This is frightening on many levels. People are slowly slipping back into complacency as gas prices settle, the US Dollar seems to be doing slightly better, and Bush has declared a “soft end” to the war in Iraq.

But don’t get too excited. With the recent mortgage loan crisis and massive shutdown of many banks and credit unions across the US, many folks are worrying if where they have their money is safe.

For many, they need look no further than the re-assuring manta, “Don’t worry, the FDIC insures up to $100,000 of your money!”.

Phew.

But doesn’t that imply that the Federal Deposit Insurance Corp (FDIC) actually needs to HAVE all that money to back up the money your banks are unable to cough up?

It turns out that the FDIC may have to borrow some of that money to make it through the continued failures of banks all over.

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We’ve been hearing a lot of news about loan modification programs coming from the government. At first the idea of helping struggling homeowners sounds great, like a new chance for so many who fell behind for one reason or another. But then you read the details and you find that only a small percentage of those people will be able to qualify for loan modifications.

Luckily, Marisol Perez was one of those people. Her story involves one situation where irresponsibility is not the key factor in the foreclosure. An unforeseen breakup which added additional financial stress.

X-ray technician, ultrasonography technician, and radiology technician jobs are actually very much in demand. Many states having waiting lists that go for several YEARS. They can earn anywhere from $45,000 to $75,000 or more depending on specializations and the local job market. Given that, when you factor this into the story, it becomes a bit easier to see where one has to be financially to qualify for this sort of help with their mortgage.

Marisol Perez already had stopped answering her phone, knowing it would be just another hectoring creditor.

Then her hair started falling out from the stress of working two jobs but still not being able to cover her monthly mortgage payment.

Then she got the letter that jabbed her in the gut: A lawyer’s office informed her it was foreclosing on her house.

“That’s when it hit me: I’m going to be homeless with three kids,” said Perez, an X-ray technician who lives in Dover.

It’s the kind of realization that has been hitting more families around New Jersey, where foreclosures are up 140 percent over last year, according to the latest data from RealtyTrac, a California firm that monitors foreclosures nationwide.

But there’s another side to that story, one that’s offering encouragement to distressed homeowners: Loan modifications also appear to be surging.

Sometimes known as “workouts,” modifications involve banks negotiating new terms — often lower interest rates or longer terms — with borrowers who otherwise would lose their homes.

America’s largest home loan provider, Bank of America, which recently acquired troubled lender Countrywide, has announced a goal of modifying at least $40 billion in mortgages by the end of 2009, helping roughly a quarter of a million families stay in their homes.

“Right now, the banks seem to be willing to make deals,” said Bonita Holmes, loan counseling director for New Jersey Citizen Action, a nonprofit group that helped 290 customers out of foreclosure in the first half of this year. The group is on pace to triple last year’s numbers.

“We’re having the most success when people come to us early,” Holmes said. “Don’t wait until you’re already in arrears.”

Marisol was extremely lucky that she wasn’t already in arrears. One of the biggest problems with foreclosure proceedings is that once the attorneys start getting involved, the amount you owe can easily triple in no time at all. Once that happens, that $4,000 you may be behind on can balloon to $15,000 or more. At that point, many folks are left to wonder if it’s even worth it - to save a mortgage that you’re still upside down on, by adding additional debt. The other option? Walking away from your mortgage.

Luckily, a second job and some savings helped to keep the momentum at a minimum for a while.

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There seem to be conflicting signs of in the economy right now. Gas prices dropping a bit, even if that’s typical for this time of year. The US Dollar seems to be gaining more traction, although we’re still heavily in debt and over-extended. And while foreclosures are dropping a slight bit, we’re still up almost 100% compared to last year.

Home foreclosures in the Phoenix area dropped from June to July, but still are staggeringly higher than the same time last year.

Default Research finds that foreclosure activity from June to July dropped by 6 percent. However, the number of trustee sales recorded in the Phoenix area increased 95 percent from July 2007 to July 2008.

The total number of trustee sales in Maricopa County was 5,504, while Pima County recorded 391 in July. About 3 percent of Maricopa households had a notice of trustee sale filed against the property, while Pima County recordings accounted for about 1 percent.

Cities hardest hit with foreclosure sales in July were:

Maricopa County — Phoenix (2,010), Mesa (521), Glendale (421), Chandler (208), Surprise (206) and Gilbert (164).

Pima County — Tucson (347), Sahuarita (12), Marana (9), Oro Valley (9) and Vail (7).

Although the key here is more than what has been seen and what will be seen. Read the rest of this entry »

It’s no surprise that, despite some folks saying we’ve hit bottom, that prices continue to decline. Though there is some sales activity in both commercial real estate and residential real estate, the residential market is still priced too high, with most sales being short sales or pre-foreclosures.

Bloomberg had this to say:

Existing U.S. home sales fell to a 10- year low in the second quarter and the median price for a single- family house dropped 7.6 percent as the real estate recession deepened.

The median price tumbled to $206,500 from $223,500 a year earlier, the Chicago-based National Association of Realtors said today. Sales of single-family houses and condominiums fell 16 percent to 4.913 million at an annualized pace.

Prices are declining with the U.S. on the brink of a recession, consumer prices rising and 30-year fixed mortgage rates at a six year high last month. A third of all sales in the quarter were foreclosures or “short sales,” in which lenders take a loss on a property, the Realtors said. Bank repossessions almost tripled in July from a year earlier, RealtyTrac Inc., a seller of foreclosure data, said in a separate report today.

A look at your local MLS or Craigslist will undoubtedly yield tons of results where the summary has the word ’short sale’ or ‘foreclosure’ in it. However, it appears even those aren’t selling at the moment:

The number of properties that have been foreclosed on by the banks and still haven’t sold is the highest we’ve ever seen.

U.S. economic growth slowed to 1.8 percent in the second quarter as unemployment rose. Forecasters say home values will drop more. The S&P/Case Shiller home price index that tracks 20 cities may tumble as much as 12 percent this year, McLean, Virginia-based Freddie Mac, the No. 2 mortgage buyer, said in an Aug. 11 report.

…

Bank seizures of properties in default rose 184 percent to 77,295 in July, according to RealtyTrac. That was the steepest increase since the Irvine, California-based company began reporting data in January 2005.

More than 272,000 properties, or one in 464 U.S. households, got a default notice, were warned of a pending auction or were foreclosed on, RealtyTrac said. Nevada, California and Florida had the highest rates, RealtyTrac said.

Foreclosures are helping to bring more realistic prices to the market, but as they undercut existing home owners who have not yet entered the foreclosure process, this becomes a case of a self-fulfilling and never ending cycle where foreclosures bring about more foreclosures which will continue to force prices to dive lower.

Smart buyers seem to be waiting things out on the sidelines until this cycle stops or slows.

Foreclosures are depressing home prices, contributing to job losses and weakening consumption as fewer people borrow against the value of their home, New York-based analysts at Lehman Brothers Holdings Inc. said Aug. 7.

A Standard & Poor’s measure of the largest U.S. homebuilders is down 32 percent in the past year as builders have struggled to reduce inventory and cut costs amid waning consumer confidence and stricter mortgage standards.

It takes 10 weeks to 12 weeks on average to sell a house, compared with four weeks or five weeks at the height of the five- year housing boom, according to Walter Molony, a spokesman for the Realtors.

…

U.S. home prices fell 15.8 percent in May, the most since at least 2001, according to S&P/Case-Shiller. One-third of home sellers in the second quarter lost money, Zillow.com, a Seattle- based provider of home valuations, reported this week.

Bank seizures, known as real estate-owned or REO properties, are the “fastest growing segment of foreclosure activity,” James Saccacio, chief executive officer of RealtyTrac, said in the statement. The REO properties in the company’s database represent about 17 percent of the inventory of existing homes reported in June by the National Association of Realtors, he said.

Default notices in July increased 53 percent from a year earlier and auction notices rose 11 percent, RealtyTrac said.

Foreclosures could put 8.4 percent of total U.S. homeowners, or 12.7 percent of homeowners with mortgages, out of their homes, according to New York-based analysts at Credit Suisse. About 53 percent of subprime borrowers, those with poor or incomplete credit histories, will have negative equity in their homes this year, and that percentage will rise to 63 percent next year, the analysts said in an April 23 report.

A new housing law is designed to help up to 400,000 homeowners refinance their adjustable-rate mortgages into fixed- rate loans. That law, backed by the Federal Housing Administration, may help borrowers who take advantage of the state relief. Almost one-third of homeowners who bought in the last five years owe more on their mortgages than their houses are worth, Zillow reported.

Despite what people are saying, things are getting worse. As foreclosures continue to creep closer to major metropolitan areas, and out of outskirt areas, more and more people will be bit.

Even if some talking (or yelling) heads like Jim Cramer suggest that the we’ve “hit bottom” and that the real estate market is now poised to improve and we can consider the bubble popped, the numbers show otherwise.

RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its Q2 2008 U.S. Foreclosure Market Report™, which shows foreclosure filings were reported on 739,714 U.S. properties during the second quarter, a nearly 14 percent increase from the previous quarter and a 121 percent increase from the second quarter of 2007. The report also shows that one in every 171 U.S. households received a foreclosure filing during the quarter.

…

“Although much of the fallout from foreclosures is being driven by rampant activity in a few states, such as Nevada, California, Florida, Ohio, Arizona and Michigan, most areas of the country are seeing at least some increase in foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac. “Forty-eight of 50 states and 95 out of the nation’s 100 largest metro areas experienced year-over-year increases in foreclosure activity in the second quarter.

“Bank repossessions, or REOs, accounted for 30 percent of total foreclosure activity in the second quarter, up from 24 percent of the total in the first quarter,” Saccacio continued. “This shift in the distribution of activity indicates that there is a progression toward purging the problem loans out of the system — at which point the housing market can regain some sense of normalcy. Of course if another surge in defaults occurs, which could well happen later this year, it would refill the foreclosure pipeline and prolong the recovery.”

Nevada, California, Arizona post top state foreclosure rates

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