REPOST: Foreclosures fall to pre-housing bust levels

A healthier U.S. housing market and economy helped to winnow foreclosures in 2014 to levels not seen since before the housing bust.

The decline is the latest evidence of how foreclosures have diminished in recent years from a national crisis to a largely market-specific concern.

While foreclosures remain elevated in many populous metropolitan areas, such as New York, Philadelphia and San Diego, they have declined annually overall in recent years, and 2014 was no exception.

The number of homes repossessed by banks fell 29 percent last year to the lowest level since 2006, a year before the subprime mortgage crisis erupted, according to data released Thursday by foreclosure listing firm RealtyTrac Inc.

One reason for the drop: Fewer homes entered the foreclosure process last year.

Foreclosure starts tumbled 14 percent versus a year earlier to the lowest level since 2006, the firm said.

“Foreclosures are no longer a threat to home values nationwide,” said Daren Blomquist, a vice president at RealtyTrac.

All told, 643,193 U.S. homes entered the foreclosure process last year, according to RealtyTrac. That represents a 70 percent drop from their 2009 peak of about 2.14 million homes.

Completed foreclosures, or homes that were taken back by lenders, fell to 327,069. That’s down 69 percent from their peak of 1.05 million five years ago.

U.S. home sales slumped much of last year after a three-year rebound, held back by flat incomes, tight credit and rising home prices.

While the steady, albeit slower pickup in home values last year likely squeezed some potential buyers out of the market, it continued to lift property values for homeowners. When home prices rise, it can help homeowners build or recover equity, which can make it easier to qualify for refinancing or sell rather than ending up in foreclosure.

Nearly 1.5 million homes returned to positive equity — when a home is valued at more than what the owner owes on the mortgage — in the 12 months ended Sept. 30, according to CoreLogic. Some 5.1 million homes, or 10.3 percent of all homes with a mortgage, remained in negative equity — when the value of a home falls below what is owed on the mortgage — as of Sept. 30, the firm said.

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REPOST: Foreclosures Falling, But Delinquency Rate Climbing

The nation’s foreclosure inventory fell to its lowest level in almost seven years in November, but the percentage of delinquent mortgage loans is on the rise, according to Black Knight Financial Services‘ November 2014 “First Look” at Mortgage Data.

Delinquent mortgages, which are those more than 30 days overdue but not in foreclosure, jumped by 12 percent from October to November, according to Black Knight. While there is somewhat of a seasonal aspect to the increase (the delinquency rate has gone up month-over-month in six of the last seven Novembers), the 12 percent spike is the largest month-over-month increase since 2008, Black Knight reported.

The actual number of delinquent loans jumped by 329,000 from October to November, up to 3.08 million, according to Black Knight. The number of delinquent loans declined year-over-year in November, however, dropped by 5.7 percent (a total of 153,000 loans), Black Knight reported.

The foreclosure inventory rate, which is the percentage of mortgage loans in any state of foreclosure, stood at 1.53 percent for November, its lowest level for any month since January 2008, Black Knight reported. The number of properties in the U.S. in pre-sale foreclosure inventory fell by 29,000 from October to November down to 829,000 (a decline of 3.5 percent) and dropped by 427,000 from November 2013 (a decline of 34.7 percent), according to Black Knight.

Foreclosure starts nationwide have also fallen to levels not seen since before the housing crisis. Foreclosure starts fell by 9.2 percent month-over-month and 29.5 percent year-over-year down to 73,900, the lowest level since May 2006, according to Black Knight. The number of properties 30 days or more delinquent or IN foreclosure skyrocketed month-over-month by 300,000 (up to 3.91 million) but year-over-year took a big tumble (down by 580,000 since last November).

The number of mortgage loans that were 90 days or more past due but not in foreclosure increased from October to November by 62,000 (up to 1.16 million) but declined year-over-year by 120,000 properties, according to Black Knight.

Do’s and Don’ts for Marketing Agreements

marketing_agreementReal estate brokers must comply with the Real Estate Settlement Procedures Act, or RESPA, which prohibits brokers from receiving anything of value in return for the referral of settlement service business. RESPA, however, permits brokers to receive reasonable payments in return for goods provided or services performed by brokers.

Marketing Service Agreements (MSAs), therefore, may be lawful under RESPA if carefully structured to comply with the Act. MSAs also have come under increased scrutiny after the CFPB issued a consent order related to MSAs. Thus, when contemplating an MSA, careful consideration must be given to structuring the agreement under RESPA. Below are some of those considerations.

Do’s

  • Be aware that RESPA permits payments for services performed by a broker only if actual services are performed and the fee is fair market value for the services performed.
  • Memorialize an MSA in a written agreement that states in detail the marketing and advertising services to be performed and the fee to be paid in return for such services.
  • Ensure that marketing and advertising services identified in a written MSA are, in fact, performed.
  • Consider including a reporting and/or audit obligation in a written MSA that requires the service provider to provide evidence that services were performed.
  • Provide a disclosure to consumers notifying them of the MSA relationship.
  • Document how the parties arrived at the marketing fee and the determination of fair market value.
  • Consider engaging an independent third party to establish the fair market value of the marketing and advertising services.
  • Modify the amount of the marketing fee under an MSA only when objective changes are made to the services performed and/or other terms of the agreement.

Don’ts

  • Do not include “services” in the MSA that require a broker to market a lender or title company directly to a consumer, like a sales pitch to a consumer or distributing lender or title company brochures or other materials directly to a consumer.
  • Do not designate a settlement service provider as the broker’s “preferred” company as part of the MSA.
  • Do not enter into exclusive MSAs such that the broker agrees to perform marketing and advertising services for only one lender or title company.
  • Do not accept fees that are in excess of the fair market value of the marketing services performed.
  • Do not base the amount of marketing fees on the volume of referrals or the success of the referrals.
  • Do not accept fees under an MSA for allowing access to sales meetings, conducting customer surveys, or creating monthly reports.
  • Do not make frequent changes to the fees paid under an MSA based on the volume or success of referrals or any other non-objective criteria.
  • Do not enter into an MSA with a company that is an affiliate of the broker.
  • Do not enter into an MSA with a month-to-month term.

Disclaimer: The DO’s and DON’Ts listed above are not all-inclusive, and small variations in the facts can lead to different outcomes. They also do not take into consideration any additional regulations that may have been imposed in your state, which may prohibit activities that are permissible under RESPA. Speak with a RESPA attorney to make sure you comply with all applicable laws.

Looking To Buy After A Short Sale? The Wait May Be Longer Than You Think…

The large majority of lenders follow Fannie Mae guidelines when qualifying potential borrowers for new loans. When closing on your short sale, you were given valid information that under the right conditions you could get a new loan two years after completing the deal.

Unfortunately, a couple of months ago Fannie Mae changed its guidelines so that there now is a four-year exclusion period before a buyer can qualify for a loan after a short sale. The guidelines do provide for a two-year period under extenuating circumstances, which are a sudden, drastic and prolonged drop in income that left the borrower with no other reasonable option but to default on the mortgage. In reality, it is extremely difficult to get this exception.

The good news is, not all lenders follow the Fannie Mae guidelines. Credit unions and community banks often will look past your credit score and other arbitrary criteria and evaluate your overall situation. They’ll take into account factors such as income, savings, job history and whether the short sale was an isolated event or caused by circumstances outside of your control. In all likelihood, you will need to apply at multiple lenders and jump through hoops, but I have seen many borrowers get mortgages this way.