San Jose Real Estate * REALTOR ® * Richard Gonzalez

06085 – Foreclosure Filings

Foreclosure Filings* have dropped over since February as shown by the Notice of Sale indicator down 32% from the previous year.

06085 – Foreclosure Outcomes

Foreclosure Outcomes* show cancellations are way up over the previous year possibly fueled by successful short sales. My own experience tells me that modifications made up a very small percentage of these cancellations. REO indicator also shows that properties are not going back to bank compared to the previous year again fueling my thought that properties are having success in short sale and modification attempts.

06085 – Foreclosure Inventories

2011 Foreclosure Inventories* have stayed steady with a steady drop in scheduled sale dates possibly fueled by modifications or short sales.

06085 – Time to Foreclose

Foreclosure Timeframes*
The interesting fact about this chart is how many months it’s taking for a bank to foreclose compared to the previous year there are clear signs that banks are moving though the foreclosure process much faster 5.97% compared to 21.66% from the previous year.

*Foreclosureradar.com

Related articles

• Santa Clara County Foreclosures, Bank Owned Homes, Short Sales (foreclosureradar.com)

Foreclosure Radar reports a drop in Notice of Default(NOD) filings from this time last year. The data supports our recent experience between investors and our clients who are working to modify their loans or short sale before a NOD is filed. I have been seeing more cooperation by lenders and servicers when communicating our intent ahead of time.

06085 – Foreclosure Filings

Foreclosure is a Reality in 2011

The federal government has provided relief programs to help those who would like to modify their loan and the Obama administration efforts continue but there have been recent attempts by federal legislators to kill HAMP. As you see in this chart investors are also throwing in the towel and my sense is that those people who haven’t made a mortgage payment in 18+ months are now going to have to come to grips with the reality that foreclosure is on the near horizon.

Cancellations have dropped indicating that modifications and/or a short sales continue to be a challenge for some homeowners. REO numbers also indicate that banks are steadily foreclosing in Santa Clara County.

06085 – Foreclosure Outcomes

Affordable Market Hit Hardest

The chart below shows the $300,000 to $500,000 real estate market has been impacted the most in February.

06085 – By Est. Market Value

Related articles

• Santa Clara County February Home Sales Surpass Same Month Last Year (prnewswire.com)
• Realtor group seeks to ease short-sale process (sfgate.com)

As we wind down the 2010 “Year of the Short Sale” the one area that continues to challenge sellers are second lien holders who ask sellers to commit to repayment of  the deficiency(Balance of unpaid loan).

Legal Warnings

The California Association of REALTORS attorneys continue to caution sellers who are being asked to wave their legal rights as a condition of second lien holders acceptance. Second lien holders may not have the ability to obtain a legal judgement against a seller who opts for foreclosure rather than moving forward with a short sale. The concern is that while there is currently no legal precedence in a non-recourse state like california for some of these second lien holders there is a concern that over time we will see a surge in collection efforts by attornies who buy these non performing notes.

Buy Your Freedom

Second lien holders are now asking for a 10% to 20% contribution from sellers who in most cases do not have the ability to pay their way out of this responsibility. Some of you may be thinking that you will just avoid paying and wait for the negative credit to fall off. The bad news is that a collection attorney has the ability to obtain a legal judgment against you and peruse you for fourteen years. Pay now or pay later.

Lesser of two Evils

Who would you rather negotiate with? The lender/servicer of your loan or a collection company. The answer is a no brainer, your servicer/lender will work with you. Collection companies add additional fees and penalties that can make any reasonable agreement difficult to negotiate. My recommendation is that you avoid letting your loan fall ninety days past due. Lenders/servicers are now closing loans and deferring them to collection companies. You may have to continue making payments on your second until you have a short sale approval in hand to prevent your loan from going to a collection company.

Wachovia has announced they will no longer postpone a foreclosure sale date once it has been set. This directly affects our ability to assist our clients if they decide to short sale in lieu of foreclosure.

What this means to sellers

Procrastination will have dire consequences on sellers who wait until the last minute(less than two weeks) to put their house on the market as a short sale. We obviously understand that sellers want to exhaust all options before considering a short sale including a modification. Sellers should make a decision to sell no later than the filing of a notice of default on their home if the want to have the best chance of a successful short sale.

What this means to buyers

Buyers must be ready to close fast. In a recent listing I had ten offers on a home, a third of the offers were using a loan product that required a forty five day escrow. On the other hand there were other offers that were all cash or conventional(5% down payment or more). If you are considering buying a short sale you should look at the possibility that you may be asked to close in less than thirty days otherwise your chances of the seller accepting your offer are slim. Sellers are under extreme pressure to perform and as such are looking for a quick close from a committed buyer.

Other lenders are following this trend

My sources tell me we are seeing a trend and there is rumor that Bank of America is considering eliminating short sale extensions. I experienced this with Household Finance(HFC), my negotiator emphasised that there would be no extension on a short sale approval and that a sale date was set for the day after the expiration of the sort sale approval. Our seller decided to accept an offer form a buyer who was able to close in twenty one days.

Adjust your expectations or they will be adjusted for you

Short sales continue to evolve and we continue to see changes to the way servicers and investors manage properties in default. It’s clear we are witnessing a shift  in the flexibility we will receive when it comes to negotiating with servicers and investors and it appears as though they are now willing to cut there losses and move on.

The question was posed to me by Mark and Susan who I had the pleasure of meeting while previewing a home out in the central valley. An area so hard hit by the housing downturn that in most communities you will find home after home with neglected lawns and notices posted on the doors and windows of a recent foreclosure.

Mark and Susan are among the growing number of homeowners who go to sleep at night knowing that their home is under water. In the case of Mark and Susan they bought their home for $350,000 in 2006 and are now watching homes twice the size of theirs selling in the neighborhood for $150,000.

Frustration and reality for California homeowners

The frustration for Mark is knowing that the government is providing assistance to first time home buyers and people who have decided to stop making payments on their mortgage. “We did everything right and could just let our house go into foreclosure like most homeowners in our position but I can’t see myself doing that”.

Mark is referring to the growing number of homeowners opting to either walk away or in some cases buy another home at a lower price then simply stop making payments on the first home letting it go into foreclosure. Most of Mark and Susan’s neighbors have  done exactly that and yet they continue to fight the temptation of following suit.

Mark also asked me how many homeowners were on the verge of default.

My response to Mark’s question was to share a statistic I recently read from the California Association of REALTORS showing the long run delinquency average of 4 percent increased to just under 9.2 percent. Foreclosure long run average was still relatively low at 5.2 percent.

9o percent of California mortgages were  still being paid on time in the first quarter of 2009.

Mark was surprised when he heard this statistic but it was no real comfort to him knowing that his situation seemed hopeless.

Is there anyone out there who can help?

“Why doesn’t the government help homeowners like us who have done everything right?” asked mark. “Give us a tax credit or provide a little incentive or relief by allowing us to modify our rate, anything to reward us for doing the right thing”.

I shared statistics, talked about legislation regarding tax relief laws for foreclosed homeowners, and just listened.

At the end of our conversation I realized that I didn’t have the answer for  Mark and Susan. All these nice people want is for someone to acknowledge their frustration and to let our legislators know they exist.

Mark and Susan are among the homeowners in this country who want to do the right thing.