Foreclosure Renovations

Will foreclosures spur home improvements? That is the hope of many who involved with the home improvement industry. The hope is that the sales of foreclosure will spur the demand long enough for the rest of the market to start back up. It does sound like there is a valid point. Many foreclosures have been so badly damaged or just fall into a state of disrepair by being abandoned for so long that some improvements may need to be made just to make the properties habitable. From this article in the Atlanta Journal Constitution titled Spending on home repairs declines details the hope of the home improvement field. Let's take a look -

A report by analysts at Fitch Ratings puts a fine point on what Atlanta-based Home Depot has been saying for several quarters: Home improvement spending is down for the second year in row.

And it’s expected to decline again this year.

In 2008, sales of home improvement products were $290.5 billion, down 4.5 percent from the previous year. The figures are from the Home Improvement Research Institute.

...

Despite the negative housing trends, the Fitch report said contractors are getting more calls for estimates. Homeowners are looking for affordable, eco-friendly repairs, such as replacing windows and siding.

Homes bought in foreclosure may also present a silver lining.

“Home improvement spending may benefit from banks or new owners renovating these properties,” the report said, though the spending spurt could be temporary.

Apparently Memorial Day weekend brought in some good numbers, finally. Since consumer confidence is also improving people may be spending again. However the devil will be in the details - what are they spending on. Like gardens to save of food expenses??? Or other small improvements to save on utility expenses.

Perhaps we are leaving the penny wise, pound foolish ideology that the housing bubble brought with it. But we really believe Top Ramen does taste better off granite counters. Because it tastes pretty bad eating our laminates!

Interest Rates Are Rising

One of the few brightspots during recent times was the low interest rates. These once in a lifetime rates spurred a refinancing boom - giving many people extra money every month and generating income for brokers, lenders, appraisers and everyone else tied to refinancing. It also helped the ARM holders - keeping affordable payments rather than rising ones. However those times are fading away. If you did not lock into a rate by early May you just may be out of luck. If governmental forces can drive rates back down they will - or at least try very hard to - but chances are that boom has also busted. From this article in Bloomberg titled Bernanke Bid To Lift Housing Scuttled By Rising Rates, Defaults. We discussed the defaults earlier, now lest look at the rising rates -

Federal Reserve Chairman Ben S. Bernanke’s efforts to bring down borrowing costs to revive the housing market and help the economy are stalling. Mortgage rates are almost back to where they were in March before the 30-year rate fell to a record and sparked a refinancing boom. Mortgage delinquencies rose to a record 9.12 percent of U.S. home loans and house prices dropped the most on record in the first quarter, industry reports show.

“Housing is not going to be the engine to get us out of this recession,” said Robert Eisenbeis, chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc., and former research director at the Federal Reserve Bank in Atlanta. “They’ve squeezed a lemon and now they’re trying to squeeze some more, but you can only get so much juice out of a lemon.”

Rates are rising as President Barack Obama is trying to spur a housing recovery. Obama has pledged to spend $275 billion to help keep as many as 9 million Americans in their homes and stem the rise of foreclosures. His measures also include a tax break of as much as $8,000 for first-time homebuyers that wouldn’t require repayment.

...

Freddie Mac estimates 73 percent of the projected $2.7 trillion of mortgage originations in 2009 will be for refinancing. In 2005, when the annual rate of home sales peaked, 48 percent of the $3.3 trillion in mortgages were refinancings, according to Freddie Mac. Refinancing originations may rise 145 percent to $1.87 trillion this year, according to a Mortgage Bankers Association estimate, the first increase in four years.

...

Treasury yields are rising as the U.S. government sells debt and investors anticipate more supply of government securities being sold to fund federal spending. That in turn is helping push mortgage rates higher.

Part of the problem for some wanting to refinance was the barriers of being underwater or having a second mortgage that would not resubordinate. People who could have saved substantially were left out of the refinance rush. Now with the rates inching upward they will be less inclined to rush out. It will also cause problems for the ARMs resets.

Over 6 Million Homeowners in Trouble

Over 6 million homes are late on their mortgages! If 12% of the homeowners with mortgages are late on their mortgages and there are approximately 50,762,000 million mortgages than approximately 6,091,440 homeowners are delinquent! Lets take a look at the mortgage chart -





From this article from the New York Times titled 12 Pct. Are Behind on Mortgage or in Foreclosure we see the housing crisis anywhere but near the bottom. Let's take a look -

A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn't expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were in the foreclosure process.

At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure.

Trouble behind and trouble ahead. Do you really believe things will turn by the end of the year? Maybe the declines will just slow down a bit...

Is the Housing Market Thawing Yet?

While properties are still not selling the numbers appear to be picking up a bit. With the values still declining there is a group of buyers willing to jump in a take a chance that the market is beginning to stabilize a bit. However we know that there is still another group still very wary that the prices still have a long way to decline. Apparently while the declines are siginficant they are still well above 2004 numbers. From this article in the Star Ledger titled New Jersey home sales show strength in April it seems that the best is being cherry-picked for the headline. Let's take a look -

The number of homes sold in the Northeast climbed 11.6 percent in April, the fastest pace in six months, although slower than last year's pace, according to data released yesterday from a real estate group.

Buyers started snapping up homes sold by owners in trouble, but the pace was still 10.6 percent slower than last year, according to the National Association of Realtors. Nationwide, the pace was more stable. Sales rose 2.9 percent over March and fell 3.5 percent compared with last year.

Also yesterday, government-released data showed New Jersey home sale prices fell in the first quarter this year 6.32 percent since the first quarter of 2008 and .75 percent over the fourth quarter of 2008. Still, home sale prices are 16.73 percent higher than they were five years ago.

...

Analysts predict New Jersey home prices will continue to fall at a rate of about 1 percent a month for the next few months, at least. Although the sales pace has increased, the number of homes for sale will continue to fluctuate and could even grow as foreclosures increase and homeowners step off the sidelines and brave the market.

There are always people who braved the market (maybe they were just not paying attention) after all there were still buyers last year! Braved the market seems to be a nice wording for those who really just knife-catching. Knowingly buying in a down market really does not make much sense. We are surprised that anyone is jumping in the market now with the expected further declines. But with this trend and predictions of market bottom perhaps the summer months will see some inclines - and not just of foreclosures.

... Or may not!

NJ Prices Still Falling

How much longer and further will home values in NJ continue to decline? We just underwent one of the most significant declines - 11.8% in March year over year. And the general consensus is that there is still more to go. That is where the consensus stops. Some are predicting that the decline is slowing and the market will turn soon. Others are not so optimistic - with the continuing Wall Street fallout and unemployment increases the market forces just do not show signs of positive changes. The Star Ledger breaks it down in an article titled N.J. home prices haven't hit bottom yet. Let's take a look -

The logic is depressingly simple. People lose their jobs, can't pay their mortgages and their homes go into foreclosure. Those houses are sold, usually at a loss. It's a cycle that is tugging New Jersey and New York-area home prices down at a record pace -- nearly 12 percent in March compared with last year, according to data released yesterday.

The New York-area market, including 14 New Jersey counties, saw an 11.8 percent price drop in March, a pace that has quickened over the past few months, according to the Standard & Poor's/Case-Shiller index.

"There is no turnaround in the market at this point," said Maureen Maitland, S&P vice president for index services.

Prices here still have further to fall, experts say, at a rate of about 1 percent a month.

...

Prices are expected to fall further as more people lose their jobs and homes, hitting a bottom sometime in the second half of the year, said Jeffrey Otteau, head of Otteau Valuation Group, which studies New Jersey real estate data.

Hitting bottom within the next six months sound great - but is it realistic. And by the predictions that would be another 6% or so decline. Still pretty significant drop from the peak of the bubble.

Well hopefully the predictions are correct, the bubble prices will remain just a memory for many - other than those still saddled with excessive debt or significantly damaged credit.

Housing Market Still In Trouble

We often hear that we are at or near bottom. The housing market will turn around soon. Sometimes it seems that the foreclosure levels has slowed somewhat - but most declines are due to the temporary moratoriums that just put off the inevitable. There are still many issues in the housing market that have not worked themselves through yet - yes the subprime bust is mostly over, and the ARMs issues will be resolved up until the interest rates rise again. But, as this article from the San Francisco Chronicle titled Signs of more trouble ahead for the housing market, there are still many more issues that have yet to be resolved. Let's take a look issues that are still unresolved (aside from the rising unemployment, lack of buyers, moving-up, tighter lending restrictions, and house values still in the decline mode) -

-- Foreclosure moratoriums end. Major lenders temporarily halted foreclosures late last year and early this year in anticipation of President Obama's housing rescue plan. In addition, California enacted a new law this fall that slowed down foreclosures. That means the foreclosure rate was artificially depressed over the past several months. The moratoriums have now expired.

...

-- Shadow inventory. Banks appear to be sitting on a vast inventory of homes that they have repossessed but not yet listed for sale. As previously reported in The Chronicle, this shadow foreclosure inventory could number in the hundreds of thousands nationwide. In addition, observers say banks appear to be deliberately delaying foreclosures, for example, not yet sending notices of default to homeowners who are months behind on their mortgages. All those properties eventually will have to hit the market, and, like all foreclosures, are likely to sell at cut-rate prices, driving down home values.

-- Walk-away underwater homeowners. The number of people who owe more than their home is worth continues to rise. Almost 22 percent of all mortgage holders were underwater by March, according to real estate site Zillow.com. That's spurring a phenomenon of "walk-away" homeowners - people who choose foreclosure because they don't want to pay off an upside-down asset.

...

-- Loan modification shortfalls. Modifying borrower's mortgages to make them more affordable is a cornerstone of foreclosure prevention. But to date, most such efforts have simply deferred foreclosure, rather than providing a permanent fix. An authoritative study by the Comptroller of the Currency found that more than half of modified loans end up delinquent again within months. However, the study was done before the Obama administration's mortgage mod plan came into play. The jury is still out on how effective it will be at preventing foreclosures.

-- Option ARM, Alt-A time bombs. Two categories of loans used for higher-end homes are emerging as the next trouble spots, as foreclosure contagion spreads beyond subprime. Delinquencies are rising for Alt-A loans given to people with good credit who could not document their income. Meanwhile, millions of option ARMs, or adjustable rate mortgages in which borrowers can choose to start off making minimum payments that don't even cover the interest, are expected to start resetting next summer. At reset, borrowers suddenly must make sharply higher payments, which can trigger foreclosures.

...

-- High end taking a hit. Until recently, most of the market activity and price drops have been among lower-cost homes. Homes under $350,000 have had the most severe price drops, while those above $750,000 have remained relatively stable. That appears to be changing, as foreclosure woes spread to the upper end. The difficulty of getting "jumbo" loans to buy pricey houses has exacerbated the situation to the point where unsold inventories of high-end homes are swelling.

In other words we still have a long, long way to go. Things first have to stabilize on their own - not with the foreclosure moratoriums or banks not bothering with foreclosure. We are getting closer to the Option ARM foreclosure wave. Hopefully the impact will not be as bad as the subprime foreclosure wave, but we doubt that...

Update to December Example

Today with the holiday and warm weather we will just doing an update of an example post from December. The property finally sold - but the owner took a very heavy loss. Let's revisit a snippet of the post -

Here is the property -

Front of the house.

Here are the financials -

• The property was purchased for $675,332.32 in September 2004 directly from the builder.

• The original mortgage at time of purchase was for $440,000 using an ARM with K Hovnanian American Mortgage.
  

• A Lis Pendens was filed against the property in December 2006.

• After an apparent divorce one of the owners was deeded the property in July 2007.

• On the same day as the new deed a new mortgage was taken for $500,000 using a balloon payment with Nationstar Mortgage.

• A private mortgage with a 2-year term (which looks to be interest free) with an apparent family member was also taken in July 2007.

• The property is currently for sale with a realtor for $625,000.

A property with a messy history.

Well, the property finally sold - for $550,000. It looks like through a realtor. So the homeowner lost $158,332.32 on the property - as well as suffered credit damage from the Lis Pendens and whatever separation took place during ownership. Probably glad to be rid of the place and move on - just a shame that there was so much suffering on so many levels in order to leave the property.


Good luck to the old owner on their new ventures. And hopefully the new owner's time will be work out better...

Savings and Debt

One quarter of homeowners do have no savings. We would imagine that when the non-homeowners are factored in the savings level is even lower. And we really wonder of the three-quarters that claim to have savings have enough to carry them over for any substantial time period. Probably very few. Homeowner savings and some other interesting statistics are covered in an article from The Albany Business Review titled Survey: 25% of homeowners have no savings. Let's take a look -

Twenty-five percent of U.S. homeowners have no savings to cover their living expenses if they lose their job, according to a survey by Wells Fargo & Co.

The quarterly survey discovered that to cut costs, homeowners are taking extreme actions; 34 percent say they have had family members or friends move in with them in the past year.

It also says 42 percent of the respondents are spending less on their children in the weak economy.

Of those who have debt other than a mortgage, 43 percent say they think about their debt every day. And 24 percent think about it at least once a week.

Because of their debt, 36 percent say they’re cutting back on expenditures such as dining out and buying clothes.

Interesting information. Notice that those cutting back are due to debt. We wonder if you added the number of people who are cutting back out of fear for their jobs - probably brings that 36% up significantly higher. Then add in the number of people who have had their credit cut and just do not have the means to have additional expenditures. Since we all know that there are many who will spend that credit regardless of the debt piled up.

Neither the money nor the incentive to spend it there. And it looks like neither one will be there for some time to come.

HomeSaver not Saving Homes

Loan modifications only work if people can pay the mortgages. Earlier this week we profiled a list of mortgage modification types that had one common requirement - the home owner needed an job/income/employment. Without that there is virtually no way that the modifications can work. Even with that there is a good chance the mod may not work. Housing Wire profiles a 70% failure rate of Fannie Mae's HomeSaver Advance program. While HomeSaver is not a loan mod program, it is a one to avoid foreclosure due to temporary economic problems. Let's take a look -

Fannie first launched the HomeSaver Advance (HSA) program in February ‘08 as a solution for borrowers experiencing temporary hardship. It allows servicers to offer unsecured, personal loans so delinquent borrowers can keep up on payments until the temporary hardship — unemployment, sickness, etc. — passes and borrowers can resume regular payments.

“This loan can offer these borrowers another alternative, and help prevent a temporary setback from becoming a foreclosure,” a Fannie executive in the single-family credit risk management division said in a media statement announcing the program.

But as mortgage performance deteriorated through ‘08, Fannie’s conservator, FHFA, noticed an alarming trend among the mortgages participating in the advance program.

“HSA is showing high redefault rates on the early offerings,” FHFA director James Lockhart noted in a Congressional report this week. “Performance on the February through April offerings shows a redefault [or recidivism] rate of almost 70%, which calls into question the program’s assumptions that borrowers have the capacity to make payments going forward.”

With the ever increasing unemployment rate even the best mods are doomed to fail at high rates.

Deals on Contractors?

Getting great deals on contractors is a big, recent story. With so many people unable to spend money on projects the one's who do seem to have their choice about who to go to. At least that is the story. Once it was hard even getting contractors to give quote - now people are getting several. Picking and choosing the contractors for the work they want done - and contractors eager to take any job so they do not have to layoff more employees. This is the latest story from USA Today in an article titled Those willing to spend can find great remodeling deals. Interesting article. Our favorite part is where the contractor fit his price to the amount of the home equity loan the client was able to get - very, very interesting. Well, let's take a look at the article -

That's driven savings for those who renovate. Despite some signs of a bottoming in the housing market, contractors coast to coast say they're bidding jobs for less than they would have two years ago. Lower costs for material, such as lumber, help. But mostly, contractors are paying less for labor, or they're cutting their profits.

...

Nationwide, the home improvement market is expected to shrink 12% this year to $217 billion for owner-occupied properties. That's after a 10% decline last year, says Harvard University's Joint Center for Housing Studies.

...

Craig Durosko, president of 50-employee SunDesign Remodeling Specialists in Burke, Va., had one client who needed to borrow $125,000 for a remodeling job. He could only get $100,000 because the house didn't appraise high enough. Sun Design tweaked the client's payment schedule so that the job could be done as planned.

...

New Jersey-based landscape architect Chris Cipriano, of Cipriano Landscape Design, says he recently bid on a pool job. The previous contractor was hired to put in a 700-square-foot pool but made it 550 square feet, Cipriano says.

Cipriano does landscaping and pools. Competition for jobs has led some landscapers to claim that they also do pools, "even if they've never built one," he says.

Pretty interesting article about remodeling. That was a favorite expense in the HELOC crowd. The ATM could allow for master suites, additions, constant remodeling of kitchens, etc. etc.

It would be really interesting if the article had more of a geographical spin on it - since nationally some areas are basically in a depression while others are just feeling a pinch.

New Appraisal Rule

On May 1st there was a big change to the appraisal requirements for a mortgage sold to Fannie Mae or Freddie Mac. No longer can appraisers be hired by mortgage brokers - now the appraisers must be hired by the lenders. This definitely will cut down on some fraud issues, but it will also put up new barriers. Making the next several months a little more difficult as the changes are adopted. We did not even know about the change until we read a WSJ article titled A Battle Plan For Refinancing Your Mortgage. Let's take a look -

On May 1, a new Home Valuation Code of Conduct took effect, which is intended to keep mortgage brokers and others from influencing appraisal values. As a result, only lenders, not mortgage salesmen, may hire and pay appraisers, often using middlemen known as appraisal management companies.

The process is too new to know what the impact will be, but some mortgage lenders and brokers fret that national appraisal management companies may not know much about their areas. "We're getting calls from Indiana about a co-op on 17th Street," says Melissa Cohn, president of Manhattan Mortgage Co. in New York, one of the nation's largest mortgage originators.

If you're worried about what your home will be valued at, see if a friendly real-estate agent will provide you with recent similar sales in your neighborhood. Otherwise, you may have to fork over an appraisal fee -- $350 to $500, depending on where you live -- to find out if you have enough equity, even if you don't qualify for the loan.

An accurate appraisal is very important in regards to home equity and refinancing issues. In order to negotiate you need to bring some equity to the table. The more the better.

But meanwhile there is a big concern that the new rule will drive up the cost of an appraisal while driving down the accuracy. Are these complaints valid? Guess we have to wait and see.

Types of Mortgage Mods

One big method used to thwart oncoming foreclosures is through mortgage modifications. Modifications are being pushed both on state and federal levels. Hoping that modifications tailored to the individuals issues and income can either forestall or entirely prevent another foreclosure. Whether you agree with this or not it definitely a political priority, and therefore a policy that is being pushed at all levels of government. We found an interesting post this morning over at Chicago 77 titled The Ugly Truth About Loan Modifications from Brad Walbrun, who is a mortgage consultant in the Chicago area. The post provides a lot of information (take a look) , but we will take a look at his description of the 4 modification types -

Tack it on the back A common one is for people who are behind in their mortgage payments right now, to take the past due and put it on the end of the loan. Let’s say somebody has a $200,000 mortgage, and is behind three payments at $1500 each. If there was a temporary reason the homeowner got behind, like a job loss, and now they are making income again, the bank can put the past due at the end of the loan and give the homeowner a fresh start.

Recasting If somebody had an adjustable rate mortgage (ARM) that went up after 2, 3, or 5 years, and the payment jumped up, the lender can “re-cast” the ARM for a longer period to keep the payment the same. Let’s say somebody had 5.5% on an ARM, and on the adjustment date it went up to 7.5%. Depending on the loan size, the difference can be hundreds of dollars monthly. This can obviously cause some hardship for the homeowner, especially if they are making less now than before, like much of the country is experiencing. What the bank might do in this case is either “fix” the rate for another 2 or 3 years so the payment stays the same, or just convert it into a fixed rate at the same rate. These types of modifications are almost always contingent on the homeowner having good payment history prior to the adjustment.

Debt forgiveness A third type is debt forgiveness or principal reduction. This is common in short sale scenarios. Let’s say somebody owned a house that was once valued at $300,000. They had 90% LTV financing for a loan amount of $270,000. And now they have to sell the house because of job relocation or because their income level has changed and they need to downsize. But the problem is that the house that was once worth $300,000 can now sell for only $240,000 (a 20% drop from peak value is not uncommon these days). The bank knows that if they have to foreclose on the house, it would sell at auction for much less than the $240,000, so they agree to accept a smaller payoff because it is a smaller loss. Short sales are also common for somebody facing foreclosure for the same reason-the bank is taking the lesser of two evils. If a $300,000 house goes into auction, it may sell for $170,000 or $200,000, but if the homeowner sells it, it will go for much higher, and the bank will save thousands in principal and legal fees.

Payment or rate reduction One last type is payment reduction or rate reduction. Again, if somebody is struggling, but the lender believes they could stay current with a lower rate or smaller payment, they might agree to it because it is the lesser of two evils. They are making less on the loan, but it beats foreclosure. If somebody is making less income now, the bank may agree to lower the payments to help the homeowner stay current. Another way to lower the payment is to stretch out the note for 40 or 50 years. Many banks will do this in lieu of lowering the interest rate because then they can lower the payments to help the homeowner and still make the same interest. In a settlement with the State of Illinois, mortgage giant Countrywide had to re-cast all of its stated loans that their retail branches originated to do the new payments on full documentation, and give homeowners payments they could actually afford. There were people who got 2 or 3% over 40 or 50 years because of this.

Notice the one big catch in all the modifications (where people stay in their homes) - the homeowners have to be working. Whether they were out of a job temporarily or are just making less now they all require current employment. That is a big catch for many folks with the rising unemployment rates. The only one available for those currently unemployed is for a short sale. Yes it is not a foreclosure, and hopefully the homeowner will not feel the same credit pain with their short sale as with a foreclosure. But lenders are becoming more and more willing to do short sales. Perhaps we will see those numbers rising to something substantial.

Meanwhile, we have RealtyTrac that lets us know foreclosure numbers, but is anyone gathering any short sales data? Not that we know of yet...

New Reverse Mortgage Issues

Not that we do not already have a long list of potential problems with reverse mortgages - now we get word that new changes will make more problems. But maybe these new changes will be a deterrent of sorts. Ever changing interests rates and closing points are bound to scare many people away. Perhaps this will turn out to be a good problem. In an article in The Record titled Reverse mortgage: declining reliability we get a glimpse of the new changes and the effects they are already having. Let's take a look -

Reverse mortgages are becoming more popular, in part because retiree stock accounts have lost so much value. Federal data show a record 11,261 reverse mortgages were made in March, up from 9,086 the month before. The National Reverse Mortgage Lenders Association expects the number to grow to about 150,000 this year, up 30 percent over last year.

Last month — and without any real warning — Fannie Mae made changes that allow for higher margins for reverse mortgage lenders. Simply put, margins are the interest rate spreads a lender makes on the loan. So, the higher the margin, the higher the interest rate the borrower pays.

Worse still, under the new rules the margin — typically 2 to 3.5 percentage points — can change from the time a borrower submits an application and the loan is funded, which can be up to 120 days.

The borrower signs a disclosure form from the lender projecting the maximum amount of money the borrower may receive. But with rates that can change, the seniors will not really know how much they can borrow until closing, or days before. That makes the disclosure form practically useless, Smaldone said.

...

But within the industry, fears are mounting that the higher margins are turning the reverse mortgage industry into the more traditional loan market, creating heavy competition that could lead to over-lending and introduce more predatory lenders.

Is this a bug or feature? And the sudden changes that caught the lending industry off-guard? There is definitely more to this than meets the eye.

Housing Bubbles Popping In Dover

Rarely do we get to see the bubble inflate and pop all in one property. Housing values that almost tripled during the bubble with eager buyers constantly popping up along the way. Values that we can see now were so off from the real values. Earlier in the week we illustrated this housing chart -

The chart illustrates how inflated the housing values were during the bubble. At the time we had no idea we would be illustrating an example property that illustrated the chart perfectly. For today's example first we will look at the latest owners follies than the rise and fall of a property value in Dover. Let's get to today's example property -

Here is the property -

The front of the "Single Family House" with two doors and visitor.

The show ready kitchen.
(Well at least we know there is a Dunkin Donuts nearby - but so does most of North Jersey).

Here is the property info -

Status: Active County: Morris Year Built: 1900 4 total bedroom(s) 2 total bath(s) 2 total full bath(s)

7 total rooms Style: Colonial Basement Basement is Finished 1 car garage Parking features: Detached Garage Heating features: Baseboard - Hotwater,Gas-Natural

Exterior construction: Aluminum Siding Roofing: Asphalt Shingle Pets allowed Approximate lot is 50X100 Approximately 0.11 acre(s) Lot size is less than 1/2 acre

Here are the financials -

• The property was purchased in June 2007 for $395,000.

• The mortgage at time of purchase was for $395,000 using an ARM from Lehman Brothers Bank.

• The foreclosure process started with the filing of a Lis Pendens in April 2008.

• A notice of settlement took place in March 2009 with a foreclosure specialist private real estate investment firm with locations in Hoboken and Little Falls.
  

• Tax rates for 2008 were $4340.98.
  

• The property is currently for sale with a realtor for $199,000.

The property was 100% financed - no money down, no piggy back loans. Just 100% financing while the bubble was popping. The property owner was trying to own the property - see the standard ARM without a teaser or an Option ARM.

The property was bought at a peak price that the property will not see again for at least a decade. A few things we do not understand - what happens to the mortgage after the "notice of settlement." With the realtor fees added in the total loss for the property will be $207,940. We know the real estate investment firm is making some type of profit on the property so the loss will be even larger. Who is taking the loss? How is this legal?

For those interest in purchasing the property, if they are able to put 20% down and received a 30-year fixed at today's Bankrate rate of 4.98% the monthly payments would be $852.68. Adding in the property taxes and the monthly payments would be about $1214.43 per month - plus utilities and insurance.

For the other interested in parties that are unable to put even close to 20% down lets look at some other numbers. Using our favorite new calculator that includes the PMI charges and the new rate, a potential new buyer is only able to put down 5% or $9950. The monthly mortgage payment would be $1012.55, plus a PMI of $122.88, and the taxes of $361.75 totaling $1497.18. And for a buyer who puts only 3% down - the mortgage would be $1033.87, PMI now $167.29 the taxes stay the same for a total monthly payment of $1562.91. Plus utilities and insurance of course.

If the is a two family or has a rental unit that might take off a big chunk of the mortgage, making the living space smaller but much more affordable.

Something very interesting about this property that we do not often see is the rise and fall of the prices during the bubble. This property has had 4 owners since 2000 here are the sales dates the the prices -

• Purchased in February 2000 for $140,000.

• Purchased in March 2003 for $195,000.

• Purchased in October 2006 for $301,600.

• Purchased in June 2007 for $395,000.

• Selling in May 2009 for $199,000.

The property more than doubling in price from 2003 to 2006 is one thing. But the more unbelievable part is the more than 23% property increase in 8 months - 8 months when mortgage companies were shuttering and property values were starting to decline. This was well past peak. Unless significant improvements were made to the property this does not seem realistic at all.

More Short Sales

One big wonder with the number of foreclosure was the slow pace many lenders negotiated with. There are stories about people waiting for weeks or months just to hear that their offer was turned down. While many buyers prefer a short sale to a foreclosure - for numerous reasons - the lenders made the process very difficult. Finally lenders have looked at the numbers and realized that short sales make a lot of sense. In this article from the New York Times titled Lenders More Open To Short Sales we get a glimpse of the new rationalization. Hopefully the second part of this is changing the ding of the credit score to just a small blemish. Let's take a look at the article -

ONE avenue for escaping foreclosure may be getting a little easier to navigate: the so-called short sale, through which distressed owners sell their homes for less than the mortgage amount and are forgiven the remaining loan balance.

...

But mortgage executives say they are now working more cooperatively on short sales, and proposed changes in the industry could increase the number of these transactions.

“Without a doubt, lenders are more willing to work through short sales,” said Andre L. Mitchell, the executive vice president of the Lynx Mortgage Bank in Westbury, N.Y. “In this marketplace if the lenders can negotiate in any way to get rid of a bad loan, they’re going to do it.”

The Treasury Department said last week that it would increase incentives for lenders to work out short sales when borrowers fail to keep pace with their loan payments. The department did not release details about those incentives.

...

Banks encourage short sales because they lose less money on such transactions than they do in foreclosures, where they must sometimes carry the house for months before selling it.

Hopefully this really works out nearly as good as the article portrays. An increase in short sales and a reduction in foreclosure would be a good thing. There appear to be two big roadblocks - second mortgages and large differences between the current liens and the potential selling prices. If the difference between the home price and the purchase price is less than 10% is likely but bigger differences (which is what is happening in the really hard hit areas) the lenders are still not negotiating as much.

The Great Disappearing Equity

From our last post we can see that equity has been vanishing in our region. The house we thought was worth $500,000 (and some of paid that much for it) is now worth maybe $400,000. So when we saw a depiction of our wealth disappearing we had to post it -


No, no, no, not that one this one -



Our mortgage debt is increasing while our equity is disappearing. It is not magic - rather market manipulation and economic carelessness. Here is the post from Business Insider titled Our Vanishing Home Equity. Let's take a look at the post -

Everyone knows that U.S. house prices have fallen almost 30% from the peak. What is less well known is that Americans' equity in those houses--the part that American homeowners actually own--has fallen much further. Why? Because, despite all the foreclosures and write-offs, our total mortgage debt has only dropped slightly from its peak.

When value falls and debt stays the same, equity gets crushed (See The Problem With Debt). If house prices end up falling more than 40% peak to trough, which seems likely, U.S. homeowner equity will drop more than 70% and as many as half of American mortgage holders will be underwater.

For most consumers, one's house is one's biggest source of wealth. Economists have demonstrated that a loss of wealth leads to cuts in spending--from psychology and necessity. A 50%+ drop in home equity is one whopping-big loss of wealth. And it will have a lasting impact on consumer spending.

Even after prices stabilize things will not improve. This will take crisis will take a long time to recover as we can see from this chart -

We still have a long way to go...

Home Prices Plunge

Watching your money slip away is never a good feeling. Neither is watching the value of your property. A decline of almost 13 percent for the region means more underwaters, more HELOC closures, and most likely more foreclosures. From this article from The Record titled Home prices plunge 12.8 percent we can see values are hurting. Let's take a look -

Home prices dropped 12.8 percent in the New York metropolitan area — which includes North Jersey — in the first quarter of 2009 from the same period a year ago, the National Association of Realtors said Tuesday.

The median price of an existing single-family home in the area that includes Bergen, Passaic and Hudson counties fell to $429,900, down from $492,800 a year earlier, the NAR said.

The volume of home sales in New Jersey plummeted 18.7 percent from the first quarter of 2008. Sales of single-family homes, condos and coops were running at a seasonally adjusted annual rate of 93,400 in the first quarter of 2009 — about half the 180,000-plus annual sales during the housing boom in 2004 and 2005.

Nationally, home prices declined 13.8 percent, to a median of $169,000. That's almost 24 percent below the median price at the national market's peak in 2006. In the New York metro area, prices are down around 20 percent after peaking in 2007 at a median of around $540,000.

...

And many potential buyers believe that if they wait, prices may fall further. That view is supported by some real estate experts, including Jeffrey Otteau, an East Brunswick appraiser who tracks the housing market statewide. He predicts that prices will drop a total of about 9 percent during 2009. Denis said she thinks prices may dip another 5 percent this year.

The article notes that even though prices are more affordable for new buyers there are many factors keeping them out of the market. First the rising unemployment levels are keeping potential buyers out. Second is the stricter requirements for mortgages. A pulse is no longer the mitigating factor for a mortgage - lenders are making people prove they can repay them (crazy huh). Third is that some will prefer to wait until after the market hits bottom. Of course - why buy when there is a good chance it will be worth significantly less by the time of closing. There really is not much incentives for new buyers to jump into the current market. A tax credit won't be much comfort when watching your property value decline.

National Foreclosures Rise - NJ Foreclosures Dip

Perhaps this is a sign that the foreclosure mediation program is working. Or perhaps we are just behind the curve. Either way it gives us a glimmer of light at the end of the recession. From The Record we get an article titled April foreclosure filings dip in N.J. Let's take a look -

Nationally, foreclosures rose 32 percent from a year ago, as one in every 374 households received a foreclosure filing in April.

...

After several states and mortgage companies put moratoriums on foreclosure actions several months ago, activity has begun to pick up again, said James J. Saccacio, chief executive officer of RealtyTrac, a California company that follows the foreclosure market.

In New Jersey, foreclosure filings were down 3.5 percent from April 2008. One in every 695 households received some sort of foreclosure filing last month — ranging from a notice that the homeowner is late on a mortgage payment all the way up to sale at sheriff's auction.

Passaic County had the state's highest rate of foreclosure, with one of every 461 households receiving a foreclosure filing during the month.

Bergen was 15th in the state, with one of every 892 households receiving a filing; Hudson County was 18th (one in 1,023) and Morris County was 20th (one in 1,215).

The article notes that the expiration of teaser rates are one huge reason for the new wave of foreclosures. We know that option arms will be a big problem in the next few years. Remember these loans were given at the peak. And many homeowners could not afford to pay more than the teaser rate. Now their loans have increased but the value of the properties are lower. Either we will see a huge wave of short sales (ha ha) or a huge wave of foreclosures.

Destressed Property Training

Came across a press release this morning signifying the importance of working with someone with Certified Distressed Property Expert training. And this is not just any training it is prestigious training! First let's take a look at this press release titled Berkeley Heights NJ Realtor Earns Prestigious CDPE Designation to Help Homeowners Avoid Foreclosure -

James Mulcahy Earns Prestigious Designation to Help Homeowners in Danger of Foreclosure.


James Mulcahy of The RE/Max Classic Group in Berkeley Heights NJ has earned the prestigious Certified Distressed Property Expert (CDPE) designation, having completed extensive training in foreclosure avoidance and short sales. This is invaluable expertise to offer at a time when the area is ravaged by “distressed” homes in the foreclosure process.


Short sales allow the cash-strapped seller to repay the mortgage at the price that the home sells for, even though it is lower than what is owed on the property. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.


In the NJ/NY Metro area, more than 11% of homes are in danger of foreclosing. It is happening in all price ranges. Local experts say that even high-priced homes are not immune.


“This CDPE designation has been invaluable as I work with sellers and lenders on complicated short sales,” said Mulcahy. “It is so rewarding to be able to help sellers save their homes from foreclosure.”

First - how does he help? He directs homeowners to do short sales instead! He does not help them stay in their homes. Does not help them with their credit. It's so rewarding getting commission.

So what exactly makes this prestigious training? A two-day seminar in King of Prussia, PA and $599 and you too could have this prestigious CDPE training. Or better yet, partake in the distance learning program. Can training get any more extensive than that? Of course not! The probably did not even break for lunches! We are exhausted just thinking about. And what does this training provide? THIS -

Background:

• Entering the Distressed Property Market
• Foreclosure
• Short Sales Explained
• Short Sale Process
• Selling Against and Working with Investors
• Building your Business
• Putting It All Together

Along with the course, you receive the following bonuses:

• The 175 Page CDPE© Field Manual to guide you through an deal you have.
• CDPE© Checklists - of exactly what to do in each situation (right down to don't forget your business cards) ($299 value)
• CDPE© Forms - each document you need to get your from the listing appointment to the closing table. ($99 value)
• CDPE© Flow Charts ($99 value) - of each foreclosure situation so you can quickly see exactly what you need to do.
• A complete sample short sale package that you walk out with and can reference forever. ($99 value)
• A CDPE Resources Disk so you can reprint the forms and checklists as many times as you need. ($129 Value)
• Use of the CDPE© Logo and Designation. (Priceless!)

Priceless and Prestigius!

Note - we think its great that people get extra training to understand their profession - but the press release is too much! Probably be in the local, free Berkeley Heights paper next week!

The Home Tending Trend

A new trend apparently on the west coast is home tending. People with nice things living in vacant, for sale homes. The deal is the temporary occupants must furnish the property and have it show ready. For that they get a very reasonable monthly payment - up until the house sells. It is a free service to the sellers. Here is a clip from CBS Evening News with their story titled The Homeless Help Homeowners -



Watch CBS Videos Online


The organization running the program is Designer Home Tending. We would imagine after the national exposure there will be a flood of applicants. And the screening for such a program is probably difficult. Interesting that in the video clip the mother acts like it is her home - but the single musician seems to acknowledge what a good, temporary deal he has.


Here is a snippet from the accompanying article titled A Unique Solution To The Housing Crisis. Let's take a look -

CBS News correspondent Bill Whitaker reports that when real estate agent Cathy Cardenas saw so many vacant houses for sale or in foreclosure and so many people unable to afford a house in these hard times, she thought, why not put them together?

...

She screens people down on their luck, un- or under- employed, and places them in houses for sale by owners who've had to relocate. In Salt Lake City, Autumn Marler and her family now reside in a 4,000 square-foot house they couldn't otherwise afford.

Says Marler, "My husband lost his job recently and we lost our home for foreclosure. And basically I pay a very small amount of rent to live in a nice house and to furnish it with my things."

Cardenas says in today's cluttered market, empty houses just aren't selling well. That lived-in look has a competitive advantage.

...


The service is absolutely free to home sellers. The home tenders pay a nominal fee, from $500 to $1,000 a month depending on the city, plus utilities. They have to be tidy and prepared to move if the house sells.
...

In two years, Cardenas has gone from a start-up to more than 500 clients, and she's found doing good is good business.

We like the fact that the program allows for very low rents and reduces the number of vacant houses.


Services like this will probably spring up in more places.

Recession Renovations

People are still interested in improving and upgrading their properties - even if these tough times. But spending $50,000 grand and up for a new kitchen is bubble era thinking. Much easier is refacing the cabinets and having a new counter installed. Much cheaper and may look just as fresh. Apparently even liquid stainless steel to turn those white or black (or almond) appliances into trendy stainless is a very big thing. The change in renovation mindsets is illustrated in this Wall Street Journal article titled Major Home Remodeling Gives Way To Modest Upgrades. Perhaps no HELOCing needed for the new kitchen? Well let's take a look at the article -

Home-improvement spending is expected to decline 12% in 2009, according to Harvard University's Joint Center for Housing Studies. Lower financing costs may be starting to stabilize the downturn in existing home sales, but "they have not been enough to offset rising unemployment and falling consumer confidence and encourage homeowners to undertake major home improvement projects," said Kermit Baker, director of the Remodeling Futures Program at the Joint Center, in a news release.

It's much different than the days when home-equity lending was plentiful. Before doing anything, people are carefully considering how they should spend their money.

In the days of easy credit, "there was a feeling of 'we can't go wrong, let's just get started,'" said Bill Judson, an architect with HartmanBaldwin Design/Build, based in Claremont, Calif. "Now, it's harder to get money, in terms of credit, and homeowners are taking it a little slower and educating themselves a little more."

...

Nationally, the volume of countertop project requests rose 39% in the first quarter of 2009, compared with the first quarter of 2008, while major kitchen remodels are down 19%, according to ServiceMagic's most-recent Home Remodeling and Repair Index/Survey. The data comes from the company's service requests; the site received 4.2 million requests from homeowners in 2008. Service requests for bathroom remodels were down 10% in the first quarter of this year, according to the report.

At the recent Kitchen/Bath Industry Show, affordable remodeling products included liquid stainless steel to refinish appliances and do-it-yourself backsplashes, Sweet said.

Liquid stainless steel and the return of the staycation. People opting for affordable countertops instead of granite. Perhaps they would prefer real food over Top Ramen as well? Guess when your property does not pay you decisions have to be made much more carefully.

Second Home Shore Foreclosures

Busy with the nice weather and holiday - so no example posting today. But we will look at an article from the Press of Atlantic City titled Data show many shore foreclosures on second homes. Of course it is much easier to let go of that investment or vacation house rather than your primary home. When the investments seemed like the only way was up you had many people invest who did not have the means. But like everything else during the bubble the answer was just to sell the property if one got into trouble. We now can see that strategy does not work forever. Now the answer seems to be for those into trouble just foreclosure or walkaway. Sure your credit will be hurt but so many people are in the same situation that some of the stamina has gone. So let's take a look at the article -

Anecdotal evidence suggests second homes make up a significant part of the foreclosures along the shore, where barrier islands are mostly covered with housing that's not occupied year-round.

In a way, a foreclosure on second home is less distressing, since it usually means someone well-off is losing an investment, vacation or retirement property, rather than someone losing their primary residence. But there was no way to put a number on how many foreclosures might be in that non-primary market.

...

Sure enough, RealtyTrac's figures show an unusually large percentage of owner-absent properties among shore homes with a foreclosure filing.

In Atlantic and Cape May counties, 36 percent of properties in foreclosure last month were owned by people living elsewhere.

...

31 percent, and Ocean County, with 20 percent, fit the national pattern of about 30 percent of owners of foreclosed homes living elsewhere, RealtyTrac said.

Given the dominance of second homes, and the paucity of year-round rentals, my guess is that one-fifth to one-third of the foreclosures in Atlantic and Cape May counties are second homes.

The author is correct that while the foreclosures are bad it is not as bad as primary residence properties. It will be interesting to see how short-term summer rentals are affected by these foreclosures. Long-term renters have rights - but what will happen to weekly and monthly renters? There will definitely be some drama unfolding down at the shore this summer...

The Short Sale Kid

There will always be someone who is able to figure out how to make a profit - even in the most troubling times. Apparently the "short sale kid" AKA Nathan Jurewicz has a program that buys properties as a short sale from a potential foreclosure victim and is able to sell them the same day for a profit. Some lenders, the JP Morgan, will not sell under these programs, but enough seem to be doing it to supposedly make the short sale kid a very wealthy individual. In an article titled 'Short Sale Kid' tries to outsmart mortgage firms from the Syracuse Post-Standard gives a detailed account of the kid and his program. Let's look at a snippet -

He buys properties in foreclosure at low-ball prices from banks, then flips them the same day for big profit-as many as 10 a month. Jurewicz says he, and the followers of his system, fill a need in a down market, but others in the industry question his booming business. They say:

• Banks are losing out on thousands of dollars on each sale at a time when the industry is receiving billions in taxpayer bailouts.

• Many distressed homeowners are unaware lenders could someday require them to pay the difference between the original mortgage and the selling price. The low-ball offer could leave them on the hook later to pay the lender the higher difference.

• A large segment of the home-buying market could be excluded. Under Jurewicz's system, cash is preferred and potential buyers with FHA loans are avoided.

Jurewicz's system is a national brand called Short Sales Riches. In June, he teamed up with real estate broker Chris McLaughlin, a lawyer and owner of four Keller Williams' realty offices in the Tampa Bay region. They developed a program that includes DVDs, a book and mentoring program that's enticing agents and investors nationwide to cash in on the housing bust.

He gets exclusive contracts to buy the properties and is able to wait until the lender agrees to the price. Once that agreement is final he sells the property for a hefty profit. The article states his system brings him in more than $100,000 per month. And apparently there have been several lawyers that say the program is legal.

Reverse Mortgage Costs

We are very leery about reverse mortgages. Planning ahead for ones future is already complicated enough - but putting future roadblocks up for shorter terms gains does not seem very logical or well thought out. We have often felt that the only ones who do well with Reverse Mortgages are the lenders and brokers. In a USA Today article titled Reverse mortgages can be costly as seniors cash in on equity describes just how little the homeowners actually receive. Before looking at the article let's take a look at some of an example of what the homeowner actually receives -

Example: A 75-year-old woman owns a home valued at $250,000. She qualifies for an HECM credit line of $135,484, with a 7% interest rate. At closing, she withdraws only $67,742 of the loan. Assuming that the interest rate stays the same and that she remains in the home for 12 years and doesn't take any other loan withdrawals, this is the cost of her reverse mortgage: Total amount borrowed $67,742 Loan costs Upfront costs $12,000 Total mortgage insurance premiums $7,933 Total monthly servicing fees $5,040 Total monthly interest charges $111,056 Total loan costs $136,029 Total loan amount owed $203,771

While it is no surprise that the lenders are doing well - this illustrates how well - the lender receives 2/3 of the total amount owed. Our worry about what happens when the example woman turns 87 and needs to live in a more assistive environment but may be close to destitute thanks to the Reverse Mortgage.

Now onto the article -

When faced with dwindling savings and mounting debt, elderly homeowners often consider a reverse mortgage for a cash infusion or to wipe out a monthly home mortgage payment. These days, some seniors also are using them to help stave off home foreclosure.

...

You must pay a one-time fee for the paperwork and processing of your loan. But last year, the government reduced such origination fees.

Before the change, homeowners paid a 2% fee on the loans. Now they pay 2% on the first $200,000 and 1% on any amount over that, with the fee capped at $6,000.

...

"If I were a consumer, I would focus more on the interest rate," says Meg Burns, director of the Federal Housing Administration Single Family Program Development. "That's an expense that is paid out over the long term of the loan, and it's a place where the product could be costly."

...

"It is just one part of a retirement strategy," says Brent Neiser, director of Strategic Programs and Alliances for NEFE. "It has its own set of cost and issues. And it should be one of the last options for supplementing your retirement paycheck."

We hear some of the same promises for Reverse Mortgages that we did for HELOCs. Using your property for trips, presents, etc. does not many any more sense than for big screen TVs or granite counter tops. But then again Top Ramen does taste better off a granite counter - or maybe not...

HELOC Lockdowns Still Surprising in NJ

We have been running stories for over a year now of homeowners having their HELOCs suspended or closed down. Yet the news media still finds people who are shocked, yes shocked, that this is happening. Perhaps a year ago this was an interesting news story - but now, still? Evidently for one of our fellow Jerseyians this is still a big news story - enough to make the news. In an article and video (sorry not embeddable - following the link) from Philadelphia CBS 3 report titled 3 On Your Side: Home Equity Loans we were about the local story. Let's take a look -

Joanne LoBuono bought her New Jersey home as a fixer upper. And for the past decade, she's been paying for the repairs with a home equity line of credit.


She met with a banker last month to check on her account.


"She went to look at my line of credit and couldn't open it. She kept saying , 'gee, this is strange, it's blocked," said LoBuono.


The bank had taken away her line of credit.


Her home value is now not worth enough to secure the loan, so the bank cut her off.


Since the mortgage meltdown, banks are re-evaluating their home loans. In Joanne's case, it came as a complete surprise.

She received the letter from the bank informing her a week after finding out. But do people really believe that banks will give notice before closing off the access? That would not make any sense - most people would take everything they had and put it somewhere else if they knew their lines were going to be closed.

There are many on-line sources where people can see the estimated current estimated value of their property. Take a minute over at RealtyTrac's Home Value page and see how much your area has declined. Then you will not be surprised when you receive that letter in the mail...

Underwaters Continue to Rise

The big question seems to be just how many homeowners are underwater - or owe more on their mortgage than their property is worth. Those who are underwater can not refinance (well perhaps with the new housing plan they can try very hard to negotiate with their lender). If and when they do sell it will have to be either a short sale or they will need to bring a check to closing. Needless to say these barriers usually put owners on the faster track to foreclosure. A new report came out from Zillow that has some astounding numbers. In the article from CNN Money titled More homeowners underwater we can see how bad things just may be. Let's take a look -

The real estate Web site Zillow.com reported that 21.8% of all U.S. homes, representing more than 21 million residences, were in a "negative equity" or "underwater" position after prices dropped more than 14% nationally in the year ended March 31.

"A combination of falling prices and low down payments has left many borrowers underwater," said Stan Humphries, Zillow's vice president in charge of data and analytics. "In some markets, more than half of all homes are in negative equity."

Those markets include Las Vegas, where a whopping 67.2% of homeowners would have to bring cash to the table if they sold their homes. Other markets are Stockton, Calif., where 51.1% of homes are underwater, and Modesto, Calif., where 50.8% of homes are in that position.

"That's really important, because homeowners in negative equity have fewer options if they take financial shocks such as divorce, job loss or medical bills, making foreclosure more likely," said Humphries.

...

Moody's Economy.com chief economist Mark Zandi estimated that 14.8 million were underwater at the end of March.

And the sad part - Zillow believes their numbers are conservative and may actually be higher due to the factoring of HELOCs and HELs. And this 21.8% is of all homes - not just properties with mortgages.

It would be interesting to find the number of homes that are underwater due to extracting equity rather than purchasing at or close to peak. Wonder if those numbers will ever come about...

Housing Fair Tonight

Reliable housing information is always important. Whether the information is for foreclosure issues or rentals. Tonight in Newark there will be a "housing fair." Hopefully attendance will be high. Let's take a look at the information from this article titled Newark hosts housing fair from the Star Ledger -

North Ward Councilman Anibal Ramos Jr., Councilman-At-Large Carlos M. Gonzalez and Essex County Executive Joseph N. DiVincenzo will sponsor the annual Newark Housing Assistance Fair for residents today at 6 p.m. at the Lady of Good Counsel Church, 654 Summer Ave.

The program is designed to offer information to homeowners and residents from housing counseling agencies. Representatives will provide assistance with finding affordable housing and emergency rental assistance. Participating organizations include La Casa de Don Pedro and the Essex County - Division Council for Supporting Housing.

Participants will also receive information about options available to avoid foreclosure through the New Jersey Foreclosure Mediation Program, which provides housing counselors, lawyers, and mediators to homeowners facing foreclosure. Information will also be offered on how to avoid foreclosure scams.

If any readers go shoot us over and email and let us know how it was.

Down and Out in Bergen

Front page on Sunday's record - not the RE section but the paper - is an article on foreclosures hitting our wealthier North Jersey suburbs. Due to savings and retirement plans many homeowners are able to push of the foreclosure notices by several months. But then the money runs dry and even the seemingly well to do get the Lis Pendens. Foreclosures are happening even in the most pristine towns. (Unfortunately Brigadoon is not one of the townships listed...) The article is titled Even affluent towns see rise in foreclosures. Let's take a look -

Home foreclosure actions nearly tripled in North Jersey's wealthier communities last year, as housing distress continued to spread beyond the modest neighborhoods that have been the most afflicted.

In a sign of how rising unemployment, especially in the finance sector, has hit higher-income residents, towns from Englewood Cliffs to Saddle River to Wyckoff saw large percentage increases in the number of homeowners facing possible loss of their property — although the numbers remain small.

An analysis of 2008 foreclosure activity by The Record revealed that lenders were at various stages of retaking nearly 370 homes in upper-income towns, where the typical single-family home sold for more than $620,000 in 2007. That was up 177 percent from about 130 cases in 2007 — at a time when foreclosure activity overall throughout Bergen and Passaic counties doubled. And rising jobless numbers means foreclosures are likely to increase in the months to come.

To be sure, the majority of foreclosure actions took place in lower-priced areas, where job losses and other setbacks can quickly lead to a crisis for homeowners who live paycheck to paycheck. Nearly three-quarters of the 8,900 North Jersey foreclosure filings in 2008 came in Paterson, Passaic, Hackensack and other communities where the typical home sells for less than $400,000.

...

By year's end, one in 108 homes in high-end towns faced possible foreclosure, compared with one in 300 during 2007.

They also provided this foreclosure chart to show how bad some areas have been hit in Bergen and Passaic -

On the front page but not online is the foreclosure numbers for the following towns-

• Allendale 2007: 7 Foreclosures 2008: 16 Increase 129%
• Closter 2007: 28 2008: 55 Increase 206%
• Demarest 2007:6 2008: 24 Increase 300%
• Englewood Cliffs 2007: 2 2008: 13 Increase 550%
• Franklin Lakes 2007: 19 2008: 39 Increase 105%
• Ridgewood 2007: 19 2008: 48 Increase 153%
• Saddle River (and Upper Saddle River) 2007: 15 2008: 60 Increase 300%
• Wyckoff 2007: 9 2008: 23 Increase 153%
• Wayne 2007: 131 2008 237 Increase 87%

As the reverberations from the Wall Street job cuts increase these numbers are bound to increase - which will also continue to push home values down. We need a follow-up report on the changes in home values. And perhaps the local underwaters.


One other interesting note - usually an article like this has lots of snark comments - as of this posting there are none, zip, zero. Where are the usual commenters?

Flip Flopping in Chatham

During the peak of the bubble almost anyone was a successful flipper. House prices were going up so fast that just purchasing the house and a few months added money into the investors pockets. Improvements and updating were paying off for even the most incompetent investors. And those that knew what they were doing made off really well. Money was everywhere and it seemed crazy not to be a part of it.

The unlucky flippers were the ones that jumped in at the end of the bubble - not realizing that they were at the end of the bubble. Paying top dollar for a property and making expensive improvements have not been making people rich - they are just leaving holes in the investor's pockets. Between the slow housing market and buyers not willing to pay for over-priced or unnecessary improvements many flips are now flops. Which brings us to today's featured example.

Here is the property -

The front of the property.

The stainless steel kitchen.

The informal great room.

Here is the property info -

Recently renovated colonial in sought after Wickham Woods. Spacious rooms, wonderful Family and Great rooms, 2 tier decking and level open yard. Great for entertaining.

Property Features
Status: Active County: Morris Subdivision: Wickham Woods Year Built: 1971 4 total bedroom(s) 2.5 total bath(s) 2 total full bath(s) 1 total half bath(s) 12 total rooms Style: Colonial Master bedroom Living room Dining room Family room Kitchen	Basement Laundry room Bathroom(s) on main floor Master bedroom is 17x13,Includes: Full Bath, Walk-In Closet Living room is 20x13 Dining room is 15x13,Formal Dining Room Family room is 20x14 Kitchen is 16x14 Basement is Finished Hardwood floors Fireplace(s) Fireplace features: Living Room Spa/hot tub(s) 2 car garage Attached parking	Parking features: Built-In Garage Heating features: 1 Unit,Gas Water Heater,Gas-Natural Forced air heat Central air conditioning Cooling features: 1 Unit Exterior construction: Vinyl Siding Roofing: Asphalt Shingle, Wood Shingle Pets allowed Lot features: Level Lot, Open Lot Approximately 0.52 acre(s) Lot size is between 1/2 and 1 acre

Here are the financials -

• The property was purchased in February 2007 for $1,190,000.

• The original mortgage at time of purchase was for $850,000 with an adjustable/fixed ARM with CitiMortgage.

• A HELOC was opened February 2009 for $145,000 with PNC Bank.

• The property is currently for sale with a realtor for $1,175,000.

• The current year's property taxes are $17,078.21.

The property was purchased just as the bubble was popping. The new owner invested at a most unfortunate time in the cycle. For each day the renovations went on the house's value was declining. A long-term renovation (this appears to have taken over 2 years) that may have paid off well during the boom years now is taking an expensive toll.

We do not know how costly the renovations were but just adding property taxes and the lower purchase price and the realtor pay this investor will lose at least $115,500 off of this investment - plus every penny put in the renovations. And on a property like this one would assume the renovations would have been expensive.

Update - It was just brought to our attention that what shows us as a realtor is a flat-rate listing service - costing about $500 not the 5 or 6 percent realtor fees. This owner is trying to save as much as possible - so the corrected loss will be approximately $45,500 plus renovations.

For those interest in purchasing the property, if they are able to put 20% down and received a 30-year fixed at today's Bankrate rate of 4.92% the monthly payments would be $5000.26. Adding in the property taxes and the monthly payments would be about $6423.44 per month - plus utilities and insurance.

For the other interested in parties that are unable to put even close to 20% down lets look at some other numbers. Using our favorite new calculator that includes the PMI charges and the new rate, a potential new buyer is only able to put down 5% or $58,740. The monthly mortgage payment would be $5937.81, plus a PMI of $725.56, and the taxes of $1423.18 totaling $8086.55. And for a buyer who puts only 3% down - the mortgage would be $6062.82, PMI now $987.78 the taxes stay at $1423.18 for a total monthly payment of $8473.78. Plus utilities and insurance of course.