Lower interest rates are supposed to spur buyer interest, but the plethora of government incentives has pulled forward demand, and few buyers are left over to clean up the mess.
Mortgage rates look primed to go to new generational lows.
But if the housing-market recovery is fading, will another drop in loan rates be enough to rekindle demand?
Or are we simply running low on interested buyers — or at least, potential buyers who’d be able to qualify for a loan in this new era of tighter credit?
In a good sign for home loan rates, yields on 30-year mortgage-backed bonds issued by Fannie Mae and Freddie Mac fell on Tuesday to new 52-week lows as long-term Treasury bond yields also slumped. The benchmark Fannie Mae yield slid to 3.87% from 3.92% on Monday; the benchmark Freddie Mac yield dropped to 3.90% from 3.96%.
Both fell below 4% this month for the first time since briefly trading under that level in late November.
The Fannie and Freddie bond yields directly influence mortgage rates charged by lenders because recent home loans are what back newly issued bonds. As investors accept lower yields on the bonds new loan rates can fall as well.
Mortgage rates have mostly been declining since early-April along with the Fannie and Freddie bond yields. Freddie Mac’s weekly survey of lenders found the average 30-year loan rate offered to borrowers was 4.75% last week, down from 5.21% in early-April.
Mortgage-backed-bond yields below 4% don’t mean that home loan rates are heading for that level soon. Still, the slide in yields should help tug loan rates down further from current levels, which already are near generational lows.
The question is whether cheaper mortgage rates can fuel a new wave of housing demand.
The National Assn. of Realtors’ report Tuesday on May existing home sales was weaker than expected, at 5.66 million units (annualized), down 2.2% from April’s pace. Economists surveyed by Bloomberg News had expected a 6% increase.
The decline occurred despite the continued spillover benefit of the federal first-time home buyer tax credit that expired April 30. To qualify for the credit a buyer had to have a purchase contract by April 30, but the deadline for closing the deal is June 30.
Naturally, the Realtors tried to put the best face on the numbers. “Very affordable mortgage interest rates and stabilizing home prices are encouraging home buyers who were on the sidelines during most of the boom and bust cycle,” NAR President Vicki Cox Golder said in a statement.
Yet the inventory of homes on the market was 3.9 million units at the end of May, an 8.3-month supply at current sales rates and down just 3.4% from April. And that’s not counting the shadow inventory.
As the Calculated Risk blog noted, the 8.3-month inventory level “is significantly above normal, and is especially concerning because the reported inventory is already historically very high. After the tax-credit related activity ends, the months of supply will probably increase, and the ratio could be close to double digits later this year. That level of supply will put additional downward pressure on house prices.”
If potential home buyers figure prices are heading lower again, the incentive provided by falling mortgage rates could be muted. What’s more, buyers may figure that if they wait they might get not only cheaper prices but lower loan rates as well, if the economy weakens in the second half.
Of course, if the economy began to create permanent jobs at a decent rate that could bolster the ranks of people confident enough to buy a new home or trade up. But the May employment report was dismal, raising fears that significant employment gains will remain hard to come by in this economy.
As even the Realtors were willing to note Tuesday, “Job growth and a manageable level of foreclosures are keys to [home] sales and price performance during the second half of the year.”
Falling mortgage rates could help, but they clearly didn’t have an overwhelming effect on existing home sales last month.
— Tom Petruno
Peak buyers couldn't afford it
The owners of today's featured property paid $965,000 on 7/13/2006. They used a $765,000 first mortgage and a $200,000 down payment. The stopped paying in late 2009, and they lost their entire down payment.
According to the listing agent, this listing may be a pre-foreclosure or short sale.
This property is in backup or contingent offer status.
The former plan 2 model in gated community of Arborel in Turtle Ridge. Spacious 2 bedroom and loft can be converted to a 3rd bedroom. An award winning design by California Pacific Homes, the property is inspired by Tuscan influences. Private walled patio off the dining room is conducive to relaxing moments in the garden. Community is gated and has amenities that include a cabana lined pool, spa, barbeque, clubhouse facilities, hiking trails and sports park. Acceptance of offer subject to lender of records approval of a short sale purchase.
Doesn't the phrase "inspired by Tuscan influences" sound rather tawdry.
The ongoing foreclosure crisis has slashed hundreds of billions of dollars in wealth from communities of color, a new CRL research report shows, as an estimated 17% of Latino homeowners and 11% of African-American homeowners have already lost their home to foreclosure or are now at imminent risk. The wealth drain is the result of direct losses from foreclosures and also the decline in neighboring property values each foreclosure brings.
The report—"Foreclosures by Race and Ethnicity: The Demographics of a Crisis," http://www.responsiblelending.org/mortgage-lending/research-analysis/foreclosures-by-race-and-ethnicity.html—shows that foreclosures will continue to climb and losses will continue to mount. From 2009 to 2012, those living near a foreclosed property in African American and Latino communities will have seen their home values drop by more than $350 billion—possibly exceeding the damage the Gulf States suffered from Hurricane Katrina. And high levels of unemployment that were caused by reckless lending and the collapse of the housing and financial markets continue to exacerbate the foreclosure crisis.
"Whether we're talking about oil spills or housing catastrophes, it's clear that America needs to invest in prevention, clean-up and recovery," said CRL President, Mike Calhoun. "As Congress finishes financial reform legislation, the rules on home lending need to get stronger, not weaker. We need to make sure a foreclosure crisis of this type never happens again, and, though so many homes have been lost, it's not too late to prevent more damage."
The percentage of homes in some stage of foreclosure in the United States is the highest on record and five times the norm, but little study has been done to quantify this trend. This report provides the most detailed estimate yet of how many foreclosures have been completed since the crisis started in 2007, how many more homes are on the brink of being lost, and how this man-made disaster has disproportionately damaged African-American and Latino communities.
No single set of numbers exists to tell this story. Instead, CRL used several databases to compute reasonable, even conservative, estimates that together add up to a grim picture: The United States has tolerated a dysfunctional lending system that has disproportionately eroded the wealth of communities of color and set them even further behind other groups on the economic ladder.
Among the report's findings:
An estimated 2.5 million foreclosures were completed from 2007 – 2009 and an estimated 5.7 additional ones are imminent. (Independent estimates have suggested that up to 13 million homes will be lost through 2014.)
On completed foreclosures, most on mortgages made between 2005 and 2008, we estimate that 56% involved a white family. But African American and Hispanic families have received a disproportionate share, even when accounting for income: Nearly 8% of both groups have already lost a home, compared to 4.5% of white borrowers.
The great majority of homes lost were owner occupied, as are those at imminent risk of being lost.
Here are several civil rights leaders' comments on the report:
"The findings in this report describe the devastating impact that the casino culture of Wall Street and the mortgage industry is having on communities of color. Instead of owning a piece of the American dream, these hardworking families have borne the brunt of an anything-goes regulatory system that has turned a blind eye toward predatory lending and the needs of vulnerable consumers, who may never recover the wealth they have lost. The report demonstrates why we need a strong, independent Consumer Financial Protection Bureau, and why mortgage servicers must act swiftly to help more families keep their homes." – Wade Henderson, President and CEO of The Leadership Conference on Civil and Human Rights.
"We know that with the right tools, every family in America can share in the American Dream. Knowing this makes these recent findings very disturbing. Latino homeownership will retract by 17% by the time we feel the full effects of the fallout from the credit crisis. That's more than one million Hispanic households, an outstanding figure and higher than other groups. This crisis is moving our community in the wrong direction and it's unacceptable," – Janet Murguía, President and CEO of NCLR (National Council of La Raza.)
"With 17 percent of Latino and 11 percent of African-American homeowners having essentially already lost their homes and estimates that many more foreclosures are on the way, we need Congress to hurry up and pass an independent Consumer Financial Protection Agency. We also need servicers to do whatever is necessary to stop this hemorrhaging now. Enough is enough." – Shana Smith, President and CEO of the National Fair Housing Alliance
For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org; or Charlene Crowell at (919) 313-8523 or charlene.crowell@responsiblelending.org.
Peak buyer with $0 down still got some HELOC booty
Some of the more prudent peak buyers put money down and lost their down payment in addition to the trashing of their credit. The totally irresponsible buyer who put no money down and managed to extract some HELOC money really benefited from gaming the system.
Today's featured property was purchased on 8/31/2006 for $1,000,000. The owners used a $800,000 first mortgage, a $200,000 second mortgage, and a $0 down payment.
On 5/14/2007 they refinanced the second mortgage for $291,000… they made $91,000 for owning about 9 months.
According to the listing agent, this listing may be a pre-foreclosure or short sale.
This property is in backup or contingent offer status.
SHORT SALE SUBJECT TO LENDER APPROVAL.Lovely Desirable Plan 2 Alexandria home,Located in Prestigous Columbus Grove. Dramatic Entry with Distressed Hardwood Floors, Vaulted Ceiling. Formal Livingroom, Formal Diningroom,French Doors Open to Paved Atrium. Over 100k in Custom upgrades! An Entertainers Delight, Spacious Gourmet Kitchen w/Eat at Island, Granite Slab Counters,Full slate backsplash, Undercounter Lighting, GE Monogram stainless steel appliances,6 burner cooktop,large Pantry. Inviting Familyroom with Crackling Fireplc. plus elegant Diningroom. Sliders lead you to rear yard with Full Blt.in Gas Barbque, sink (Outdoor Kitchen),Paved Patio.Four Bedrooms Plus LOFT(possible 5th bdrm), 3 Full Tiled Baths, 1 Bedroom & Bath Downstairs. Huge Mastersuite w/boxed coffered Ceiling, Retreat,Cozy Fireplace.Master Bath 6 jet Jacuzzi tub,wardrobe area,dbl.vanities,huge walkin closet w/blt.in. Blt.in Music sys.Prewired Too many amenties to list.3 Car Tandem Garage. Model Perfect Home! MUST SEE!
Why Is This Written In Title Case? Prestigous? amenties?
We just got word of a 4bd/3ba 2,538 square foot home in Irvine that has hit the market. It is a Plan C in the Greenfield tract in the village of Northwood. It has a 3 car wide garage and was built in 1985 by Standard Pacific. It is priced at $879,000. This home is not yet on MLS but will be in 7 days.
If you want to learn more about this property, please contact us:
I have profiled this property before, and the HELOC abuse is extraordinary. I wonder if the owners were buying their own stairway to heaven.
Bought at the bottom, abused HELOCs, gamed the system, and squatted for 18 months
The owners of today's featured property are representative of all that is wrong with home owners in Irvine. They did everything wrong, and they are being strongly rewarded for their bad behavior.
The property was purchased on 8/20/1997 for $349,000. The owners used a $279,100 first mortgage and a $69,900 down payment.
On 1/3/2000, the owners celebrated the millennium by opening a $150,000 HELOC.
On 4/28/2003 they opened a $200,000 HELOC.
On 1/5/2004 they obtained a $353,500 HELOC.
On 4/22/2004 they got another $145,000 HELOC.
On 2/25/2005 they refinanced with a $661,000 first mortgage.
On 2/23/2006 they obtained a $344,000 HELOC.
On 9/18/2006 they obtained a stand-alone second for $390,000.
Total property debt is $1,051,000
Total mortgage equity withdrawal is $771,900.
Total squatting time is at least 18 months.
Foreclosure Record
Recording Date: 06/03/2010
Document Type: Notice of Default
Foreclosure Record
Recording Date: 03/26/2010
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 12/21/2009
Document Type: Notice of Default
Foreclosure Record
Recording Date: 06/25/2009
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 04/20/2009
Document Type: Notice of Default
These owners extracted about $100,000 per year for the 7 years they were stripping the property. When the ATM machine was finally turned off, they managed to game the system for 18 months… so far. Since they are still back at the NOD stage, they will be in the property until at least October, and since this one is in jumbo loan territory, they will likely be allowed to squat for much longer.
What would you do with $771,900?
What would you do with two years or more without a housing payment?
According to the listing agent, this listing may be a pre-foreclosure or short sale.
This property is in backup or contingent offer status.
Fabulous opportunity in the guard gated community of Northwood Pointe. 4 spacious bedrooms plus extra large bonus room/office. Formal living room and dining room. Kitchen with double oven, cooking island and breakfast nook. Super sized family room with fireplace and built in entertainment center. Corner lot with great curb appeal. A short walk to award winning Canyonview Elementary and Northwood High. Enjoy community pool, parks and trails. Close to shopping, dining, entertainment, 5 fwy and toll roads.
In his time off from his job as an animal control officer, Matthew Piper mows greenbelts and repairs streetlights free of charge for his Moreno Valley condominium community.
Piper, 31, the treasurer of the Aspen Hills Community Association, said he worries about the association's finances and feels compelled to help.
Piper and a handful of other homeowners have endeavored to keep the community afloat since April 25, 2008, when its builder, Rancho Cucamonga-based Prestige Homes, filed for bankruptcy.
At that time, only 50 of the 168 townhomes planned for the lakeside community had been built.
Construction stopped abruptly, leaving the ghostly gray frames of three buildings as a fixture of the landscape.
Aspen Hills is among the communities with homeowners associations that are enduring the full force of the economic hurricane.
Marjorie Murray, a housing policy analyst and president of the Center for California Homeowner Association Law, a nonprofit consumer advocacy group, said that in bankrupt developments throughout the state, homeowners "are living in an island with wreckage all around them and it is completely unclear what their recourse is."
Because of the housing crisis and job losses, many community associations nationwide wrestle with high delinquencies in the collection of homeowners fees that are their lifeblood, said Frank Rathbun, spokesman for the Community Associations Institute, a Virginia-based educational organization that advocates on behalf of community associations.
In Florida, community associations recently were dealt a setback when a state appellate court denied a motion to compel a bank to complete a foreclosure on a property where neither the mortgage nor association fees were being paid. Nor could the bank be forced to start paying the association fees.
Frozen in mid-construction when the real estate market collapsed, Aspen Hills has an uncertain future. Homes continue falling to foreclosure, leaving the homeowners association in a struggle to provide services with diminished income.
Neither the builder nor its lenders can be required to complete the project or deliver promised amenities.
In Moreno Valley, Aspen Hills' entry gates at Lasselle Street are always swung open, stirring the ire of homeowners who had expected the security of a private community. But the gates were never automated.
amenities lacking
The clubhouse, stripped of furniture by thieves, and a partly completed swimming pool are behind fencing, off limits to residents. Weeds choke the banks of the lake, areas planned for parks with barbecues, and children's play yards. Grass and shrubs are irrigated with water siphoned from a fire hydrant because a modern irrigation system using recycled water was not completed.
Residents say they bought into the idea of a pleasant, low-stress community. That has not materialized.
"From what they pitched us, you buy a house and move in and pay your HOA dues and everything would be taken care of," said Jamaal Cannon, an elementary school physical education teacher and the homeowners association's president.
The economy also has taken its toll on residents who have been forced into foreclosure or chosen it rather than continuing to make payments on houses they could buy today at a third of what they paid for them, said Piper.
According to multiple-listing information about the Aspen townhouse community, a three-bedroom home that sold new in Aspen Hills for $357,500 in July 2007 recently resold after being listed for $102,000. A two-bedroom home similar to one that sold for $251,280 in 2007 resold for $81,000 in November.
Piper said of the 42 homes Prestige Homes sold when the project opened three years ago, 14 have gone to foreclosure, and three others were resold for less than their mortgages.
In March 2009, Temecula-based Equity Management resigned as Aspen Hills' management company and turned over all responsibilities to homeowners on the community's association board.
Equity Management had not been paid for eight months, said Carol Piering, spokeswoman for Associa, Equity Management's corporate parent. "We were very sympathetic to what was happening, but it got to the point that we had to let Aspen Hills go," she said.
Before filing for bankruptcy, Prestige Homes paid the association's ongoing bills. Homeowners association fees were deposited into a reserve account to cover future maintenance expenses like painting and roof repairs for which condominium associations are responsible, Piper said.
But after Prestige notified Aspen Hills residents it was going bankrupt, Piper said, Prestige halted its financial support and the association was forced to deplete its reserves as monthly bills exceeded revenue.
Company quit paying
Prestige Homes stopped paying the association's fees for eight unsold homes, including six boarded-up model homes. As of May 1, Piper said, Prestige owed the association $63,776, a sum that grows by the month.
Also, Piper figures that only 18 homeowners are regularly paying their monthly fees. In all, he said the association is owed about $97,000 from the builder and delinquent homeowners.
Piper said some homeowners argue that they should not pay fees because they are not getting the lifestyle they expected.
"We were sort of abandoned by the developer and management company that was initially here. … In my mind it is a breach of contract," said Eulanda Page, a homeowner who contends that her fees should be reduced, not raised as some have suggested to replenish the reserves.
Piper said he has gone door to door trying to explain to homeowners that unless they pay their monthly fee of $217.40, the association can't pay for vital services like trash pickup, sewer and water.
breaking point
At one point last summer, Piper said, the association owed so much to the local water district that the district threatened to shut off the irrigation water. That prospect was averted, he said, by negotiating a plan to pay off the balance.
In a belt-tightening effort, volunteers from the community perform much of the landscaping and maintenance. Piper spends 10 to 40 hours a week on association work.
Piper said he has called city and state agencies for help but learned that none have authority to assist an association in Aspen Hills' predicament. As a last resort, he searched the Internet for professional advice.
John Cligny, a property manager with Association Management Company LLC, in the San Francisco Bay Area, said Piper contacted him by mistake, thinking Cligny was in the South Bay area of Los Angeles County.
Cligny realized Aspen Hills was "kind of at the end of their rope," so he flew to Southern California to talk to the association members about their options.
Early last month, as an act of charity, Cligny took on the association as a long-distance client at a discounted rate. He says their predicament underscores the need for legislative changes to help homeowners associations survive an onslaught of financial troubles stemming from the economy.
Cligny recommended amending the association's governing documents to prevent Aspen Hills from being overrun with investors, who so far have purchased 18 of the houses and converted them to rentals.
Owner occupants cannot buy homes using FHA mortgages at Aspen Hills, Cligny said, because the FHA will not insure loans in communities where more than 15 percent of the homes are 30 days delinquent on assessments.
Aspen Hills will get a second strike against it if rentals exceed 50 percent of the units, which would give the FHA yet another reason for refusing to back loans to owner occupants there.
Cligny is urging the association to more aggressively collect fees and, when necessary, send neighbors to collection agencies and place liens on the homes of those who fail to pay.
liens fall short
But Piper said the association's liens are worthless when homes are sold in foreclosure. Because home values have fallen dramatically, he said, nothing remains from the proceeds after lenders, whose claims have priority, take their share.
Assessment delinquencies have become thorns in the side of homeowners associations across the state, said Kelly G. Richardson, who chairs the legislative action committee of the Community Associations Institute.
What would help, he said, would be state legislation giving associations the right to take nine months of delinquent assessments off the top of a foreclosure sale.
"It would be a godsend for the associations' (liens) not to be wiped out over and over again," he said. Because of the assessment losses, he said, other homeowners are forced to make up the shortfall through higher assessments or declining services.
The problem is magnified, Richardson said, because banks are stalling the foreclosure process, which lets delinquent assessments pile up. Banks do not have legal responsibility for paying such fees until they take possession of a home, and then they are not required to pay the former owner's obligations, he said.
Aspen Hills residents are eager for Prestige Homes' lenders to foreclose on the unfinished portion of their neighborhood and arrange for a developer to build out the rest of the lots and amenities.
Five-bank consortium
But the five-bank consortium represented by Wells Fargois not legally required to foreclose on the project, and it isn't clear that they will do so, said Mike Buckley, the consortium's bankruptcy lawyer.
In August 2008, the bankruptcy court granted a motion that allowed the lenders to foreclose on residential projects that Prestige Homes had been developing in California and Arizona, but ownership of Aspen Hills remains in the bankrupt builder's name.
Trustee auctions have been scheduled repeatedly and then canceled for "a wide variety of reasons," said Buckley, declining to be more specific.
Because the lenders have not taken title to Aspen Hills, they have no obligation to start paying association fees on the eight unsold homes. Nor are they going to complete the swimming pool, parks and gates.
Jeff Last, managing director for XRoads Solutions, a real estate consulting firm working for the consortium, said to protect the public safety and to fight blight, the lenders have fenced off the clubhouse, pool and abandoned framed houses and hauled away construction debris.
Last said it does not make sense for the lenders to spend more on the property when it is uncertain if they will take possession. "If we foreclosed, I would anticipate we could do a lot more," he said.
Today there is no market for new attached housing in Moreno Valley, according to Steve Johnson, who heads the Riverside office of Metrostudy, a real estate research firm. "The banks probably realize there is very little demand for the project. So they are not in a hurry," he said.
But Cligny said the community can't afford to wait. "There needs to be some responsibility put on lenders that requires them to perfect the foreclosure and not leave a project in limbo. I think they have responsibility to people who in good faith purchased in the project," he said.
Cligny said he has filed, on behalf of the Aspen Hills Community Association, a claim on bonds that Prestige Homes purchased that could cover a portion of the builder's unpaid homeowners association fees.
The relief that the association could get is limited since such bonds cover only six months worth of assessments, according to the California Department of Real Estate.
bonds said lacking
Also Robert Gilmore, district manager of the department's Southern California subdivision section, said Prestige Homes did not post a bond to guarantee that the community's recreation center, including the swimming pool and clubhouse, would be completed.
A developer is required to post a bond or refrain from mentioning amenities like a recreation center that are not yet built when pitching a new community to prospective home buyers.
Developer James Previti Sr., who owns Prestige Homes and seven other companies that have gone into bankruptcy, did not return calls to find out why a completion bond had not been posted.
Also, escrow instructions that Prestige Homes filed with the Department of Real Estate said the entry gates would be built before home sales occurred, which Gilmore said would logically mean the gates also should function.
Gilmore said if Aspen Hills homeowners complain to the Department of Real Estate that advertised amenities were never delivered and the builder did not buy a completion bond, their complaint would be sent to the department's enforcement section for investigation.
If Prestige Homes is found at fault, Gilmore said, the department could prevent Prestige Homes from selling more townhouses at Aspen Hills or forward the case to local authorities for criminal prosecution. But he acknowledged it's hard to see how either action would get the community back on its feet.
They couldn't afford it
There are many loan owners who simply overextended themselves and bought more property than they could afford. Most did this out of desire for appreciation, but some simply wanted a nice house, and with nobody involved with the tranaction to tell them no, many people over borrowed.
Today's featured property was purchased on 6/9/2005 for $970,000. The owners used a $776,000 Option ARM with a 1% teaser rate, a $97,000 HELOC, and a $97,000 down payment.
On 9/28/2007 they obtained a $153,000 HELOC.
Total property debt is $929,000 plus negative amortization and missed payments.
Total mortgage equity withdrawal is $56,000 which doesn't fully recover their down payment.
According to the listing agent, this listing may be a pre-foreclosure or short sale.
This property is in backup or contingent offer status.
Gorgeous 4 bedroom, 2.5 bath home in the highly desirable Northpark area of Irvine. A very open floorplan that is both spacious and bright, one will find 2,500 sq ft. of elegant living space bursting with upgrades: from upgraded cabinetry and granite kitchen countertops, to ceramic tile floors, to a delightful breakfast nook that looks out to a perfectly manicured and spacious backyard with a trickling fountain and barbeque station. No one behind, so feels very private. Upstairs is a large master bedroom with a remodeled master bath including dual vanities, a separate shower, large walk-in closet, and a deep soaking tub. There is no one behind, so privacy is assured – and there is inside parking for 3 cars. Northpark feels like a 5-star resort with multiple pools, Jacuzzis, basketball and tennis courts. The schools are highly-rated and are within walking distance. Come and enjoy the good life in this fantastic home.
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