mortgage delinquencies

[turbo6bar]

The House passed a bill on the 10th allowing FHA to increase the annual premium from 0.5% to 1.50%. This is akin to a 1.5% increase in interest rate. Coupled with a reduction in seller contributions, this creates a deflationary force in housing. All else equal, a 1% increase in annual premium is a 20% increase in monthly payment.

Overall, this strengthens capital reserves for FHA. Indirectly, however, a rise in rate may create a greater number of future delinquencies. FHA and Congress hope the scale is tipped in favor of good.

[Noah930]

Originally Posted by Eric Coffey

It's funny how a lot of folks think that they can (or should be able to) get bank owned or approved RE deals at substantially less than current market value.

From personal home shopping experience, foreclosures should exchange for substantially less than current market value. Because they're often trashed. On paper, 2000 sq ft, 3 BR, 2.5 BA looks the same, foreclosed or not. But after my wife and I looked at probably 80 homes last year (with maybe half a dozen of those being foreclosures--we quit going to foreclosures after awhile), we found that foreclosed homes seemed to universally have issues with missing light fixtures, doors, bathroom fixtures, trashed carpeting, broken kitchen cabinetry, holes in walls/floors, etc. Clearly signs of abuse on top of neglect. And with obviously no story about the rest of the condition of the house/roof/foundation/etc.

You can get a home inspection (which is like a PPI), but you'd still not have any of the history of the place (which would be like maintenance records on an old car purchase), and the only knowledge you'd have of the place would be that the previous owners didn't take very good care of it.

[fintstone]

Two data points

1) I recently made a full price offer for a local short sale home listed at $498K. The house had been vacant for a couple of years, was a bit run down and the lot was grown up. The banks (it had a first and second) refused to accept the offer, made no counter other than to say that they would just forclose. A few months later, they have forclosed and somone else owns the house. My realtor called last week and told me that he was in touch with the new owner who was willing to sell me the house for my previous offer. The new owner is a builder who is planning to fix a few things and flip it. He has already cleaned up the acre lot and it looks much better. Obviously, he must have bought the house for much less than my offer...if he can purchase and fix up the home, then sell it to me for the same price and still make a profit. WTF?

2) I have a vacation home that appraises for $320K. It appraised for $680K in 2006. I believe the actual value to be about $450K...but the appraiser are very cautious in the area now. I owe about $630K (1st and 2nd, both with Wells Fargo). It is an adjustable, conventional, interest-only loan.

I tried to refinance since rates are low and the home has an adjustable rate...I had about $320K to bring to the table...but the lender...would not refinance it because the appraisal came in so low and I would not have 20% equity. I would have 80% equity if they just let me finance the 1st mortgage...but they required that I have 80% of both and refinance both at once. It seems odd that they would rather I be so far under water...and risk my walking away from the home (which would be like saving $350K over keeping it). I have plenty of income and a credit rating of well over 800. Are they that sure about pusuing me for the difference if I stop paying? I will not do this, but they surely do not know that. It seems that they would have plenty of incentive to get as much cash from me as possible. It seems odd that they would prefer that I owe them $630K on a home worth $320K as opposed to owing $310K on the same home.

[turbo6bar]

If you're considering foreclosures that have been on the market for more than a few days/weeks, you're looking at the leftovers. Investors with strong hands tie up the good deals very quickly. If you want 'retail' quality property, on your terms, don't expect a good price.

Noah930, for the past couple years, foreclosure pricing was not far below retail pricing after considering repairs. That was a loser's game. The scene is steadily changing. It will be a buyer's market for the next few years.

[Rick Lee]

Fint, a lot of banks view first and second liens as totally separate, even if they're held by the same bank. BTDT!

On your first case it sounds like the guy bought the place at the courthouse steps or had some connection with the bank to snag it quickly and spare the realtor commissions. Did you offer cash or need financing? I've lost a few deals to lower bidders because they were paying cash.

[turbo6bar]

fint, banks/lenders/realtors were irrational on the ride up, and they fail to disappoint on the ride down. that's life.

[turbo6bar]

fint, a little bit of work at the courthouse will tell you exactly what the builder paid.

[Noah930]

Originally Posted by turbo6bar

If you're considering foreclosures that have been on the market for more than a few days/weeks, you're looking at the leftovers. Investors with strong hands tie up the good deals very quickly. If you want 'retail' quality property, on your terms, don't expect a good price.

Noah930, for the past couple years, foreclosure pricing was not far below retail pricing after considering repairs. That was a loser's game. The scene is steadily changing. It will be a buyer's market for the next few years.

We looked for a house for 6-8 months. If there was something that fit our criteria in the 3 neighborhoods we were looking, we were on it within a week of MLS listing. Stuff did not "sit" unloved on the market. I did not consider a single one of the recently-listed foreclosure properties we saw to be in anything approaching move-in condition.

I understand the concept of quality stuff moving quickly. We bid on 4 other homes before we got ours. On 3 of those, there were multiple bidders (on the fourth our offer was accepted but we dropped out after reconsidering the amount of work we needed to put into it). One of the 3 was a short sale that went within two weeks for more than asking. The second of the 3 went within a week after the seller dropped the price (at the new asking price). The third went (for cash) within a week at asking price.

[fintstone]

Originally Posted by Rick Lee

Fint, a lot of banks view first and second liens as totally separate, even if they're held by the same bank. BTDT!

On your first case it sounds like the guy bought the place at the courthouse steps or had some connection with the bank to snag it quickly and spare the realtor commissions. Did you offer cash or need financing? I've lost a few deals to lower bidders because they were paying cash.

I had preapproved financing with a large down payment...but not cash.

[fintstone]

Originally Posted by turbo6bar

fint, a little bit of work at the courthouse will tell you exactly what the builder paid.

Agreed...but have already moved on anyways. I am looking a potential position in another city now...so not going to make a play for that one now unless the new position falls through (good possibility it will though).

[turbo6bar]

Originally Posted by Noah930

ff moving quickly. We bid on 4 other homes before we got ours. On 3 of those, there were multiple bidders (on the fourth our offer was accepted but we dropped out after reconsidering the amount of work we needed to put into it). One of the 3 was a short sale that went within two weeks for more than asking. The second of the 3 went within a week after the seller dropped the price (at the new asking price). The third went (for cash) within a week at asking price.

Could be the sun baking my noggin, but I have noticed a perceptible change in the market. A combination of factors are at play. The expiration of the homebuyer credit is one factor. Statistics showed that first-time homebuyers had an abnormal impact on sales. Their absence should bring the fervor out of the distressed housing market. For a while there, it was absurd. Last fall and early this year buyers were bidding well over asking on HUD properties. It's still happening there, but the fools are overlooking good buys through other channels (REOs from banks and other agencies).

Patience rewards the bold.