Real Estate Foreclosure News

Connecticut Ranked 33rd in REO Properties Rate in May

Though the number of REO properties in Connecticut appears to be dwindling slightly, the foreclosure crisis in the state is still far from over.

RealtyTrac’s May 2009 U.S. Foreclosure Market Report showed that notices of foreclosure filings declined by about 50 percent compared with April figures and 20 percent below last year’s May level. The state ranked 33rd in terms of foreclosure filings in May, with one out of 398 houses under REO properties.

Topping Connecticut’s foreclosure activity in May were the counties of New London and Norwich, with 12 each. They were followed by Waterford and Ledyard with 6 each, 4 foreclosures in East Lyme while 2 each for Old Lyme, Colchester, Groton and North Stonington.

Among states in New England, Connecticut fared well than Rhode Island, Massachusetts and New Hampshire. Vermont and Maine have the lowest foreclosure rates among New England states.

Nationwide, foreclosure filings were received by 321,480 homeowners in May, a 6 percent decline from the April level but about 18 percent increase from the May 2008 total. This makes one out of 398 properties on the brink of becoming REO properties.

Leading the foreclosure rampage is the state of Nevada with one out of 64 houses receiving a notice of foreclosure, over six times the average national foreclosure rate.

Nevada is followed by California in terms of foreclosure rate with one out of 144 houses receiving foreclosure filings. The state has the second highest repossession rate in the country despite a 4 percent drop in foreclosure activity from the April figures.

The ranking for the third highest state in terms of foreclosure rate went to Florida with one out of 148 houses under threat of foreclosure. Arizona grabbed the fourth place with foreclosure filings made on one household out of 158 units, while Utah settled in the fifth place with one out of 316 houses under threat of foreclosure.

On the other hand, California’s total foreclosure filings of 92,249 was the highest among states, an increase of about 23 percent from last year May’s total. On a positive note, bank foreclosures in California declined 1 percent compared with April’s figures.

The foreclosure crisis, which resulted to a subsequent sale of discounted REO properties, has pulled down average home prices across the country.

Enhanced Foreclosure Help Program Takes Effect in California

The latest legislative effort to provide foreclosure help in California takes effect today. The bill, California Foreclosure Prevention Act, approved in February by the state assembly and signed by Governor Arnold Schwarzenegger, enhances previously launched foreclosure help schemes to help more Californians keep their homes.

The major provision of the new law is the imposition of a three-month foreclosure moratorium starting today.

In the foreclosure data released by RealtyTrac for the month of May, California posted 92,249 filings, the highest number among all the states. California was also second highest in foreclosure rate, with one in every 144 houses in the state receiving foreclosure action.

The new law is the third statewide effort to provide foreclosure help to troubled Californian homeowners. In 2007, Governor Schwarzenegger formally asked mortgage lenders to modify subprime loans.

In 2008, the governor signed Bill 1137, which required mortgage lenders to contact homeowners first and work out options with them before filing foreclosure actions.

Mortgage lenders who plan to get exempted from the foreclosure moratorium are required to submit a description of their loan modification schemes. Compliance to this submission requirement will exempt them from imposing a 30-day foreclosure moratorium.

If a lender’s loan modification program is approved, the lender is permanently exempted from the three-month foreclosure moratorium.

On the other hand, if the lender’s loan modification program is rejected, the lender is given 30 days to improve its program and then file for reconsideration.

Assemblyman Ted Lieu explained that the three-month foreclosure moratorium will force mortgage lenders to work out loan modifications, which have been largely voluntary on the part of lenders.

Under President Obama’s Making Home Affordable program, lenders are given cash incentives to modify loans to make monthly payments affordable. Banks can reduce payments by extending loan terms, reducing the principal or deferring the payments of arrears.

Lieu admitted there are distressed homeowners who cannot save their homes despite efforts to provide foreclosure help, but he insisted there are many borrowers who can be helped with some assistance.

Mark Leyes, spokesperson for the California Department of Corporations, added that the state cannot force banks to modify loans, but it can use the moratorium law to compel them to provide foreclosure help in the form of reduced loan payments.

According to Leyes, homeowners who are looking for foreclosure help can see the list of mortgage lenders that have complied with the new law’s requirements by the middle of July.

Home Depot Optimistic Amidst Foreclosed Homes for Sales

Home Depot Inc., considered the world’s biggest home-improvement retailer, provided a more optimistic profit forecast at a meeting of financial analysts this week, despite the continuing effects of foreclosed homes for sales.

The company said that it now expects its annual earnings per share to fall by only 20 to 26 percent compared to the previous fiscal year. In May, Home Depot expected its earnings per share to fall by 26 percent to approximately $1.32 per share.

Recently, financial analysts interviewed by Thomson Reuters expected Home Depot’s earnings per share decline to be $1.40.

The company also hopes that a home improvement market correction will help it to reach its long-term operating profit margin target of around 10 percent.

Despite the company’s optimism, Home Depot is still concerned about the pace and density of foreclosed homes for sales, according to Carol Tome, the retailer’s chief financial officer. She pointed out the reality that about 26 percent of Home Depot outlets are in seven states hit by the accelerated pace of foreclosed homes for sales in the first quarter of this year.

Tome also added that Home Depot’s same-store sales levels in states where the pace of foreclosed homes for sales slowed down ranged from flat to slightly above average sales in the first quarter. She also said that the signals they are seeing in relation to foreclosed homes for sale are mixed.

Along with other retailers selling home improvement products, Home Depot has been struggling with declining sales as homeowners delay their purchases of new home appliances and their home repair and improvement projects to cope with the economic downturn.

To increase sales, Home Depot has implemented further customer service improvements and has launched in-store workshops to cater to do-it-yourself customers. Recently, it held an earthquake preparedness workshop in its California outlets.

Home Depot hopes that these initiatives and the expected home improvement market correction will enable it to reach its profitability target. Analysts contend that the amount of time to reach the target is crucial for the company.

Barclays Capital analyst Michael Lasser said that the most significant variable driving Home Depot’s margin is its leverage from strong comps.

Comps refer to same-store sale comparisons and can help analysts determine the sales performance of a company’s brand and the contribution of stores to overall company revenues.

With Home Depot’s shares recently down by 0.21 percent at $24.29, the retailer is hopeful it can survive the effects of foreclosed homes for sales.

Renters in Bank Foreclosure Homes Increasing

Renters are the latest casualty in the ever-growing foreclosure crisis in California. More and more tenants are scrambling to find cheap places to stay after they discovered that the properties they are renting are bank foreclosure listings.

Most landlords who are facing the prospect of foreclosure often neglect to inform their tenants about the situation. And tenants being evicted from their rental homes are becoming a common sight in California.

Some renters, as soon as they saw a foreclosure sale notice posted on their rental homes, would start looking for alternative place to live rather than wait for banks or new owners to evict them. But all of them agree in saying that they are innocent victims of the foreclosure crisis.

In Sonoma County, 4 out of 10 bank foreclosure homes are rentals, according to online real estate monitoring company RealtyTrac. Data showed that renters occupy almost 40 percent of the total foreclosure properties in the country.

The problem about the growing number of renters being evicted in a short notice has prompted California lawmakers to extend deadlines of eviction.

Also, government-controlled mortgage lenders Federal Home Loan Mortgage Corp. and Federal National Mortgage Association have launched programs that allowed renters to remain in bank foreclosure homes until such time that they can be sold. Both government agencies own about two-thirds of the total home loans nationwide.

Renters who are usually taken by surprise by the turn of events often find themselves bewildered and froth with uncertainty over how long they can remain in their rented foreclosed homes, where or whom to pay the rent and who to call when the house needs repair.

Under California’s revised law aimed at protecting tenants in repossessed homes, lenders or banks are required to give tenants a 60-day notice, up from the previous 30 days, to vacate the property.

However, because lenders do not want to act as landlords and prefer to dispose the properties immediately to reduce the load on their portfolio, would offer money to tenants to vacate the homes as soon as possible.

If tenants agree to take the cash from lenders or banks, they waive their legal rights and allow agents hired by lenders to show the rented bank foreclosure homes to potential buyers.

Tips for Investors in Detroit Foreclosed Housing Inventories

Investors from around the U.S. and the world have been taking advantage of bargain-priced homes and large foreclosed housing inventories in Detroit.

According to Jeremy Burgess, co-owner of Urban Detroit Wholesalers, most investors snapping up properties in bulk from foreclosed housing inventories in Detroit come from outside the state and outside the U.S.

Burgess buys underpriced homes, repairs them and then rent them out or sell them to other investors.

Another realtor, Mike Shannon, said only a few are local investors because they are either unemployed, out of money or have already made their home investments. Shannon specializes in selling foreclosed housing and has customers from Australia, New Zealand, England and other countries.

Shannon advises investors in Detroit’s foreclosed housing market to plan for an investment period of five to ten years. He also advises them to take advantage of the Section 8 housing federal program, which is a voucher program designed to help lower-income households.

Under the voucher program, needy families can rent privately-owned housing with the rent fully or partially paid by the national government.

An investor can buy a foreclosed property, repair it, find a qualified Section 8 renter and then collect a fair market rent, which could be anything between $850 and $1,200 for a three-bedroom unit.

Another tip from Shannon is to get in touch with local housing nonprofits that are helping families with lower credit scores. These nonprofits work with these families to repair their credit and find affordable financing for them. Investors can sell their restored foreclosed housing units to these families.

Another Detroit investor, David Butler, said he has moved away from speculative investments. What he does is to buy foreclosed homes from Urban Detroit Wholesaler and then offer these restored homes through lease-option agreements.

Lease-option agreements enable lower-income families to rent while accumulating amounts for a future purchase of the rental property. The families can complete the purchase when their incomes improve or when the mortgage market improves and they are able to obtain affordable home loans.

Butler said that he looks for ways to make costs minimal so that the final product would be affordable. He said he limits his purchase, repair and tax costs for one housing unit to only $45,000 and then sells it through a nonprofit with a profit margin of about 12 percent.

Altogether, the investors in the Detroit foreclosed house market have various ways to earn income from their investments. The best ways would be those that make profits and at the same time help low-income households finally own a home.