Home Mortgages – One in Ten Behind in Payments
The Mortgage Bankers Association in a report issued today, showed that the percentage of loans at least a month overdue or in foreclosure was up from 9.2 percent in the April-June quarter, and up from 7.3 percent a year earlier.
Plus, this same report stated that one in 10 American homeowners with mortgages, were either at least a month behind on their payments or in foreclosure at the end of September.
Homeowners … 30% Working Paycheck to Paycheck
In a survey poll conducted by AOL and Zogby consisting of 6,672 participants, 22 percent believe they would lose their homes were they to experience an unexpected short-term job loss. Thirty percent said they were working paycheck to paycheck to cover housing costs and 30 percent said they knew someone who has gone through or is being forced to sell their home due to a foreclosure. Also, when asked if they would sell, 67 percent said they would turn to the internet first. San Diego real estate
1.2 Million Homes in Foreclosure
Last Friday Mortgage Bankers Association (MBA) issued a report showing a record 1.2 million homes were in foreclosure during the second quarter of 2008. This was 2.8% of all outstanding loans, and double the same period last year.
During the three months ended June 30, 2.9 million homeowners, or 6.4%, were behind on their payments, up more than 25% from last year.
Jay Brinkmann, MBA's Chief Economist said: "The national foreclosure numbers continue to be driven by the hardest hit states that are continuing to get much worse. The increases in foreclosures in California and Florida overwhelmed improvements in states like Texas, Massachusetts and Maryland."
California and Florida accounted for 39% of all foreclosures started during the quarter.
A few of of our past posts on home foreclosures:
Survey Says Home Values Must Fall Another 14%
A Record Number of Homeowners Avoid Foreclosure in the Second Quarter
Jumbo Financing and the Impact on The San Diego Real Estate Market
Home Builders Pushed 100% Loans to Move Properties
San Diego County Foreclosures up 125% from 2007
CALIFORNIA HOME FORECLOSURE SALES JUMP 22.5%
Credit Impact of Real Estate Short Sales & Deeds In Lieu
Credit Impact of Real Estate Short Sales & Deeds In Lieu
Many San Diego homeowners mistakenly believe that their credit rating will be better off with a short sale vs. a foreclosure. This belief may be seriously flawed.
Short sales, deeds in lieu of foreclosure and foreclosure usually don't minimize the impact on a borrower's credit score. All three proceedings have roughly the same negative impact on an individual's credit score, according to Craig Watts, a spokesman for Fair Isaac Corp., which created the widely used FICO score.
Mr. Watts says that to date little analysis has been done distinguishing, for instance, the credit risk of individuals who completed a short sale versus those involved in a foreclosure. For that reason, "the model ends up treating them [a short sale, a deed in lieu of foreclosure, and a foreclosure] all the same." San Diego income property
Home Foreclosure vs. Short Sale
In a short sale, home owners ask their lender to accept a buyer’s offer that is less than the amount needed to pay off the balance of the mortgage. Lenders who agree to a short sale also typically agree to forgive the remaining debt.
Many call short sales a win-win for lenders and homeowners. The homeowner avoids foreclosure and banks avoid the cost of carrying the property through the lengthy foreclosure process, not to mention the hassles of selling an empty property in a market saturated with other foreclosures.
On average, lenders lose approximately 19 percent of a mortgage’s value with a short sale but lose an average of 40 percent on mortgages that proceed to foreclosure, according to one source.
The problem with short sales? Like other foreclosure mitigation efforts, the challenge is in determining which financial entity “owns” the loan and, thus, has the final say on a short sale offer. Banks also have been slow to ramp up internal processes needed to review and approve short sale packages. Delays and last-minute dickering often prolong or even derail transaction closings and creates frustration for potential home buyers and their real estate agents. San Diego Realtors
Second Home Foreclosure Tax Penalty
Investors in second or multiple homes stand to be among the biggest losers from the housing downturn. That’s because proposed mortgage bailout programs don’t address second homes and investment properties. Many owners of multiple properties don’t realize that investments they thought would help them build long-term wealth may in fact leave them in bankruptcy and facing a sizeable tax debt.
Homeowners who borrowed against the value of their second home, or who financed the purchase of their second home and subsequent homes by pledging their primary home or other properties as security, may be liable for taxes on the difference in value should they sell any of their properties for a price less than the value owed on the mortgage.
Under the Mortgage Forgiveness Debt Relief Act, a homeowner doesn’t have to pay taxes on forgiven debt if the collateral behind the mortgage is owner-occupied. That provision doesn’t apply to a growing number of homeowners renting out their second home or investment property. Of some 7.5 million vacation homes, only about 10 percent are considered owner-occupied, according to the NATIONAL ASSOCIATION of REALTORS® (NAR). Many of these homeowners borrowed against the ever-increasing (or so it seemed) value of these properties to finance improvements or to buy other properties. San Diego County real estate agents