance. The lender has a legal obligation to provide this on request; the burden is on the lender to provide an accurate accounting. Review this carefully to make sure that no charges have been erroneously added. If you have missed some payments, you will be assessed late fees. When you present your proposal to the lender, try to get these charges deleted from the outstanding mortgage balance.
Your proposal should also include your financial situation. If you lost your job, include proof with the letter.
The more documentation you can provide the lender, the faster the decision will be. However, lenders are swamped with these requests; you are not the only one facing a possible foreclosure. The earlier you can start the process, the better chance you have of getting the short sale approved.
But the lender's approval to proceed with a short sale does not end the process. When you or your real estate agent find a prospective buyer, the contract must state that it is contingent on lender's approval. You have to send the contract to the lender; it would help to include an accounting of all expenses that you will have to pay at settlement, as well as the final number that the lender would receive at settlement.
A HUD-1 settlement statement would expedite the process. Your lender will then review the documentation and may reject certain expenses. For example, if the contract provides that you will give your buyer money toward closing costs, or that you will pay some items that are traditionally the buyer's obligation, such as title search and survey, the lender may not allow such payments.
You want to go to settlement knowing all of the terms and conditions on which your lender will accept the short sale, including whether you will have to come up with money at the settlement table.
You are in financial trouble. If you have missed some payments, your lender may already have notified the credit-reporting companies. You can try to persuade the lender not to report any more delinquencies, but that is at the lender's discretion.
The short-sale process works but is complicated, time-consuming and uncertain. If you can start now, before you are in default, you will be ahead of the game.
By Benny L. Kass
Saturday, August 18, 2007; Page F12
Q: We are in financial trouble. Our house will not sell for enough money to pay off the mortgage, let alone a real estate commission. Our real estate agent suggested that we do a "short sale." What is this?
A: A short sale is an arrangement with your lender in which it allows you to sell the property for less than you owe. This is a method of disposing of your home without having the lender foreclose on you.
Why would a lender permit this? First, you should understand that not all lenders do. The decision depends on a number of factors: Where is your house? How much loss will the lender suffer? What is the possibility that an investor would buy the property at a foreclosure sale? Each lender has its own requirements, so I can provide only general information. You will have to consult your lender to determine what it needs to move forward with a short sale.
Let's take this example: You bought the house last year for $500,000, foolishly taking advantage of the mortgage broker's sales pitch and obtaining a 100 percent loan. You lost your job and cannot afford to continue with the monthly mortgage payments. The house will probably sell for only $475,000. You are, unfortunately, what lenders call "upside down."
Your first calls should be to your financial and legal advisers -- not the lender. You don't want to contact the lender until you fully understand the risks involved and are sure you want to do this.
Under federal law, when a debt is forgiven, it can be treated as ordinary income on which tax must be paid. Thus, if your lender allows you to sell the property for $475,000, less a 2 percent commission, you will have a deficit of $34,500. According to many tax professionals, you will have to pay income tax on this amount of forgiven debt, even though you did not receive the money.
Furthermore, make sure that, even should the lender approve the short sale, you will not be obligated to make up this difference, which is called a deficiency. Unfortunately, most lenders will not put their agreement in writing, so your legal advisers will have to satisfy themselves -- and you -- on this matter. In fact, many lenders have been known to use this "forgiveness of debt" issue to dissuade their borrowers from pursuing a short sale.
After you are satisfied that you understand the concept and are prepared to move forward, then you should contact your lender. Ask to speak to the manager of the short-sale department. Typically, a lender has a "loss remediation" department that handles these matters.
Your lender will need a letter of authorization for a lawyer or real estate agent to work on your behalf. Privacy laws prohibit lenders from discussing personal and financial information with a third party without such written permission. This letter will include your name, property address and loan number.
You, or your agent, should then prepare a comprehensive letter explaining why you are requesting the short sale. Emphasize your hardship, without turning it into a sob story. A market analysis showing what houses in your area are selling for will also help. Finally, spell out your request in detail: the price you are asking the lender to approve, the commission the real estate agent can accept and the closing costs associated with the settlement. Keep in mind that in many jurisdictions, there is a recordation and transfer tax, which is typically split between buyer and seller.
Your proposal should be as specific as possible. You don't want to learn at settlement that you still have to come up with a lot of cash because your lender did not authorize certain out-of-pocket expenses.
You should also request from your lender your outstanding mortgage balance. The lender has a legal obligation to provide this on request; the burden is on the lender to provide an accurate accounting. Review this carefully to make sure that no charges have been erroneously added. If you have missed some payments, you will be assessed late fees. When you present your proposal to the lender, try to get these charges deleted from the outstanding mortgage balance.
Your proposal should also include your financial situation. If you lost your job, include proof with the letter.
The more documentation you can provide the lender, the faster the decision will be. However, lenders are swamped with these requests; you are not the only one facing a possible foreclosure. The earlier you can start the process, the better chance you have of getting the short sale approved.
But the lender's approval to proceed with a short sale does not end the process. When you or your real estate agent find a prospective buyer, the contract must state that it is contingent on lender's approval. You have to send the contract to the lender; it would help to include an accounting of all expenses that you will have to pay at settlement, as well as the final number that the lender would receive at settlement.
A HUD-1 settlement statement would expedite the process. Your lender will then review the documentation and may reject certain expenses. For example, if the contract provides that you will give your buyer money toward closing costs, or that you will pay some items that are traditionally the buyer's obligation, such as title search and survey, the lender may not allow such payments.
You want to go to settlement knowing all of the terms and conditions on which your lender will accept the short sale, including whether you will have to come up with money at the settlement table.
You are in financial trouble. If you have missed some payments, your lender may already have notified the credit-reporting companies. You can try to persuade the lender not to report any more delinquencies, but that is at the lender's discretion.
The short-sale process works but is complicated, time-consuming and uncertain. If you can start now, before you are in default, you will be ahead of the game.
Michigan foreclosure filings up 39 percent June-July
Michigan foreclosure filings up 39 percent June-July
By ALEX VEIGA, The Associated Press
2007-08-21 21:10:21.0
LOS ANGELES -
The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.
There were 179,599 foreclosure filings reported during July, up from 92,845 during the same period a year ago, Irvine-based RealtyTrac Inc. said Tuesday. There were 164,644 foreclosure filings reported in June.
The national foreclosure rate in July was one filing for every 693 households, the company said.
"While 43 states experienced year-over-year increases in foreclosure activity, just five states - California, Florida, Michigan, Ohio and Georgia - accounted for more than half of the nation's total foreclosure filings," RealtyTrac Chief Executive James J. Saccacio said.
The filings include default notices, auction sale notices and bank repossessions.
Some properties included in the survey might have received more than one notice, if the owners have multiple mortgages.
The company did break out individual properties as part of its report for the first six months of this year, when a total of 573,397 properties reported some sort of foreclosure activity.
That represents a 58 percent jump from the 363,672 properties in the first six months of 2006 and a 32 percent increase from the 433,504 in the last six months of 2006, the firm said.
In the July report, Nevada, Georgia and Michigan accounted for the highest foreclosure rates nationwide.
Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.
Georgia's foreclosure rate was more than twice the national average, with one filing for every 299 households. The state reported 12,602 foreclosure filings, up 75 percent from June.
Michigan reported 13,979 filings in July, a 39 percent spike from June.
California, Florida and Ohio were among the states with the highest number of foreclosure filings in July, RealtyTrac said.
California cities continued to dominate top metropolitan foreclosure rates.
The state reported 39,013 foreclosure filings last month, the most by any single state. However, the number of filings rose less than 1 percent from June.
The state's foreclosure rate was one filing for every 333 households, RealtyTrac said.
Florida's foreclosure filings dropped 9 percent between June and July to 19,179. The July figure, however, represents a 78 percent jump from the year-ago period.
In recent months, the mortgage industry has been battered by rising defaults and foreclosures, primarily driven by borrowers with subprime loans and adjustable rate mortgages.
Lagging home sales and flat or decreasing home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt, spurring the rise in foreclosure activity.
Loan types seeing higher delinquencies and defaults in general are home equity loans or second mortgages used to cover a downpayment, subprime loans to people with shaky credit histories, and Alt-A loans, which can include interest-only and adjustable rate mortgages sold with little or no documentation.
Copyright 2007 The Associated Press. All rights reserved.
By ALEX VEIGA, The Associated Press
2007-08-21 21:10:21.0
LOS ANGELES -
The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.
There were 179,599 foreclosure filings reported during July, up from 92,845 during the same period a year ago, Irvine-based RealtyTrac Inc. said Tuesday. There were 164,644 foreclosure filings reported in June.
The national foreclosure rate in July was one filing for every 693 households, the company said.
"While 43 states experienced year-over-year increases in foreclosure activity, just five states - California, Florida, Michigan, Ohio and Georgia - accounted for more than half of the nation's total foreclosure filings," RealtyTrac Chief Executive James J. Saccacio said.
The filings include default notices, auction sale notices and bank repossessions.
Some properties included in the survey might have received more than one notice, if the owners have multiple mortgages.
The company did break out individual properties as part of its report for the first six months of this year, when a total of 573,397 properties reported some sort of foreclosure activity.
That represents a 58 percent jump from the 363,672 properties in the first six months of 2006 and a 32 percent increase from the 433,504 in the last six months of 2006, the firm said.
In the July report, Nevada, Georgia and Michigan accounted for the highest foreclosure rates nationwide.
Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.
Georgia's foreclosure rate was more than twice the national average, with one filing for every 299 households. The state reported 12,602 foreclosure filings, up 75 percent from June.
Michigan reported 13,979 filings in July, a 39 percent spike from June.
California, Florida and Ohio were among the states with the highest number of foreclosure filings in July, RealtyTrac said.
California cities continued to dominate top metropolitan foreclosure rates.
The state reported 39,013 foreclosure filings last month, the most by any single state. However, the number of filings rose less than 1 percent from June.
The state's foreclosure rate was one filing for every 333 households, RealtyTrac said.
Florida's foreclosure filings dropped 9 percent between June and July to 19,179. The July figure, however, represents a 78 percent jump from the year-ago period.
In recent months, the mortgage industry has been battered by rising defaults and foreclosures, primarily driven by borrowers with subprime loans and adjustable rate mortgages.
Lagging home sales and flat or decreasing home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt, spurring the rise in foreclosure activity.
Loan types seeing higher delinquencies and defaults in general are home equity loans or second mortgages used to cover a downpayment, subprime loans to people with shaky credit histories, and Alt-A loans, which can include interest-only and adjustable rate mortgages sold with little or no documentation.
Copyright 2007 The Associated Press. All rights reserved.
U.S. foreclosure rates jump sharply in July
U.S. foreclosure rates jump sharply in July
Alex Veiga
Associated Press
Aug. 21, 2007 12:25 PM
LOS ANGELES - The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.
There were 179,599 foreclosure filings reported during July, up from 92,845 during the same period a year ago, Irvine-based RealtyTrac Inc. said Tuesday. There were 164,644 foreclosure filings reported in June.
The national foreclosure rate in July was one filing for every 693 households, the company said.
"While 43 states experienced year-over-year increases in foreclosure activity, just five states - California, Florida, Michigan, Ohio and Georgia - accounted for more than half of the nation's total foreclosure filings," RealtyTrac Chief Executive James J. Saccacio said.
The filings include default notices, auction sale notices and bank repossessions.
Some properties included in the survey might have received more than one notice, if the owners have multiple mortgages.
The company did break out individual properties as part of its report for the first six months of this year, when a total of 573,397 properties reported some sort of foreclosure activity.
That represents a 58 percent jump from the 363,672 properties in the first six months of 2006 and a 32 percent increase from the 433,504 in the last six months of 2006, the firm said.
In the July report, Nevada, Georgia and Michigan accounted for the highest foreclosure rates nationwide.
Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.
Georgia's foreclosure rate was more than twice the national average, with one filing for every 299 households. The state reported 12,602 foreclosure filings, up 75 percent from June.
Michigan reported 13,979 filings in July, a 39 percent spike from June.
California, Florida and Ohio were among the states with the highest number of foreclosure filings in July, RealtyTrac said.
California cities continued to dominate top metropolitan foreclosure rates.
The state reported 39,013 foreclosure filings last month, the most by any single state. However, the number of filings rose less than 1 percent from June.
The state's foreclosure rate was one filing for every 333 households, RealtyTrac said.
Florida's foreclosure filings dropped 9 percent between June and July to 19,179. The July figure, however, represents a 78 percent jump from the year-ago period.
In recent months, the mortgage industry has been battered by rising defaults and foreclosures, primarily driven by borrowers with subprime loans and adjustable rate mortgages.
Lagging home sales and flat or decreasing home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt, spurring the rise in foreclosure activity.
Loan types seeing higher delinquencies and defaults in general are home equity loans or second mortgages used to cover a downpayment, subprime loans to people with shaky credit histories, and Alt-A loans, which can include interest-only and adjustable rate mortgages sold with little or no documentation.
Alex Veiga
Associated Press
Aug. 21, 2007 12:25 PM
LOS ANGELES - The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.
There were 179,599 foreclosure filings reported during July, up from 92,845 during the same period a year ago, Irvine-based RealtyTrac Inc. said Tuesday. There were 164,644 foreclosure filings reported in June.
The national foreclosure rate in July was one filing for every 693 households, the company said.
"While 43 states experienced year-over-year increases in foreclosure activity, just five states - California, Florida, Michigan, Ohio and Georgia - accounted for more than half of the nation's total foreclosure filings," RealtyTrac Chief Executive James J. Saccacio said.
The filings include default notices, auction sale notices and bank repossessions.
Some properties included in the survey might have received more than one notice, if the owners have multiple mortgages.
The company did break out individual properties as part of its report for the first six months of this year, when a total of 573,397 properties reported some sort of foreclosure activity.
That represents a 58 percent jump from the 363,672 properties in the first six months of 2006 and a 32 percent increase from the 433,504 in the last six months of 2006, the firm said.
In the July report, Nevada, Georgia and Michigan accounted for the highest foreclosure rates nationwide.
Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.
Georgia's foreclosure rate was more than twice the national average, with one filing for every 299 households. The state reported 12,602 foreclosure filings, up 75 percent from June.
Michigan reported 13,979 filings in July, a 39 percent spike from June.
California, Florida and Ohio were among the states with the highest number of foreclosure filings in July, RealtyTrac said.
California cities continued to dominate top metropolitan foreclosure rates.
The state reported 39,013 foreclosure filings last month, the most by any single state. However, the number of filings rose less than 1 percent from June.
The state's foreclosure rate was one filing for every 333 households, RealtyTrac said.
Florida's foreclosure filings dropped 9 percent between June and July to 19,179. The July figure, however, represents a 78 percent jump from the year-ago period.
In recent months, the mortgage industry has been battered by rising defaults and foreclosures, primarily driven by borrowers with subprime loans and adjustable rate mortgages.
Lagging home sales and flat or decreasing home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt, spurring the rise in foreclosure activity.
Loan types seeing higher delinquencies and defaults in general are home equity loans or second mortgages used to cover a downpayment, subprime loans to people with shaky credit histories, and Alt-A loans, which can include interest-only and adjustable rate mortgages sold with little or no documentation.
Don't mess with mortgage economics
Don't mess with mortgage economics
August 19, 2007
The No. 1 key to a capitalist society is that failure, foreclosure and bankruptcy are good for the economy, by making the value of homes come down and weeding out predatory lenders.
Now there is a glut of affordable homes for sale, along with many used items still of value, that the economy will absorb at reduced rates that make it stronger and more profitable over time. Real estate investors can pick up rental homes and other items at discount rates that make them more profitable.
The pandering by U.S. Sens. Chris Dodd, D-Conn., and Charles Schumer, D-N.Y., or state Sen. Hansen Clarke, D-Detroit, that government should prevent a natural revaluation of the real estate market is preposterous and misleads consumers into thinking subprime lenders did something wrong, when, in fact, the federal government kept long-term interest rates low until it could pass the bankruptcy reform act.
To blame licensed lenders for the bubble popping in the housing market is ignorant and does not consider all of the economic factors that happen naturally.
Tom Baker
Sterling Heights
More cooperation needed
Before I can recommend federal aid to help the lenders, I would like them to show a bit more effort to assist in preventing the continuation of the crisis ("Foreclose this crisis; Federal policy can save some homes and help prevent another mortgage mess," Aug. 12).
Hopefully, by now you have seen the success that our first-in-the-nation mortgage/deed task force has achieved in Wayne County. In 2005, I funded staff from the sheriff and Wayne County prosecutor to join my staff in the register's office; 100% of their combined investigative effort is directed to stop this fraudulent criminal activity, much of which leads to foreclosure. Thus far, we have opened 345 cases, returned 80 properties to rightful owners who had them stolen, and placed criminals in prison, attaining a 100% conviction rate.
In July, I was infuriated to be rebuffed by a large California lender who refused to identify a local appraiser, a title company representative or a local lender representative. I asked for these loan team members who were instrumental in closing a loan of $2 million on a Grosse Pointe property they confirmed was a first-payment default.
Until I see more cooperation from the industry, I hope our tax money is not sent to correct their bad business decisions.
Bernard J. Youngblood
Wayne County register of deeds
Detroit
August 19, 2007
The No. 1 key to a capitalist society is that failure, foreclosure and bankruptcy are good for the economy, by making the value of homes come down and weeding out predatory lenders.
Now there is a glut of affordable homes for sale, along with many used items still of value, that the economy will absorb at reduced rates that make it stronger and more profitable over time. Real estate investors can pick up rental homes and other items at discount rates that make them more profitable.
The pandering by U.S. Sens. Chris Dodd, D-Conn., and Charles Schumer, D-N.Y., or state Sen. Hansen Clarke, D-Detroit, that government should prevent a natural revaluation of the real estate market is preposterous and misleads consumers into thinking subprime lenders did something wrong, when, in fact, the federal government kept long-term interest rates low until it could pass the bankruptcy reform act.
To blame licensed lenders for the bubble popping in the housing market is ignorant and does not consider all of the economic factors that happen naturally.
Tom Baker
Sterling Heights
More cooperation needed
Before I can recommend federal aid to help the lenders, I would like them to show a bit more effort to assist in preventing the continuation of the crisis ("Foreclose this crisis; Federal policy can save some homes and help prevent another mortgage mess," Aug. 12).
Hopefully, by now you have seen the success that our first-in-the-nation mortgage/deed task force has achieved in Wayne County. In 2005, I funded staff from the sheriff and Wayne County prosecutor to join my staff in the register's office; 100% of their combined investigative effort is directed to stop this fraudulent criminal activity, much of which leads to foreclosure. Thus far, we have opened 345 cases, returned 80 properties to rightful owners who had them stolen, and placed criminals in prison, attaining a 100% conviction rate.
In July, I was infuriated to be rebuffed by a large California lender who refused to identify a local appraiser, a title company representative or a local lender representative. I asked for these loan team members who were instrumental in closing a loan of $2 million on a Grosse Pointe property they confirmed was a first-payment default.
Until I see more cooperation from the industry, I hope our tax money is not sent to correct their bad business decisions.
Bernard J. Youngblood
Wayne County register of deeds
Detroit
Michigan foreclosures still on the rise
Michigan foreclosures still on the rise
August 21, 2007
By GRETA GUEST
FREE PRESS BUSINESS WRITER
Michigan continued its rapid foreclosure pace in July, ranking third nationwide, according to figures released this morning.
Wayne County topped the list of major metropolitan areas, with a 70% jump in foreclosure activity in July compared with a year ago, according to RealtyTrac Inc., an Irvine, Calif.-based online foreclosure firm. The county reported 8,683 foreclosure filings in July, or one filing for every 97 households.
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Michigan ranked third with 13,979 foreclosure filings in July, up 39% from June and a 130% increase from July 2006. That's a rate of one foreclosure for every 320 households, compared to one for every 693 households nationwide, RealtyTrac said.
"While 43 states experienced year-over-year increases in foreclosure activity, just five states -- California, Florida, Michigan, Ohio and Georgia -- accounted for more than half of the nation's total foreclosure filings," said James Saccacio, chief executive officer of RealtyTrac.
RealtyTrac data, which has been criticized for inflating foreclosure filings, includes numbers for default notices, auction sale notices and bank repossessions in the total foreclosure filing numbers. In Michigan, the 13,979 filings breaks down into 2,293 default notices, 6,947 auction sale notices and 4,739 bank repossessions.
August 21, 2007
By GRETA GUEST
FREE PRESS BUSINESS WRITER
Michigan continued its rapid foreclosure pace in July, ranking third nationwide, according to figures released this morning.
Wayne County topped the list of major metropolitan areas, with a 70% jump in foreclosure activity in July compared with a year ago, according to RealtyTrac Inc., an Irvine, Calif.-based online foreclosure firm. The county reported 8,683 foreclosure filings in July, or one filing for every 97 households.
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Michigan ranked third with 13,979 foreclosure filings in July, up 39% from June and a 130% increase from July 2006. That's a rate of one foreclosure for every 320 households, compared to one for every 693 households nationwide, RealtyTrac said.
"While 43 states experienced year-over-year increases in foreclosure activity, just five states -- California, Florida, Michigan, Ohio and Georgia -- accounted for more than half of the nation's total foreclosure filings," said James Saccacio, chief executive officer of RealtyTrac.
RealtyTrac data, which has been criticized for inflating foreclosure filings, includes numbers for default notices, auction sale notices and bank repossessions in the total foreclosure filing numbers. In Michigan, the 13,979 filings breaks down into 2,293 default notices, 6,947 auction sale notices and 4,739 bank repossessions.
Thursday, August 9, 2007
Lenders curtail no-money-down mortgages
No cash? No home loans for many.
Lenders curtail no-money-down mortgages
Dina ElBoghdady / The Washington Post
WASHINGTON -- Home buyers again need their own money to close a deal.
Lenders faced with growing piles of bad loans, even to borrowers once considered good credit risks, have clamped down on the no-money-down mortgage. The abrupt shift threatens to dash the hopes of millions of potential buyers, especially those shopping for their first homes.
Four out of 10 first-time buyers used no-down-payment mortgages in 2005 and 2006, according to surveys by the National Association of Realtors. But some lenders are now scrapping such loans completely. Others are pickier about who gets them. All figure that the more cash borrowers put down, the less likely they are to default.
"No-down-payment loans are just about near impossible to get right now," said Jennifer Bridges, a real estate agent in Woodbridge, Va., at ERA Blue Diamond Realty. "We'll have someone all lined up and then without warning, the lender will say: 'It's gone.' It's terribly depressing."
National City Home Equity, a division of National City Bank, one of the nation's big home lenders, stopped funding some types of zero-down loans this month, said Ken Carter, the division's executive vice president.
"When home prices were appreciating and interest rates were declining, that product made sense," Carter said. "Today, we're on the opposite side of that coin, and it's not prudent to be stretching."
Washington Mutual, another big lender, in March stopped offering such loans to subprime borrowers, typically people with poor credit. It also reduced the size of loans to other borrowers.
"It used to be that we would finance a loan up to $1 million with no down payment for a first-time home buyer," said Daniel H. Aminoff, a senior loan consultant at Washington Mutual Home Loans in Alexandria, Va. "But as of March, we will only finance a loan of $417,000 with no down payment."
Concerns about mortgages and credit continued to roil financial markets last week. And American Home Mortgage Investment of New York cut most of its staff of more than 7,000 employees, effective Friday.
Changes in lending policies will most affect people who lack great credit, steady income or cash reserves. These changes made it difficult for Robert Rebellino while he was trying to get a mortgage for a newly built townhouse in Gainesville, Va.
Rebellino, 58, was preapproved for a no-down-payment loan by lender EquiFirst in mid-July. When he signed a contract three days later, EquiFirst had eliminated that type of loan, he and his mortgage broker said.
The next-best loan required a 5 percent down payment -- in his case, $21,000. Rebellino and his wife, Stephanie, put up the cash and recently settled on the house.
"We were really upset, but there was not a lot we could do," said Rebellino, an Army civilian who was transferred to Alexandria, Va., from Ohio. "We needed a place in a certain time frame, and it looked like the loan terms would only get worse."
Many years ago, a 20 percent down payment for a home was the norm. But as prices escalated, fewer people could afford that. After all, 20 percent of $500,000 -- the cost of a middle-class suburban house in the Washington, D.C., area -- is $100,000.
No-down-payment mortgages came into play about a decade ago, at first for wealthy borrowers with stellar credit. The idea was to give those borrowers loans that allowed them to buy houses without having to liquidate other investments, said Sean O'Boyle, a vice president at SunTrust Mortgage in Chevy Chase, Md.
"But the model deteriorated, and it became available to just about anybody in recent years," he said.
In part, that was because lenders assumed that as long as home prices kept climbing, borrowers who could not afford future mortgage payments could sell or refinance. But once home prices dropped in many parts of the country, that option evaporated. Delinquencies and foreclosures surged. With urging from federal regulators, lenders tightened their policies.
SunTrust boosted the credit-score requirements for no-down-payment loans, Boyle said. It also started requiring borrowers to have six months of payments in reserve, up from two months, he said.
Many lenders now place more emphasis on job stability and low debt when writing no-down-payment loans. Almost all verify a borrower's income and employment, which was not the case during the housing boom.
Justin Johnson, 28, met all those requirements, which he assumes is why he recently secured 100 percent financing from his lender to buy a townhouse in Frederick County, Md.
"We really wanted to buy a house, and we don't have a lot of savings to be able to put a down payment," Johnson said. "The only way we could afford it is to get 100 percent financing from the lender. We were informed that it would be very hard to go this route."
Like many cash-strapped borrowers, Johnson applied for a "piggyback" mortgage, meaning he took out two loans. The first covered 80 percent of the cost of the home, and the second was a home-equity line of credit that covered the remaining 20 percent, at higher interest.
The arrangement enabled him to avoid paying the mortgage insurance required by lenders if a loan exceeds 80 percent of a home's value. But the second, smaller mortgage is risky for lenders. If Johnson loses his house, proceeds from its sale would go toward paying off the first mortgage. Typically, there would be little or no money left to cover the second.
Piggyback loans were one of the main reasons that Countrywide Financial, the nation's largest mortgage lender, took a big hit to its second-quarter profit. That announcement helped trigger the stock market's tumble last week.
Countrywide said that even people with good credit were defaulting on home-equity lines, largely because of unforeseen events such as illness, divorce or job loss.
The California-based lender plans to eliminate home-equity lines for subprime borrowers. Executives also said they would curtail 100 percent financing for more creditworthy prime borrowers and impose more restrictions on first-time home buyers.
Without the piggyback option, many first-time buyers who want 100 percent financing may find themselves priced out of the market because they would have to pay mortgage insurance, said Eric D. Gates, a mortgage broker at Apex Home Loans in Bethesda, Md. "That will make the monthly payments much higher," he said.
For Reggie Watson, insurance added $125 a month. Still, he considers himself lucky. Watson and his wife, Kisha, both 26, paid low rent when they were in college. When they moved to the Washington area, they were flabbergasted by home prices. But they found a no-down-payment loan in June and closed on a townhouse in Ashburn, Va., last month.
"I've finally gotten over sticker shock, and I think once we make that first payment, we'll be all right," Watson said. "I'm definitely relieved because it's been so stressful looking for a home."
Lenders curtail no-money-down mortgages
Dina ElBoghdady / The Washington Post
WASHINGTON -- Home buyers again need their own money to close a deal.
Lenders faced with growing piles of bad loans, even to borrowers once considered good credit risks, have clamped down on the no-money-down mortgage. The abrupt shift threatens to dash the hopes of millions of potential buyers, especially those shopping for their first homes.
Four out of 10 first-time buyers used no-down-payment mortgages in 2005 and 2006, according to surveys by the National Association of Realtors. But some lenders are now scrapping such loans completely. Others are pickier about who gets them. All figure that the more cash borrowers put down, the less likely they are to default.
"No-down-payment loans are just about near impossible to get right now," said Jennifer Bridges, a real estate agent in Woodbridge, Va., at ERA Blue Diamond Realty. "We'll have someone all lined up and then without warning, the lender will say: 'It's gone.' It's terribly depressing."
National City Home Equity, a division of National City Bank, one of the nation's big home lenders, stopped funding some types of zero-down loans this month, said Ken Carter, the division's executive vice president.
"When home prices were appreciating and interest rates were declining, that product made sense," Carter said. "Today, we're on the opposite side of that coin, and it's not prudent to be stretching."
Washington Mutual, another big lender, in March stopped offering such loans to subprime borrowers, typically people with poor credit. It also reduced the size of loans to other borrowers.
"It used to be that we would finance a loan up to $1 million with no down payment for a first-time home buyer," said Daniel H. Aminoff, a senior loan consultant at Washington Mutual Home Loans in Alexandria, Va. "But as of March, we will only finance a loan of $417,000 with no down payment."
Concerns about mortgages and credit continued to roil financial markets last week. And American Home Mortgage Investment of New York cut most of its staff of more than 7,000 employees, effective Friday.
Changes in lending policies will most affect people who lack great credit, steady income or cash reserves. These changes made it difficult for Robert Rebellino while he was trying to get a mortgage for a newly built townhouse in Gainesville, Va.
Rebellino, 58, was preapproved for a no-down-payment loan by lender EquiFirst in mid-July. When he signed a contract three days later, EquiFirst had eliminated that type of loan, he and his mortgage broker said.
The next-best loan required a 5 percent down payment -- in his case, $21,000. Rebellino and his wife, Stephanie, put up the cash and recently settled on the house.
"We were really upset, but there was not a lot we could do," said Rebellino, an Army civilian who was transferred to Alexandria, Va., from Ohio. "We needed a place in a certain time frame, and it looked like the loan terms would only get worse."
Many years ago, a 20 percent down payment for a home was the norm. But as prices escalated, fewer people could afford that. After all, 20 percent of $500,000 -- the cost of a middle-class suburban house in the Washington, D.C., area -- is $100,000.
No-down-payment mortgages came into play about a decade ago, at first for wealthy borrowers with stellar credit. The idea was to give those borrowers loans that allowed them to buy houses without having to liquidate other investments, said Sean O'Boyle, a vice president at SunTrust Mortgage in Chevy Chase, Md.
"But the model deteriorated, and it became available to just about anybody in recent years," he said.
In part, that was because lenders assumed that as long as home prices kept climbing, borrowers who could not afford future mortgage payments could sell or refinance. But once home prices dropped in many parts of the country, that option evaporated. Delinquencies and foreclosures surged. With urging from federal regulators, lenders tightened their policies.
SunTrust boosted the credit-score requirements for no-down-payment loans, Boyle said. It also started requiring borrowers to have six months of payments in reserve, up from two months, he said.
Many lenders now place more emphasis on job stability and low debt when writing no-down-payment loans. Almost all verify a borrower's income and employment, which was not the case during the housing boom.
Justin Johnson, 28, met all those requirements, which he assumes is why he recently secured 100 percent financing from his lender to buy a townhouse in Frederick County, Md.
"We really wanted to buy a house, and we don't have a lot of savings to be able to put a down payment," Johnson said. "The only way we could afford it is to get 100 percent financing from the lender. We were informed that it would be very hard to go this route."
Like many cash-strapped borrowers, Johnson applied for a "piggyback" mortgage, meaning he took out two loans. The first covered 80 percent of the cost of the home, and the second was a home-equity line of credit that covered the remaining 20 percent, at higher interest.
The arrangement enabled him to avoid paying the mortgage insurance required by lenders if a loan exceeds 80 percent of a home's value. But the second, smaller mortgage is risky for lenders. If Johnson loses his house, proceeds from its sale would go toward paying off the first mortgage. Typically, there would be little or no money left to cover the second.
Piggyback loans were one of the main reasons that Countrywide Financial, the nation's largest mortgage lender, took a big hit to its second-quarter profit. That announcement helped trigger the stock market's tumble last week.
Countrywide said that even people with good credit were defaulting on home-equity lines, largely because of unforeseen events such as illness, divorce or job loss.
The California-based lender plans to eliminate home-equity lines for subprime borrowers. Executives also said they would curtail 100 percent financing for more creditworthy prime borrowers and impose more restrictions on first-time home buyers.
Without the piggyback option, many first-time buyers who want 100 percent financing may find themselves priced out of the market because they would have to pay mortgage insurance, said Eric D. Gates, a mortgage broker at Apex Home Loans in Bethesda, Md. "That will make the monthly payments much higher," he said.
For Reggie Watson, insurance added $125 a month. Still, he considers himself lucky. Watson and his wife, Kisha, both 26, paid low rent when they were in college. When they moved to the Washington area, they were flabbergasted by home prices. But they found a no-down-payment loan in June and closed on a townhouse in Ashburn, Va., last month.
"I've finally gotten over sticker shock, and I think once we make that first payment, we'll be all right," Watson said. "I'm definitely relieved because it's been so stressful looking for a home."
Foreclosure hot line gets 1,008 calls from Mich. residents
Foreclosure hot line gets 1,008 calls from Mich. residents
August 7, 2007
BY MARGARITA BAUZA
FREE PRESS BUSINESS WRITER
A national hot line that counsels homeowners on avoiding foreclosure received 1,008 calls from Michigan residents in the last three months. Michigan ranked ninth among the states that placed the most calls to the Homeownership Preservation Foundation’s national foreclosure hot line.
Those were call figures for foundation’s second quarter, which ended June 30.
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The Homeownership Preservation Foundation is a nonprofit dedicated to reducing foreclosures among American homeowners. It runs a free counseling hot line: 888-995-4673.
Ohio homeowners placed the highest number of calls with 3,288. California ranked second with 2,357 calls and Georgia ranked third with 2,206 calls.
Counselors fielded more than 30,000 calls in the second quarter of 2007, six times the number it received during the same period last year.
August 7, 2007
BY MARGARITA BAUZA
FREE PRESS BUSINESS WRITER
A national hot line that counsels homeowners on avoiding foreclosure received 1,008 calls from Michigan residents in the last three months. Michigan ranked ninth among the states that placed the most calls to the Homeownership Preservation Foundation’s national foreclosure hot line.
Those were call figures for foundation’s second quarter, which ended June 30.
Advertisement
The Homeownership Preservation Foundation is a nonprofit dedicated to reducing foreclosures among American homeowners. It runs a free counseling hot line: 888-995-4673.
Ohio homeowners placed the highest number of calls with 3,288. California ranked second with 2,357 calls and Georgia ranked third with 2,206 calls.
Counselors fielded more than 30,000 calls in the second quarter of 2007, six times the number it received during the same period last year.
Mortgage delinquencies, defaults spreading
Mortgage delinquencies, defaults spreading: AIG
Thursday August 9, 2:02 pm ET
NEW YORK (Reuters) - American International Group (NYSE:AIG - News), one of the biggest U.S. mortgage lenders, warned on Thursday that mortgage defaults are spreading.
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While saying most of its mortgage insurance and residential loans were safe, AIG made a presentation to analysts and investors that showed delinquencies are becoming more common among borrowers in the category just above subprime.
Although acknowledging the "significant declines" in subprime securities, Chief Executive Martin Sullivan said AIG's tight underwriting standards had minimized losses and he was "poised to take advantage of opportunities" in the mortgage market.
But it was clear the overall market was getting worse.
"We are experiencing stress in the Midwest markets where jobs have been lost and we are now seeing it in Florida and California," said William Nutt Jr., chief executive of AIG's mortgage insurance arm.
AIG shares were at $65.60, down 88 cents, or 1.32 percent, in afternoon trading on the New York Stock Exchange. The Standard & Poor's insurance index (^GSPINSC - News) was down 2 percent.
'PANIC MODE'
"The market's in a panic mode because the subprime crisis is spreading into other areas of the economy," said Bill Hackney, a managing partner of Atlanta Capital Management.
But Hackney said he was keeping AIG as one of his largest holdings because it had "the size and diversity to weather it."
On Wednesday, AIG reported second quarter earnings that included a pretax operating loss of $78 million in its mortgage insurance unit and a decline in earnings at its consumer finance division, which originates and invests in real estate loans.
But higher premiums in life and property insurance offset the drop, and net earnings rose by more than a third to $4.28 billion, or $1.64 a share.
AIG said delinquency rates for first mortgages had risen to 3.98 percent in June from 3.56 percent in April and a low of 3.08 percent in July 2005. First mortgages represent 90 percent of AIG's domestic mortgage business.
"You never have credit problems isolated to just one area," said Paul Newsome, an analyst with A.G. Edwards.
The loss ratio for first mortgages, which represents claims and expenses as a percentage of premiums, more than tripled in the second quarter to 84 percent from 26 percent a year ago. The total loss ratio -- including second mortgages -- nearly quadrupled to 130 percent.
'WHISTLING IN THE DARK'
AIG divided its mortgage portfolio into three categories: subprime, for borrowers with credit scores below 620; "nonprime," for borrowers with credit scores between 620 and 659, and prime, for borrowers with credit ratings above 660.
As of June 30, AIG's consumer finance arm had delinquencies of 3.68 percent in subprime, 2.13 percent in nonprime, and 0.81 percent in prime.
AIG, the world's largest insurer, said total delinquencies in its $25.9 billion mortgage insurance portfolio were 2.5 percent, but it did not give year-ago figures.
It said 10.8 percent of subprime mortgages and 4.6 percent in the category with credit scores just above subprime were 60 days overdue.
"Problems in July have gone beyond the subprime market," said Bill Bergman, an analyst with Morningstar. "Maybe not AIG, but some of these lenders have been whistling in the dark."
(Reporting by Ed Leefeldt)
Thursday August 9, 2:02 pm ET
NEW YORK (Reuters) - American International Group (NYSE:AIG - News), one of the biggest U.S. mortgage lenders, warned on Thursday that mortgage defaults are spreading.
ADVERTISEMENT
While saying most of its mortgage insurance and residential loans were safe, AIG made a presentation to analysts and investors that showed delinquencies are becoming more common among borrowers in the category just above subprime.
Although acknowledging the "significant declines" in subprime securities, Chief Executive Martin Sullivan said AIG's tight underwriting standards had minimized losses and he was "poised to take advantage of opportunities" in the mortgage market.
But it was clear the overall market was getting worse.
"We are experiencing stress in the Midwest markets where jobs have been lost and we are now seeing it in Florida and California," said William Nutt Jr., chief executive of AIG's mortgage insurance arm.
AIG shares were at $65.60, down 88 cents, or 1.32 percent, in afternoon trading on the New York Stock Exchange. The Standard & Poor's insurance index (^GSPINSC - News) was down 2 percent.
'PANIC MODE'
"The market's in a panic mode because the subprime crisis is spreading into other areas of the economy," said Bill Hackney, a managing partner of Atlanta Capital Management.
But Hackney said he was keeping AIG as one of his largest holdings because it had "the size and diversity to weather it."
On Wednesday, AIG reported second quarter earnings that included a pretax operating loss of $78 million in its mortgage insurance unit and a decline in earnings at its consumer finance division, which originates and invests in real estate loans.
But higher premiums in life and property insurance offset the drop, and net earnings rose by more than a third to $4.28 billion, or $1.64 a share.
AIG said delinquency rates for first mortgages had risen to 3.98 percent in June from 3.56 percent in April and a low of 3.08 percent in July 2005. First mortgages represent 90 percent of AIG's domestic mortgage business.
"You never have credit problems isolated to just one area," said Paul Newsome, an analyst with A.G. Edwards.
The loss ratio for first mortgages, which represents claims and expenses as a percentage of premiums, more than tripled in the second quarter to 84 percent from 26 percent a year ago. The total loss ratio -- including second mortgages -- nearly quadrupled to 130 percent.
'WHISTLING IN THE DARK'
AIG divided its mortgage portfolio into three categories: subprime, for borrowers with credit scores below 620; "nonprime," for borrowers with credit scores between 620 and 659, and prime, for borrowers with credit ratings above 660.
As of June 30, AIG's consumer finance arm had delinquencies of 3.68 percent in subprime, 2.13 percent in nonprime, and 0.81 percent in prime.
AIG, the world's largest insurer, said total delinquencies in its $25.9 billion mortgage insurance portfolio were 2.5 percent, but it did not give year-ago figures.
It said 10.8 percent of subprime mortgages and 4.6 percent in the category with credit scores just above subprime were 60 days overdue.
"Problems in July have gone beyond the subprime market," said Bill Bergman, an analyst with Morningstar. "Maybe not AIG, but some of these lenders have been whistling in the dark."
(Reporting by Ed Leefeldt)
Thursday, June 7, 2007
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