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The threat of foreclosure has over 1 in 5 homeowners wondering about their options and what will happen to them. In this video we provide a few examples of how you can take charge of your life and financial situation in order to avoid foreclosure.
YAKIMA, Wash. -- Residents of Selah's outlying areas often drive by the all-brick exterior home on 1100 Selah Loop Road.
For two Sundays last month, those neighbors got to look inside the 1960s-era house that piqued their curiosity.
Most were in awe at how large that home was from the inside -- it's more than 4,100 square feet with four bedrooms, a finished basement and living areas.
"It just keeps going and going," said Lanny Lowe, 57, of Selah, who toured the house Sept. 26.
The Selah home is a real estate-owned home, or REO, a foreclosed home that a bank repossesses, usually after the home fails to sell during a trustee sale.
REOs have increased in Yakima County over the past few years.
Through August, there were 213 REOs in Yakima County in 2010, according to RealtyTrac, an Irvine, Calif., firm that tracks foreclosure trends. That is fewer than the 218 REOs during the same period in 2009, but well above the 61 REOs in 2008.
Banks may do nothing with the REOs or rent them out, but eventually the homes are put on the local real estate market.
"In the last week, I've had a real influx of (REO) listings," said Phil Barnes, an agent with Creekside Realty in Yakima.
The REOs come from all price ranges, not just the inexpensive ones.
"They're all over the county," said Lynda Hopkins, an agent for Yakima's Lakemont Real Estate who markets REOs properties, including the home in Selah. "There are expensive homes people can't afford."
Overall, Yakima County's real estate market has fared better than other parts of the United States, but the local real estate industry is still paying attention to the increase in REOs.
There are different theories on the cause of the increase.
One is that federal efforts, such as loan modification programs, created a delay of some homes going into foreclosure.
But those homes eventually went into foreclosure and created an additional influx of bank repossessions in the past few months.
Another theory is that foreclosures have increased, caused by everything from bad mortgage loans to a fallout from a higher number of people out of work.
In July, about 1.3 percent of mortgages for Yakima County homes were in foreclosure, compared with 0.99 percent at the beginning of 2010 and 1.03 percent in July 2009, according to CoreLogic, a Santa Ana, Calif., firm that provides consumer and financial data.
And a greater number of those foreclosures are failing to sell on the courthouse steps, leading to more bank repossessions.
Foreclosed homes are sold every Friday morning at the Yakima County Courthouse. The sale is done by firms working on behalf of a trustee, usually a bank or a company representing the bank.
In the past, about one out of every 15 Yakima County homes auctioned off would sell, said Dennis Copeland, owner of Legal Couriers Inc., a firm that posts foreclosure notices and conducts the trustee sales at the courthouse.
These days, it's more like one out of 20 homes, he said.
"The problem that I noticed just recently is that there is a lot of (foreclosed) properties where the deed of trust is from 2007, 2008, 2009," Copeland said. "There is no equity."
Often banks will collect price estimates from real estate brokers or home appraisers on local homes that are several months delinquent on mortgage payments. The bank uses them to decide how to sell the homes if they go into foreclosure and are repossessed, Barnes said.
Barnes said he's doing about 10 such price estimates a week as of late, compared to just one or two a few years ago.
For him, it's another indicator of more foreclosures and more bank repossessions in the county.
REOs and other foreclosed homes made up 9.3 percent of Yakima County's real estate sales for July, well below that of the national rate of 17.9 percent, according to Seattle-based real estate firm Zillow.com.
But some believe REOs may play a bigger role in a market that is starting to see a slowdown in housing activity.
In August, residential home sales dropped by 20.9 percent in dollar volume and 23.8 percent in the number of sales from August 2009, according to Headwaters-The Source, a Selah-based firm that tracks Yakima County real estate sales.
REOs create additional competition for an already-growing inventory of homes on the market.
As of the end of June, the supply of homes on the market in Yakima County was nine months, according to the Washington Center for Real Estate Research. The supply for a balanced market is usually five to seven months.
Bank owners have no emotional attachment or financial need to price it too high, said Kenny Nelson, broker of DK Bain Real Estate Inc. in Sunnyside.
The goal for these banks is to break even, he said.
Monthly median prices for bank-owned homes sold in Yakima County so far in 2010 have ranged from $59,000 to $119,250, according to Headwaters-The Source.
That range is much less than the monthly median price of homes overall, which ranged from $145,000 to $160,000.
Another issue is a reduction in potential buyers due to the expiration of two homebuyer tax credits -- $8,000 for first-time home buyers and $6,500 for repeat home buyers.
And there are even fewer buyers for homes that are in the higher-priced ranges. Homes that cost more than $250,000 have at least a year's supply, according to the Washington Center for Real Estate Research.
The home on Selah Loop Road was initially listed at $419,000 when it was put on the market more than four months ago. It did not even sell when the listed price dropped to $279,000.
"Not everyone needs 4,100 square feet or wants to pay $500 a month in property taxes," Hopkins said.
Fannie Mae, which currently owns the home, tried another tactic Friday to get the home sold: a private auction.
There were about 20 registered bids on the home, Hopkins said.
The auction company, Williams & Williams, would not reveal the final bid, stating that the information was proprietary between the seller and the prospective buyer once the auction concluded.
Despite the increase of foreclosures and REOs in Yakima County, other markets in the country are in worse shape.
The percentage of mortgages nationwide in foreclosure during July was 3.13 percent, more than double Yakima County's rate of 1.3 percent, according to CoreLogic.
"All of their performance numbers are very low relative to the U.S., and at those rates distressed properties will not have a large impact on the market," said Sam Khater, senior economist for CoreLogic.
Local agents believe there may not be enough REOs and foreclosed homes to create huge revenue declines locally. But they're watching to see if the increase is great enough to stall sales activity growth for several years, especially if high unemployment continues to be an issue.
"This isn't going to go away any time soon," Barnes said.
For more information go to:
zillow.com
corelogic.com
realtytrac.com* Mai Hoang can be reached at 509-577-7685 or mhoang@yakimaherald.com.
This is Rep. Alan Grayson explaining the crisis of real estate foreclosure fraud and how it links to the entire securitization chain of Wall Street.
In the current real estate market, is it a good time to downsize and sell the family home?
What is the best season to sell a home?
Is it possible to make money when selling a home to downsize to a smaller residence?
A reward for responsible homeowners
By Allan Sloan, senior editor-at-largeSeptember 8, 2010: 11:33 AM ET
FORTUNE -- The government has bailed out Wall Street firms, giant banks, creditors of Fannie Mae and Freddie Mac -- and is trying to bail out people who've defaulted or are about to default on their mortgages. But let's say you're a hardworking family that has done nothing wrong except buy a home when the housing bubble was at its peak a few years ago. Your mortgage is now way underwater, but you're still making payments because you want to stay in your home -- and you're actually honorable. You're paying for everyone else's bailout, but because you have no equity in your house, you can't refinance to take advantage of the ultra-low mortgage rates that Uncle Sam's bailout strategy has produced. To use the technical term, you're being screwed.
Enter Keith Gumbinger, a leading mortgage expert, with an interesting proposal for how the government can help you, help the housing market, and even help whoever owns your mortgage. Gumbinger, a vice president at the HSH Associates mortgage consulting firm, wants the federal government to issue what he calls "value gap coverage." It would reduce your interest payments, reduce your incentive to walk away from your mortgage, and show that behaving well doesn't make you a sucker.
"This is for people who are underwater on their mortgages but still current on them and have every intention of remaining so, and hope to remain in their homes for the foreseeable future," says Gumbinger. "These people are being compelled to pick up the tab for reckless borrowers and failing banks, and get absolutely no help from anywhere for themselves. How about a reward for doing the right thing for a change?"
Let me show how this would work, using HSH numbers that I've rounded for simplicity's sake. Say you bought a house for $350,000 in July 2006 -- those were the days of 100% financing, so you borrowed $350,000 on a 30-year fixed-rate mortgage at 6.8%. The house is now worth $280,000, but your mortgage balance is $334,000. The current rate for a 30-year fixed-rate loan, if you could get one, is 4.7%.
Under Gumbinger's plan, you'd get a new $280,000 mortgage at 4.7%, and the government would guarantee the other $54,000, on which you'd pay 4.7% interest to the current mortgage holder. This would reduce your payments by $6,700 a year, or roughly 25%. Your mortgage holder wouldn't have to take a write-down, because the shortfall would be guaranteed by Uncle Sam. You get lower payments, preserve your credit rating, and save your pride by not becoming a deadbeat.
The government is probably on the hook, in one way or another, for some of your shortfall now. This way everyone gets breathing space for the home market to recover. The government's exposure would shrink over time as house prices begin to rise modestly (or so we hope) and your payments gradually reduce the principal on your loan. You wouldn't have any equity in your house until its market value exceeds the loan balance plus the government's guarantee. But then again, you don't have any equity now.
Gumbinger says there are many differences between his proposal and the government's latest mortgage relief effort, including the fact that the government's requires mortgage holders to take a writedown, and his doesn't. You can find his detailed plan, with the fees he proposes to cover costs right here.
Sure, this plan isn't perfect. Among other things, we'd have to make sure people didn't immediately sell their house, stick the government with the $54,000 bill, then buy another house with a low-down-payment FHA mortgage to reduce monthly payments and have all the equity upside.
But Gumbinger's idea strikes me as a better place to start than current restructuring programs, which sound great but somehow don't seem to work out.
How much would this cost the government? Who knows? But it has to be cheaper financially and socially than leaving millions of honorable homeowners at higher risk of foreclosure and forcing them to pay above-market rates on underwater loans.
First Published: September 7, 2010: 5:49 AM ET
