GOOD NEWS-FORECLOSURES ON THE WANE

Posted by Lise | Filed under: Buyers

A question for the first time home buyer and the luxury home buyer alike is, “Should I be looking for a foreclosures in this market?”  In some communities, foreclosures are plentiful and holding down the values of a stabilizing market.  More than half of all loans in foreclosure are located in just five states: Florida, California, Illinois, New York and New Jersey.  Yes, there are foreclosures in Bethesda and McLean, Northwest DC and Old Town, but to the same levels as in those five states.  If you are looking for a good deal, there are still good deals to be found that are “regular sales,” and believe me, it is a lot easier to deal with a “regular seller!” than a seller trying to negotiate a short sale with the lender or a faceless asset manager at a big bank.

Now,  little bit of good news has appeared on the horizon according to the Mortgage Bankers Association (MBA). The MBA quarterly National Delinquency Survey revealed that the percentage of homeowners with mortgages who were in foreclosure or seriously delinquent fell during the first three months of the year, and improvement in the performance of loans taken out from 2005-07 suggests a sustainable trend.

The serious delinquency rate — the percentage of loans in foreclosure or delinquent by 90 days or more — has steadily declined over the last year from 9.54 a year ago to 8.1 percent during the first quarter.  The percentage of mortgages in foreclosure was 4.52 percent, down from a record high of 4.64 percent in the fourth quarter, and the percentage of loans behind by 90 days or more dropped for the fifth consecutive quarter, to 3.58 percent.  Those loans — originated before many lenders tightened their underwriting standards — drove the mortgage market collapse, and now represent about 31 percent of loans outstanding but 65 percent of the loans seriously delinquent.

“Given that loans originated during this period are now past the point where loans normally default, and that loansoriginated since then generally have better credit quality, mortgage performance should continue to improve,” said MBA Chief Economist Jay Brinkmann.

The combined percentage of loans in foreclosure or behind by at least one payment was 12.31 percent, down from 13.6 percent during the fourth quarter. That equates to about 6.1 million loans.

But Brinkmann said short-term delinquencies remain at pre-recession levels, and foreclosure starts marked their second-largest drop ever during the first quarter, bringing them back to the lowest level since the end of 2008.

The survey showed 1.08 percent of outstanding mortgages entered the foreclosure process during the first quarter, or roughly 536,000 loans.

Although useful for gauging trends, Brinkmann acknowledged that national delinquency statistics “are somewhat meaningless” in real estate because local market conditions determine values and people’s perception of values.

In Florida, for example, 23 percent of loans are at least one payment behind or in foreclosure, and nearly one-fourth of all homes in foreclosure are located in the state.  Brinkmann noted that the survey showed foreclosures are still being initiated in Nevada at an annualized rate of more than 9 percent, and in Arizona the annualized rate of foreclosures started is more than 7 percent.

Although not all homes that enter the foreclosure process are ultimately repossessed by banks or sold to investors on the courthouse steps, a glut of of REO properties and short sales has depressed prices in many markets, discouraging some owners of nondistressed properties from putting them on the market.

The California Association of Realtors (CAR) reported that distressed properties accounted for 48 percent of all home sales in the state during April, down from 51 percent in March but about the same as the 49 percent share registered a year ago. CAR said REO properties accounted for 28 percent of sales in April, down from 31 percent in March, and that 19 percent of sales were short sales, down from 20 percent in March.

ForeclosureRadar, which tracks foreclosure-related filings in five Western states, this week reported that foreclosure-related filings in California fell in April to lows not seen since the fall of 2008.

Notice of default filings, auction notices, bank repossessions, and sales to third parties were all down dramatically in California and Arizona, the company said. While Nevada saw declines in notices of default and auction notices, bank repossessions were largely unchanged and sales to third parties jumped.

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33 Responses

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