The improving job market and economy is helping push mortgage delinquencies and foreclosure starts down, but the percentage of loans in the foreclosure process remains stubbornly high, especially in states most affected by robo-signing issues, according to a quarterly survey of lenders by the Mortgage Bankers Association.
Since peaking at 10.1 percent in March 2010, the percentage of borrowers behind on their house payments has fallen to a seasonally adjusted 7.6 percent at the end of 2011 -- about halfway to the pre-recession average of roughly 5 percent, said MBA Chief Economist Jay Brinkmann.
The percentage of loans entering the foreclosure process -- which before the downturn averaged just under 0.5 percent -- has also declined, from a peak of 1.4 percent at the end of third-quarter 2009 to 1 percent at the end of fourth-quarter 2011.
But at 4.4 percent, the percentage of loans in the foreclosure process at the end of 2011 was not far off the all-time high of 4.6 percent seen at the end of 2010. That compares to the long-term norm of roughly 1.2 percent.
Robo-signing issues -- which lenders hope to put behind them this year as they implement recently announced settlement with state attorneys general -- have created foreclosure backlogs.
While foreclosure starts are falling, it's taking loan servicers longer to auction off or repossess homes once they enter the foreclosure process, particularly in states where courts oversee the process.
In "judicial foreclosure" states where courts handle most foreclosures, 6.8 percent of mortgages were in foreclosure at the end of 2011. In "nonjudicial" foreclosure states where most foreclosures are processed outside of the court system, loan servicers are clearing the backlog more quickly, and 2.8 percent of mortgages were in foreclosure.
The MBA survey covers 42.9 million loans on one- to four-unit residential properties, or about 88 percent of all first-lien mortgages. Extrapolating the survey’s results suggests that of the 48.75 million mortgages outstanding at the end of 2011, 2.13 million were in the foreclosure process.
Five states accounted for more than half of all loans in foreclosure -- Florida, California, Illinois, New York and New Jersey. All but California are judicial foreclosure states.
The 10 states with the greatest percentage of mortgages in foreclosure were: Florida (14.27 percent), New Jersey (8.21 percent), Illinois (7.41 percent), Nevada (7.03 percent), Maine (5.92 percent), New York (5.88 percent), Connecticut (5.05 percent), Hawaii (4.97 percent), Ohio (4.94 percent), and Indiana (4.94 percent). All but Nevada are judicial foreclosure states.
The states with the lowest foreclosure rates were: Wyoming (1.03 percent), North Dakota (1.05 percent), Alaska (1.06 percent), Nebraska (1.55 percent), South Dakota (1.75 percent), Montana (1.76 percent), Texas (1.78 percent), Virginia (1.84 percent), Alabama (1.94 percent), and Arkansas (1.97 percent). Among those states, only North Dakota handles foreclosures judicially.
Thursday, March 1, 2012
Four steps to buying a house in 2012
Q: I am on a mission to buy a home. I've wanted to own a home my entire life, and thought I would miss the opportunity to buy while the market was down, because I had no real savings when the market crashed. I think I'm ready, though, and prices still seem low. What should I be doing now to make this happen in 2012?
A: The recession has done lots of favors for buyers-to-be, including dropping prices and interest rates to bargain levels. But it has also created a lending and housing market climate in which loans are tough to get, tensions about buying into a down market run high, and transactions are harder and longer to close than they have ever been.
Here are the things to do now, to buy a home this year:
1. Fix credit problems. More deals than ever are dying on the vine, and credit problems are a top reason home-sale transactions fall out of escrow. Detect and correct errors on your credit report now by reviewing the federally mandated free reports you can get at AnnualCreditReport.com.
2. Study up. Do some research, both online and offline, into things like:
Areas: Start your online research into decision points like tax rates, school districts, neighborhood character and even prices in various areas. Check out NabeWise.com for some local insight into neighborhood flavor and personality.
When you start connecting with local agents, ask them to brief you on neighborhood market dynamics. They can give you a deeper view into need-to-knows like how long homes typically stay on the market and whether they generally go for more or less than the asking price, so you can be smart about how you search vis-Ã -vis what you have to spend.
Agents: This is the perfect time to ask your family and friends for a referral to an agent they know, have used and love. Then, follow up by doing an online search for the agent's name and seeing what sort of online reviews and activities you find. When you've narrowed the field down to a few, call them up and set up a meeting to find out if you're a good fit.
Distressed properties: In some areas, more than 40 percent of the homes on the market are short sales and foreclosures, and they involve a very different timeline and set of facts than traditional home sales. Read up and talk with the agent candidates you interview about what you should expect from these types of listings, to minimize surprise and manage your expectations way in advance.
3. Save even more. Sounds like you've worked hard for a number of years to save enough cash that you think you're in the clear when it comes to funding your down payment and closing costs. Studies show that after months of saving, people often let up and relax into a spending season. Even at your early stage in the process, it's easy to start noticing and buying the furnishings and touches you want to install in your new home.
Although you shouldn’t feel deprived or forgo amazing and affordable deals on things you know you're going to need, rest assured that no matter what amount of cash you have on hand, when you start house hunting, making offers, closing your transaction or moving in, the time will definitely come when you'll wish you had more.
You might want to ratchet up your offer a bit to best another buyer, or you might just end up with a place that needs a little sprucing up. It might be months before you know exactly what you'll need extra cash for, but now is not the time to press the gas pedal when it comes to your monthly spending.
4. Purge. Now's the time to sell, donate or give away as much of your personal possessions as you can. Use the proceeds to pad your cash cushion, or tuck the donation receipts away for your tax records next year.
Start here, and chances are good that your house hunt -- and purchase -- will be in full swing by spring, if not sooner.
Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.
A: The recession has done lots of favors for buyers-to-be, including dropping prices and interest rates to bargain levels. But it has also created a lending and housing market climate in which loans are tough to get, tensions about buying into a down market run high, and transactions are harder and longer to close than they have ever been.
Here are the things to do now, to buy a home this year:
1. Fix credit problems. More deals than ever are dying on the vine, and credit problems are a top reason home-sale transactions fall out of escrow. Detect and correct errors on your credit report now by reviewing the federally mandated free reports you can get at AnnualCreditReport.com.
2. Study up. Do some research, both online and offline, into things like:
Areas: Start your online research into decision points like tax rates, school districts, neighborhood character and even prices in various areas. Check out NabeWise.com for some local insight into neighborhood flavor and personality.
When you start connecting with local agents, ask them to brief you on neighborhood market dynamics. They can give you a deeper view into need-to-knows like how long homes typically stay on the market and whether they generally go for more or less than the asking price, so you can be smart about how you search vis-Ã -vis what you have to spend.
Agents: This is the perfect time to ask your family and friends for a referral to an agent they know, have used and love. Then, follow up by doing an online search for the agent's name and seeing what sort of online reviews and activities you find. When you've narrowed the field down to a few, call them up and set up a meeting to find out if you're a good fit.
Distressed properties: In some areas, more than 40 percent of the homes on the market are short sales and foreclosures, and they involve a very different timeline and set of facts than traditional home sales. Read up and talk with the agent candidates you interview about what you should expect from these types of listings, to minimize surprise and manage your expectations way in advance.
3. Save even more. Sounds like you've worked hard for a number of years to save enough cash that you think you're in the clear when it comes to funding your down payment and closing costs. Studies show that after months of saving, people often let up and relax into a spending season. Even at your early stage in the process, it's easy to start noticing and buying the furnishings and touches you want to install in your new home.
Although you shouldn’t feel deprived or forgo amazing and affordable deals on things you know you're going to need, rest assured that no matter what amount of cash you have on hand, when you start house hunting, making offers, closing your transaction or moving in, the time will definitely come when you'll wish you had more.
You might want to ratchet up your offer a bit to best another buyer, or you might just end up with a place that needs a little sprucing up. It might be months before you know exactly what you'll need extra cash for, but now is not the time to press the gas pedal when it comes to your monthly spending.
4. Purge. Now's the time to sell, donate or give away as much of your personal possessions as you can. Use the proceeds to pad your cash cushion, or tuck the donation receipts away for your tax records next year.
Start here, and chances are good that your house hunt -- and purchase -- will be in full swing by spring, if not sooner.
Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.
Price is not all that matters in real estate sales
Negotiation strategies differ depending on how well the home is priced and who's on the other side. If you're trying to buy a short-sale listing where the lender has to agree to accept less than the amount owed, the seller doesn't have much say in the negotiations about price unless he can contribute money to pay down the loan amount.
Regardless of who you're dealing with, you're more likely to grab a seller's or lender's attention if you are preapproved for the mortgage you'll need and can provide verification of cash for the down payment and closing costs.
Many buyers feel that cash is king. If buyers are willing and able to pay all cash with no mortgage, no hassling with the lender and no appraisal contingency, they feel they're owed a price concession.
Not all sellers agree. Some, who are confident in the value of their home, would rather work with an offer from a well-qualified buyer who needs to obtain a mortgage but who will pay a higher price.
Before you start negotiating, you should understand as much as you can about the other party. For instance, if the sellers are moving to a retirement home, they might go for the highest-priced offer in a multiple-offer situation, even though it might not be ideal in other regards. If they are liquidating their last asset, every penny will count.
An all-cash or large-cash-down buyer might not be able to negotiate a "deal" based on the fact that no lender will be involved. But if the home is a good value and suits your long-term needs, you might increase your offer price and include a mortgage. This way, you conserve cash for other uses.
HOUSE HUNTING TIP: Many buyers don't want to negotiate. They want their first offer to be their best offer. Usually, the only time this is effective is if yours is the only offer, the house is priced right for the market, and you offer full price. In this market, you're better off planning for some negotiation, and not putting all your cards on the table at once.
In most areas, the home-sale market still favors buyers. A lot of sellers are selling for less than they paid. Some have to bring money to the closing. Sellers who have owned for years are selling for less than they would have years ago. It's natural that they would want to try for the highest price possible.
Negotiations are about more than price. Generally, the fewer the contingencies or the cleaner the contract, the more attractive it will be to the seller. Closing and possession dates can become issues at the bargaining table. What's included and excluded, time periods to satisfy contingencies, and virtually everything in the contract is negotiable.
Since everything is up for grabs, be clear about what's not negotiable -- for instance, you can't go over a certain price. Show flexibility in areas that will hopefully be valuable to the sellers, such as buying "as is" regarding some needed repairs.
Don't waste your time with sellers who are firm at a price that is considerably over market value. Wait until they become realistic while you continue looking. Some sellers eventually get tired of having their home listed and reduce the price to market value. Others don't.
Sellers need to understand that buyers in today's market will walk away from a negotiation if they feel they're not getting anywhere or are being treated unfairly. Buyers could become suspicious or disappear if they're told by the sellers or their agent that other buyers are lining up to make an offer when they aren't.
THE CLOSING: A smart strategy is to defend your position while being honest and fair with the other party.
Dian Hymer is a nationally syndicated real estate columnist and author.
Regardless of who you're dealing with, you're more likely to grab a seller's or lender's attention if you are preapproved for the mortgage you'll need and can provide verification of cash for the down payment and closing costs.
Many buyers feel that cash is king. If buyers are willing and able to pay all cash with no mortgage, no hassling with the lender and no appraisal contingency, they feel they're owed a price concession.
Not all sellers agree. Some, who are confident in the value of their home, would rather work with an offer from a well-qualified buyer who needs to obtain a mortgage but who will pay a higher price.
Before you start negotiating, you should understand as much as you can about the other party. For instance, if the sellers are moving to a retirement home, they might go for the highest-priced offer in a multiple-offer situation, even though it might not be ideal in other regards. If they are liquidating their last asset, every penny will count.
An all-cash or large-cash-down buyer might not be able to negotiate a "deal" based on the fact that no lender will be involved. But if the home is a good value and suits your long-term needs, you might increase your offer price and include a mortgage. This way, you conserve cash for other uses.
HOUSE HUNTING TIP: Many buyers don't want to negotiate. They want their first offer to be their best offer. Usually, the only time this is effective is if yours is the only offer, the house is priced right for the market, and you offer full price. In this market, you're better off planning for some negotiation, and not putting all your cards on the table at once.
In most areas, the home-sale market still favors buyers. A lot of sellers are selling for less than they paid. Some have to bring money to the closing. Sellers who have owned for years are selling for less than they would have years ago. It's natural that they would want to try for the highest price possible.
Negotiations are about more than price. Generally, the fewer the contingencies or the cleaner the contract, the more attractive it will be to the seller. Closing and possession dates can become issues at the bargaining table. What's included and excluded, time periods to satisfy contingencies, and virtually everything in the contract is negotiable.
Since everything is up for grabs, be clear about what's not negotiable -- for instance, you can't go over a certain price. Show flexibility in areas that will hopefully be valuable to the sellers, such as buying "as is" regarding some needed repairs.
Don't waste your time with sellers who are firm at a price that is considerably over market value. Wait until they become realistic while you continue looking. Some sellers eventually get tired of having their home listed and reduce the price to market value. Others don't.
Sellers need to understand that buyers in today's market will walk away from a negotiation if they feel they're not getting anywhere or are being treated unfairly. Buyers could become suspicious or disappear if they're told by the sellers or their agent that other buyers are lining up to make an offer when they aren't.
THE CLOSING: A smart strategy is to defend your position while being honest and fair with the other party.
Dian Hymer is a nationally syndicated real estate columnist and author.
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