Foreclosures Are Still Concentrated In Three States

Foreclosure-tracker RealtyTrac reports that the number of foreclosures nationwide rose 7 percent on a month-to-month basis last month.

However, 3 states dominated the foreclosure list, tallying more foreclosures between them than the rest of the country combined.

•California : 30.0 percent
•Florida : 15.7 percent
•Arizona : 5.4 percent

On a per-household basis, the states ranked 2, 3 and 4. Only Nevada's foreclosure rate was higher.

Now, we point out these statistics for two reasons.

The first is to remind you that foreclosures can be highly local. For all of the foreclosure-related stories that run in the papers and on TV, defaults make a much larger impact on home values in some areas versus others.

And, second -- foreclosures can represent a terrific buying opportunity. Not every foreclosed home is in pristine condition, but there is a plethora of affordable housing out there, suitable for first-time buyer, move-up buyers and investors, too.

Furthermore, as banks get better at disposing of foreclosed homes, the process of buying one isn't as challenging as it was, say, 12 months ago.

As part of its research, RealtyTrac.com catalogues a lot of foreclosed homes and lists them online. However, you may find it better to start your search with a local real estate agent that knows the foreclosure market.

So long as buying foreclosures is a high-touch process -- and it is a high-touch process -- you may want to have a human face and agent to guide you through it.

Foreclosures Still Concentrated In Three States

For the fourth consecutive month, the country's foreclosure activity was dominated by a small number of states.

As reported by RealtyTrac.com, more than 50 percent of the country's foreclosure-related actions in June concentrated in just 3 states:

California
Florida
Nevada

The states rounding out the Top 10 include Arizona, Georgia, Michigan, Texas, Ohio, Illinois and Colorado.

Meanwhile, June's reported foreclosure figures are consistent with the data from earlier this year, suggesting that the foreclosure remedy plans put forth by the government and by lenders can barely keep pace with the national default rate.

Foreclosure-related actions nationwide are up 5 percent from May.

The silver lining in data this negative is that foreclosures are creating tremendous buying opportunities for the right buyers. Because foreclosed homes tend to sell at a discount versus non-foreclosed homes and because mortgage rates are low, home sales are showing strength in a multitude of markets because of ample supply at relatively cheap prices.

Distressed homes accounted for one-third of all existing home sales in May.

Search the complete June 2009 foreclosure report for yourself, including foreclosure heat maps and other trends on the RealtyTrac website.

Which 3 States Account For More Than 50% Of The Foreclosures?

For the second month in a row, the country's foreclosure activity was dominated by a small number of states.

As shown by the latest stats from RealtyTrac.com, more than half of the country's foreclosure actions from April were concentrated in just 3 states:

1. California
2. Florida
3. Nevada

Those 3 states are home to just 19 percent of the U.S. population.

No matter in which state you live, however, it's important to understand the far-reaching ramifications of foreclosures.

Although real estate is local, mortgage lending is not. Fannie Mae and Freddie Mac insure loans in all 50 states and when those mortgages go into default, the government entities often take losses.

This is the primary reason why both Fannie and Freddie asked for government aid to the tune of $19 billion and $6 billion, respectively, last week. It's also the reason why loan fees have increased over the last 12 months -- another way to shore up balance sheets is to raise consumer charges.

Furthermore, downpayment requirements are larger than before foreclosures proliferated and private mortgage insurance is more expensive, too.

These are important changes to homeowners in all states -- not just the 3 named above. In some cases, they can be the difference between a home loan approval and an underwriting turndown.

Search the complete April 2009 foreclosure report for yourself on RealtyTrac's website.

Is This Really The Truth, "1 In 8 U.S. Homes Are Late Paying Or In Foreclosure?"

USA Today ran this 2008 Foreclosures By State heatmap last week, reminding us of a simple truth: Headline statistics can be misleading.

According to data compiled by RealtyTrac, 1 in 8 U.S. homes were in various stages of default or delinquency at the end of 2008. This is a fact and it was widely reported by the press.

However, as the heatmap plainly shows, in stripping out just 35 of the nation's 3,232counties, we can decrease the number of foreclosures nationally by half.

In other words, yes, 1 in 8 U.S. homes face mortgage trouble. In your neighborhood, though, the ratio is likely much, much lower. Real estate is a local phenomenon. National statistics rarely apply.

Foreclosures Fell 31% in September in California.

According to foreclosure-tracking service RealtyTrac, the foreclosure rate is falling nationwide.

Versus August, foreclosures fell by 12 percent in September 2008 as more than half of the states showed month-over-month improvement.

Most interesting in the data is that several states that led the foreclosure boom in 2007 now appear to be leading the charge out of it.
For example:

* In Arizona, foreclosures are down 9.43 percent
* In California, foreclosures are down 31.64 percent
* In Colorado, foreclosures are down 6.22 percent
* In Illinois, foreclosures are down 5.14 percent
* In Michigan, foreclosures are down 22.43 percent

But despite September's promising data, the press is choosing to report that foreclosures are up 71 percent over the same period last year. The data is accurate, but not necessarily relevant.

When home buyers and sellers engage real estate markets, they rarely think in annual terms. For them, it's about buying or selling this month, or next month, or the month after that. When someone is "in" the market, their mentality is "right now".

In other words, annual data is more befitting of an economist, while month-to-month data is more befitting of you. Of course foreclosures are up 71 percent since last year -- a lot has happened since then. But on a monthly basis, signals point to improvement.

September's foreclosure data may be a signal of market recovery, or it may just be a blip. Time will tell, really. Either way, RealtyTrac's foreclosure data reinforces what most real estate professionals already know and that's that markets all over the country are showing signs of life.

How Hard Times in 3 States is Making It Harder to Qualify for Loans in All States

RealtyTrac released its foreclosure data for August 2008, it's headline reading in typical doomsday-like fashion:

FORECLOSURE ACTIVITY
INCREASES
12 PERCENT IN AUGUST
Activity Up 27 Percent
From August 2007

But, as is also typical, the news isn't nearly as dire as the headline would make us believe.

Looking at the data, it appears that U.S. foreclosure rates may have already crested because states like Ohio, Michigan and Florida are showing marked improvement, as are some other states.

RealtyTrac even acknowledges as much on its corporate blog.

In addition, the report also contained two choice nuggets about where these foreclosures are happening. According to the data:

Just 3 states accounted for more than half of the nation's foreclosure activity.

This tells us that the "national foreclosure crisis" isn't really national. It's isolated to a few states and a few neighborhoods. Nationwide, it's closer to business as usual and homeowners are doing just fine.

National trends are relevant, however, because when lenders take losses anywhere in their portfolio, they're apt to tighten mortgage guidelines everywhere. This is a major reason why qualifying for a home loan is harder than it used to be, and why some lenders have much stricter rules in states like Florida and California.

Tightening mortgage guidelines can be a preventative step.

Now, a few months doesn't make a trend, but the slowing rate of foreclosures may portend a gradual guideline loosening sometime in late-2009. If lenders are less fearful of loss, after all, they would be more inclined to take on additional risk.

Ironically, this would help slow the foreclosure rate even faster because with looser mortgage guidelines, more homeowners could refinance their way out of trouble, or out of high interest rates

10 Cities That May Be Signaling That the Worst of the Housing May Already Be Over

Last week, Forbes Magazine published a Top 10 list that should grab the attention of housing market bottom-feeders.

The Top 10 list of Increasingly Affordable U.S. Housing Markets shows that falling home prices and steady mortgage rates are providing a support floor in some of the country's most beat-up regions.

The report's methodology is simple:

Take citywide income data as reported by HUD.
Match it against purchase prices from court records
Run the math using "prevailing interest rates" from Wells Fargo.

A city is considered "more affordable" if increasing numbers of "average families" can afford "average homes". It's not surprising, therefore, that the Forbes list is dominated by cities in which home prices have plummeted over the last year, and in which he economy is relatively sound.

This may suggest that a housing rebound is already underway in several of the cities listed as Increasingly Affordable U.S. Housing Markets, including:

San Diego, CA
Orlando, FL
Riverside, CA
Phoenix, AZ
Las Vegas, NV

Read the complete study and its results at Forbes.com.

Foreclosures Down in June

According to RealtyTrac, the rate of foreclosures across the U.S. is slowing. Versus May, June foreclosures fell at a 3 percent clip.

25 states showed improvement month-over-month, led by many of the same areas that had fueled foreclosure activity in 2007.

A sampling of RealtyTrac's data includes:
California : Foreclosures down 4.54 percent
Georgia : Foreclosures down 14.91 percent
Arizona : Foreclosures down 0.07 percent
Michigan : Foreclosures down 6.00 percent
Illinois : Foreclosures down 15.65 percent

However, the improving nature of the data is not what is making news this morning. Instead, the press is reporting that foreclosures are up by half since last year and that bank seizures have tripled.

And while the annual data may be accurate, that doesn't mean that it's necessarily relevant to home buyers and home sellers across the country.

This is because people buying and selling homes don't usually boast an "annual" mentality; when someone's an active participant in the real estate market, the mentality is "right now".

In other words, annual data fits an economist, but month-to-month data fits you.

June's foreclosure data may be the start of a trend, or it may be a blip. It's really too soon to tell.

But the RealtyTrac data reinforces what real estate professionals already know -- that markets all over the country are showing signs of life.

Produce the Note

I came across this excerpt from the Consumer Alert Network recently. If you are being forced into foreclosure, the following may be of help and a part of your strategy for getting more cooperation from lenders.

Using the “produce the note” strategy is something all homeowners facing foreclosure can do. If you believe you’ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process.

WHO OWNS THE NOTE?

Your goal is to make certain the institution suing you is, in fact, the owner of the note (see steps to follow below). There is only one original note for your mortgage that has your signature on it. This is the document that proves you owe the debt.

During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street. In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage. This is the key to the produce the note strategy. Now, many lenders are moving to foreclose on homeowners, resulting in part from problems they created, and don’t have the proper paperwork to prove they have a right to foreclose.

THE HARM

If you don’t challenge your lender, the court will simply allow the foreclosure to proceed. It’s important to hold lenders accountable for their carelessness. This is the biggest asset in your life. It’s just a piece of paper to them, and one they likely either lost or destroyed.

When you get a copy of the foreclosure suit, many lenders now automatically include a count to re-establish the note. It often reads like this: “…the Mortgage note has either been lost or destroyed and the Plaintiff is unable to state the manner in which this occurred.” In other words, they are admitting they don’t have the note that proves they have a right to foreclose.

If the lender is allowed to proceed without that proof, there is a possibility another institution, which may have bought your note along the way, will also try to collect the same debt from you again.

A Tennessee borrower recently had precisely that happen to her. Her lender, Ameriquest, foreclosed on her in July of 2007. About three months later, another bank sent her a default notice for the mortgage on the house she just lost. She called to find out what was going on. After being transferred from place to place and left on hold for lengthy periods of time, no one could explain what happened. They said they would get back to her, but never did. Now, she faces the risk of having her credit continually damaged for a debt she no longer owes.

FIGHT FOR FAIRNESS

This process is not intended to help you get your house for free. The primary goal is to delay the foreclosure and put pressure on the lender to negotiate. Despite all the hype about lenders wanting to help homeowners avoid foreclosure, most borrowers know that’s not the reality.

Too many homeowners have experienced lender resistance to their efforts to work out a payment structure to keep them in their homes. Many lenders bear responsibility for these defaults, because they put borrowers into unfair loans using deceptive, hard-sell practices and then made the problem worse with predatory servicing.

Most homeowners just want these lenders to give them reasonable terms on their mortgages, many of which were predatory to begin with. With the help of judges who see through these predatory practices, lenders will feel the pressure to work with borrowers to keep them in their homes. Don’t forget lenders made incredible amounts of money by using irresponsible practices to issue and service these loans. That greed led to the foreclosure crisis we’re in today. Allowing lenders to continue foreclosing on home after home, destroying our neighborhoods and our economy hurts us all. So, make it hard for your lender to take your home. Make ‘em produce the note!

STEPS TO FOLLOW

A. If your lender has already filed suit to foreclose on your home:

Use the first form. It’s a fill-in-the-blank legal request to your lender asking that the original note be produced, before it can proceed with the foreclosure. In some jurisdictions, the courts require the original request to be filed with the clerk of court and a copy of the request to be sent to the attorney representing the lender. To find out the rules where you live, call the Clerk of Court in your jurisdiction.

If the lender’s attorney does not respond within 30 days, file a motion to compel with the court and request that the court set a hearing on your motion. That, in effect, asks the judge to order the lender to produce the documents.

The judge will issue a ruling at your hearing. Many judges around the country are becoming more sympathetic to homeowners, because of the prevalence of predatory lending and servicing. In the past, many lenders have relied upon using lost note affidavits, but in many cases, that’s no longer enough to satisfy the judge. They are holding the lender to the letter of the law, requiring them to produce evidence that they are the true owners of the note. For example:

In October 2007, Ohio Federal Court Judge Christopher Boyko dismissed 14 foreclosure cases brought by investors, ruling they failed to prove they owned the properties they were trying to seize.

B. If you are in default, but your lender has not yet filed suit against you:

Use the second form. It’s a fill-in-the-blank letter to your lender which also requests they produce the original note, before taking foreclosure action against you.

If the lender does not respond and files suit against you to foreclose, follow the steps above.

UPDATE:

CNN features The Consumer Warning Network and the “Produce The Note” strategy. Borrowers are putting this plan into action and getting results!

The 80/20 Rule Of Foreclosures in America (May 2008)

RealtyTrac's May 2008 foreclosure report looks terrible in the papers, but there's good reasons why we don't get our news from the headlines only.

A deeper look at the data shows that the whole country is not being impacted equally.

California is home to 8 of the 10 most foreclosure-heavy cities in the country.

Just 4 states accounted for more than half of the country's foreclosure activity
Many states -- including Ohio -- showed a reduction in foreclosure activity.

But of all of the interpretations, it's most astounding that the Pareto Principle is still (pretty much) in effect -- 80 percent of foreclosure activity was tied to just over 20 percent of the states.

Misleading Charts In The Media : Foreclosures Versus Home Prices

This is a chart from RealtyTrac's Q1 2008 Foreclosure Report. It is misleading.

A common conclusion that people make from charts like this is that foreclosures are the cause of falling home prices.

That's false. There may be a relationship between the two, but one doesn't necessarily cause the other.

Home prices fall when the supply of homes outweighs the demand for homes.

Yes, foreclosures can increase the amount of homes for sale in an area, but the demand-side of the equation is equally important as a predictor of home values.

Supply and Demand is the basis of all pricing.

Now, some parts of the housing demand equation are constant from season to season -- families outgrow their homes and move-up to larger ones; or desire a specific neighborhood in which to raise childen; or downsize into retirement.

Other parts of home demand, however, are elastic.

For example, when the economy is sluggish, the number of real estate investors tends to diminish, as does the number of people asked to move for job-related reasons.

This slows the influx of buyers to a region, city, or neighborhood and places downward pressure on home prices.

And falling Consumer Confidence impacts demand for homes, too.

When Americans are dubious about their economic future, they tend to play it safe(r). Unsettled about financial prospects, homeowners will often choose stay in their current home versus buying a new one.

Nationwide, consumer confidence levels are their lowest levels since the early 1990s.

And lastly, demand for home is subject to elements of psychology. Some people simply don't like buying into a market they perceive to be falling. Ironically, that becomes a self-fulfilling prophecy and the market spirals lower.

Because of the perceived Cause-Effect relationship between foreclosures and home prices, people like to cite a foreclosure "statistic" that's really just an observation. The common belief is that for every foreclosure in a neighborhood, nearby home values lose 1 percent of their value.

This is untrue because there's no evidence that values fell because of the additional home supply. It's more likely related to the demand for homes. In other words, there may be a relationship between the defaulted mortgage loan and falling values, but it's definitely not a direct one.

Home values fall for the same reason that foreclosure levels rise -- there's not enough buyer demand to cause otherwise.