August 2009
We at Troubled Property Solutions in San Diego,CA have successfully closed many short sales in the last 18 months in San Diego county and in many other parts of southern california.
Price declines are still happening in our San Diego home market, but Zillow has reported a slow down in the record depreciation. Home depreciation is still at record levels, hovering around 12% annually in San Diego. Home prices in San Diego have decline over 50% in some markets hard hit, and homeowners are finding their homes to be upside down, with more than $200,000 in negative equity. Short sales for those homeowners in San Diego are a great option to get out from the surmounting debt. Each day the homeowner holds the home, the house is worth less and less. For San Diego residences a loan modification only reduces the payment, not the amount owed. To become financially free many San Diego residences are choosing to sell their house through a short sale, whereas the home is sold and the bank takes the loss. Upside down San Diego residences may find they are unable to sell their home for years to come due to their negative equity situation unless the bank agrees to take the loss. Short sale experts are now finding themselves busier than ever, as homeowners choose to move on. The article below presented by Zillow discusses home price declines in various markets, including in San Diego.
If you need to sell your house contact us at 1 (619) 631-4546 to get started today!
Some Good News Finally…But Will It Last?
By: Stan Humphries, Chief Economist | August 11, 2009
After peaking in the second quarter of 2006 and reporting its first year-over-year decline in January of 2007, the US Zillow Home Value Index turned in 27 consecutive months of increasingly larger annual depreciation rates between 2007 and the end of the first quarter 2009. That all changed in the second quarter of 2009 when the annual depreciation rate of the national ZHVI changed direction for the first time since turning negative back in 2007. From 12.4% annualized depreciation in March 2009, the depreciation rate moved to 12.3% in April, 12.2% in May and 12.1% in June. Anyone who ever doubted that 12% annual depreciation would be a possibly hopeful sign clearly never experienced a real estate market that has seen a total drop in values of more than 22% from their peak.
Not only that, but several hard-hit markets like Los Angeles, Riverside, San Francisco, San Diego and Stockton have now reported between five to eight months of consecutive monthly improvements in their annualized depreciation rates.
There are, unfortunately, some markets that still show no signs yet of slowing depreciation, such as Las Vegas (-34.6%), Phoenix (-26%) and Fort Myers (-29.4%). And these are hard-hit markets too, with peak-to-current value declines of 45.8%, 53.8% and 57.9% respectively. Of course, all of these peak-to-current value declines pale in comparison to that seen in Stockton where values have dropped from a high of $411,227 in February 2006 to a current value of $160,794 – a decline in real estate values of 61%. The New York metro region is also in this list of areas where annual depreciation has not yet started to improve. There values have already fallen more than 21% from peak and Manhattan only started chalking up negative year-over-year depreciation in the latter part of 2008, joining the rest of the metropolitan region which had been turning in negative annual growth rates much earlier. The strongly negative depreciation in Manhattan (-20.2%) will likely continue to weigh down the overall metro region which overall reported an annual depreciation rate of 12.3%.
So why not an unalloyed optimism about the current second quarter performance? As noted previously, there are still numerous substantial downside risks to home values. These include:
• Continued high levels of for-sale inventory. Sales volumes have undoubtedly bottomed but lots of new supply is being put on the market to take the place of those homes that are selling, keeping overall inventory levels high. This number may prove a stubborn one to move as all the homeowners who’ve wanted to sell in the past three years but either couldn’t or didn’t even try (i.e., pent-up supply) will start dipping their toes back into the market now.
• High rates of negative equity. We currently estimate that 23% of single-family homes with mortgages are in negative equity. High negative equity is a fertile breeding ground for foreclosures, particularly during a recession with high unemployment such as we are experiencing now.
• Large numbers of foreclosures and possibly even more coming down the pipe as many areas are reporting increases in notices of default and notices of foreclosure sale, the precursors to actually foreclosures. Foreclosures equal more supply and cheaper prices, both which push down values on non-distressed sales.
• Increasing mortgage rates, particularly if the Fed stops buying Treasuries as they are likely to do in mid-September.
For now, enjoy some less depressing real estate news and keep a keen eye near-term on foreclosure rates and for-sale inventory levels.
San Diego has seen a surge in short sales and foreclosures. Home prices have dropped almost 50 percent from peak of market in some San Diego cities, including Oceanside, Escondido, Chula Vista, and parts of other cities such as Vista and San Marcos.
One lender, Deutsche Bank, says that currently 14 million homeowners owe more than their house is worth, and this number may rise to 48 percent of all homeowners!
As prices continue to decline in San Diego, short sale experts believe that more homeowners will choose a short sale over a loan modification in San Diego because of the negative equity position. Deutsche Bank believes that prices will decline another 14 percent, which may leave even more San Diego homeowners needing a short sale to sell their house. Short sales in San Diego are increasingly becoming popular as homeowners do not want to remain tied to the surmounting debt of their house. See the article below for futher details.
If you need a short sale or loan modification, or to understand other alternatives call us for a free consultation at 1 (619) 631-4546.
“Underwater’ Mortgages to Hit 48%, Deutsche Bank Says”
By Jody Shenn
Aug. 5 (Bloomberg)
Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.
The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.
As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.
“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote.
Seven markets in states with the fastest appreciation during the five-year housing boom — including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas — may find 90 percent of borrowers underwater, according to the report.
The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen.
Home prices will decline another 14 percent on average, the analysts wrote.
To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net
Last Updated: August 5, 2009 15:32 EDT
They are several items that need to be satisfied in order to successfully modify a residential loan. if you meet the criteria below we recommend a loan modification and we work with the best in Industry to get this done.
If you do not meet the Criteria listed below, we have other solutions Call 1-619-631-4546 to discuss your options.
By Luke Mullins
Originally Posted March 4, 2009 on USnews.com
At the heart of the President Barack Obama’s ambitious plan to rescue the housing market is the conviction that restructuring distressed mortgages will keep struggling borrowers in their homes and help insert a floor beneath plummeting property values. With $75 billion dedicated to reworking troubled loans, that’s a big bet—especially considering that a top banking regulator said last December that almost 53 percent of loans modified in the first quarter of 2008 went bad again within six months. But supporters argue that mortgage modifications need to be properly engineered to work—and many early ones weren’t. To that end, the Obama administration on Wednesday unveiled fresh details on its plan to restructure at-risk loans and help as many as four million home owners avoid foreclosure. Here are seven things you need to know about Obama’s loan modification program.
1. Payments, not prices: The plan centers on the belief that struggling borrowers will stay in their homes—even as values decline sharply—as long as they can make their monthly payments. Although not everyone agrees with this, billionaire investor Warren Buffett endorsed the philosophy in his most recent letter to shareholders. "Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans)," Buffett wrote. "Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay."
2. Thirty-one percent: To that end, the administration’s plan requires participating loan servicers to reduce monthly payments to no more than 38 percent of the borrower’s gross monthly income. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower’s monthly income. In lowering the payment, the servicer would first reduce the interest rate to as low as 2 percent. If that’s not enough to hit the 31 percent threshold, they would then extend the terms of the loan to up to 40 years. If that’s still not enough, the servicer would forebear loan principal at no interest. The plan does not, however, require servicers to reduce mortgage principal, which Richard Green, the director of the Lusk Center for Real Estate at USC, considers a shortcoming. "For underwater loans, if you don’t write down the balance to be less than the value of the house, people still have an incentive to default," Green says. "Writing down the principal first instead of last—which is what [the Obama administration is] proposing—makes sense to me."
3. Cash incentives: To encourage participation, servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments. Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.
4. Financial hardship: The Obama administration is pitching its plan as an effort to help responsible homeowners ensnared in the historic housing slump and painful recession—not speculators. As such, only owner-occupied, primary residences with outstanding principal balances of up to $729,750 are eligible. Occupancy status will be verified through documents, such as the borrower’s credit report. In addition, the program is designed to target homeowners who are undergoing "serious hardships"—such as a loss of income—which have put them at risk of default. To participate, borrowers will have to sign an affidavit of financial hardship and verify their income with documents. "If we would have had such stringent verification over the last four or five years, we probably wouldn’t be in as bad a position as we are in," says Richard Moody, the chief economist at Mission Residential. But while Moody has no objection to such verification, obtaining documents from so many homeowners could be an onerous effort. "It’s going to be a very time-consuming process," he says. Only loans originated on or before Jan. 1, 2009, are eligible, and modified payments will remain in place for five years. Now that the administration’s plan is out, lenders are free to begin modifying loans.
5. Net present value: To determine if a particular mortgage will be modified, the servicer will perform a so-called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn’t. If the modified loan is expected to produce more cash flow for the mortgage holder, the servicer is to restructure the loan. Howard Glaser, a mortgage industry consultant and a U.S. Department of Housing and Urban Development official during the Clinton administration, called this component of the plan "clever," arguing that it would work to ensure broad participation. "When you apply the formula, the loans that are modified are the ones that are in the best economic interest of the investors to modify," Glaser says. "The federal subsidy for the payment on the modification…tips the scale toward modification as a better deal for the investor."
6. Second liens: The Obama plan also addresses the issue of second liens—such as home equity loans or home equity lines of credit—by offering incentives to extinguish them. But key details on this component of the plan remained unclear. "Distinguishing the second lien is really important," Green says. "[But] exactly how they are going to convince the second lien holder to do this is not clear to me at all."
7. Will it work? Moody argues that while the plan may reduce foreclosures for primary residences, it could lead to a spike in defaults for another group of homeowners. Although he supports the administration’s efforts to focus the initiative on primary residences, Moody notes that "it could be the case that a lot of [real estate speculators] have been just hanging on waiting to see exactly what the details are of this [plan]," Moody says. Now that it’s clear the Obama plan leaves speculators out, "we could actually see a spike in foreclosures or at least mortgage defaults among this group."
Glaser, meanwhile, worries that lenders may soon be overwhelmed by inquiries from homeowners looking to participate. "Starting today, millions of borrowers are going to start to call their lenders to see whether or not they are eligible," he said. "And I’m not sure that the financial services industry has the capacity to handle these inquiries."