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.
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.
Affordable Market Hit Hardest
The chart below shows the $300,000 to $500,000 real estate market has been impacted the most in February.
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.
The Department of Real Estate has made a shift in their staff workload from licensing to fraud prevention and protection of the pubic. One of the areas that has become a priority has become short sales and how licensees are offering services to the public to deal with short sales.
A trend that has become an issue has been buyers who entice listing agents to submit their offers only to the lenders for approval. The issue is with regard to agency(who the agent represents in the transaction) and it can create a legal problem with the listing agent and the homeowner. The banks want the best offer the market supports. Flippers are more likely to make an offer lower than a competing offer. This presents a problem for the homeowner and the listing agent. Homeowners must submit highest and best to protect themselves.
Negotiators must be licensed
The primary requirement for negotiating a short sale is that the individual performing the negotiation must be a licenced real estate Broker or a salesperson supervised by a broker. Sellers must verify the negotiators licence status on the DRE website dre.ca.gov.
Paying a Short Sale negotiation fee
A listing agent that requires the buyer or buyers agent to agree to pay a short Sale negotiation fee on behalf of the seller is in violation of real estate law. An update published in September goes into detail regarding this issue. ConsumerAlert_ShortSalesUpdate
The DRE has recently issued a consumer alert with the intent to assist homeowners navigate through the short process.
DRE_ConsumerAlert_ShortSales
The California Association of REALTORS latest report tracks entry level housing requirements for the state of California over the second quarter of 2010. Santa Clara County has slipped slightly in the affordability index from 55% in Q1 2010 to 51% in Q2 2010.
The report also tracks income requirements for entry level housing and monthly principal, interest, taxes, and insurance (PITI) payments a buyer should budget towards housing. A first time home buyer would need to make a PITI payment of $2,940. This is taking into account a Santa Clara County median purchase price of $535,500.
Read report here
I uploaded the latest sales data to youtube. Please take a moment to watch this three minute video.
January 2010 sales data for Santa Clara County.
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