Bank Owned Homes in Bend Oregon Archives - Page 2 of 3

More Homes in Short Sale

A week ago I wrote about a Bank of America program designed to encourage short sales in Florida. Programs such as this signify a shift in banks’ approach to short sales and foreclosures. RealtyTrac reports that the number of short sales approved by banks rose in the second quarter of this year while the length of time it took to sell those home actually fell. Until recently banks have not been very supportive of short sales. The problem has been and still is, there are more parties involved with short sales than sales of foreclosed homes. Short sales often involve two banks (first and second mortgage), realtors, loan servicers, home owners, and mortgage insurance companies. Getting approval of an offer from all those parties can often take two months or longer.

The time line for a short sale is still quite long but banks are making efforts to streamline the process. The driving force behind this shift to sell more homes through short sales is the length of time and resulting carrying costs associated with foreclosing on homes. While a foreclosure sale can happen much more quickly than a short sale, the amount of time it takes to get a foreclosed home to market can be as long as two years. Banks don’t want to be homeowners and they definitely don’t want to own homes that aren’t producing income for two years or more. Another factor is that homes sold through short sale generally sell at a mere 20 percent discount compared to sales of homes not in financial distress while bank owned homes sell at a 40 percent price cut. On a $175,000 home that is a difference of $35,000. By selling homes in short sale banks are also able to avoid carrying costs, attorney fees and repairs necessary to get a foreclosed home to market.

It is clear why short sales should be more attractive to banks than foreclosures. What is surprising is how long it has taken banks to figure out that they can make more money or not lose as much on a short sale and then make a real effort to improve the process. Now the trick will be to make short sales more attractive to buyers. Many buyers aren’t willing or can’t afford to wait two months for a bank to respond to their offer.

There are currently 127 homes listed as short sales in Bend with prices ranging from $54,900 to $980,000. There 55 homes listed as bank owned with prices between $59,900 and $849,000. To see more Bend homes for sale search Central Oregon MLS.

Incentive to Sell Homes in Short Sale

Bank of America has introduced a program in Florida that offers home owners as much as $20,000 to short sale their homes. The program which was introduced last week through emails to select realtors in Florida is just a trial to gauge interest. Short sale offers on homes must be submitted by the homeowner to Bank of America before November 30 to be eligible for the program. This program is very similar to the “cash for keys” programs that many banks already offer to home owners and/or tenants of homes that have been foreclosed. The main difference is that the bank is trying to be creative and offer that money earlier in the process. If the program is successful it could be expanded to other states.

It appears that success will be measured by the ability of the program to keep homes out of the foreclosure process and of course, how much money the bank saves. In Florida the foreclosure process takes 676 days on average. With attorneys involved and the likelihood of homes being damaged or stripped of appliances and fixtures by jilted homeowners the cost to a bank to get foreclosed homes ready to sell can easily be more than $20,000. One of my favorite quotes in the original Palm Beach Post blog post comes from Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance, who called the short sale payout a “bribe.” “You can call it a relocation fee, but it’s basically a bribe to make sure the borrower leaves the house in good condition and in an orderly fashion,” Cecala said. Whether it is a “bribe” or an “Incentive” this could be welcome news for people in financial trouble with their homes in Florida and hopefully many other states.

Will New Rule Affect Our Ability to Buy Homes?

Maybe you have heard of the Dodd-Frank legislation signed into law last year. More likely, you haven’t. The law is aimed at overhauling financial regulations as a response to the subprime mortgage scandal and financial meltdown a few years ago. Depending on who you talk to, the new regulatory rules being spawned by this law are fantastic for consumers, bad news for consumers, horrible for the financial industry or all of the above. I don’t want to get into the politics of the law but I do want to mention a rule that has come out of this legislation that could make it difficult for a large number of people to obtain a mortgage and ultimately buy homes.

This proposed rule is a result of a provision in the Dodd-Frank Act that requires lenders to maintain a stake in mortgages sold to investors. For years lenders to less than perfect borrowers have sold loans to third parties in an effort to reduce their risk and to increase liquidity. We all know what happened when people started defaulting on those loans over the last few years. As a result, the intention of part of the Dodd-Frank Act is to encourage lenders to tighten their underwriting guidelines by requiring them to maintain a 5% stake in any loans made to marginal borrowers and then sold to third parties. The theory is that this would reduce the number of loans that default because lenders would still have a vested interest in the success of those loans. It’s a noble cause to save us from ourselves as so many other laws have attempted to do in the past. The trouble is, now that no fewer than six regulatory agencies have come together to create a rule to enforce the Act, many are wondering if anyone but perfect borrowers will be able to obtain a mortgage.

The proposed rule defines what loans will qualify for exemption from the 5% risk-retention requirement placed on lenders. Essentially, it boils down to only loans to borrowers that fall under a new debt to income ratio cap and have a 20% down payment will qualify for the exemption. What I think is most worrisome is that there appear to be limits on lenders written into this rule that would restrict the number of loans qualifying for the exemption. Some people are estimating that as many as 66% – 90% of all loans currently being sold to/securitized by Fannie Mae and Freddie Mac would fail the exemption test.

The big fear is that lenders won’t want to write any loans that fall into the 5% risk-retention requirement. However, if there is money to be made, and there will be, someone will be willing to take the risk. The question is, what will be the cost of that risk that will be passed on to the borrower? Will the increase in fees or interest rates be prohibitive? The good news, for now, is that this rule is just a proposal. The housing industry is too big a part of our economy to be put at risk by prohibiting people from buying homes. There is a lot of opposition to this proposed rule and it is coming not only from bankers and bank lobbyists but also from those who have been critics of lending practices. Will they be able to get regulators to re-evaluate and re-write the rule? Let’s hope so.

Fighting Foreclosure Evictions in Oregon

An Oregon woman successfully fought her foreclosure eviction against Wells Fargo last week. To my knowledge she is the second Oregon borrower to do so this summer. In both cases the borrowers were allowed to stay in their homes because the evicting bank was unable to provide a clear title to the home. In order for a lender to foreclose on a borrower in Oregon all transfers of loan ownership must be recorded with the county where the house is located. In the first case this summer MERS (Mortgage Electronic Registration Systems) was the culprit but in the second case it was just a matter of poor record keeping by Wells Fargo and Option One Mortgage. It is cases like this that are giving banks pause with regards to how they proceed with foreclosures.

The big question these cases raise in my mind is what happens to the borrowers now? They are both still living in their respective homes but I have a feeling all they have done is prolong the inevitable. The fact remains that these borrowers are delinquent on their loans and their respective wins only mean that they do not have to move out not that their foreclosures have been overturned. The banks in both cases said that they are reviewing the courts’ findings and I imagine that means they are working to establish title to the homes in question. It is unclear to me what effect the already proven, unrecorded chain of loan ownership will have on the banks’ ability to gain title. Will the borrowers be able to live for years in these homes without making a payment while their cases are decided in court?

What is clear is that banks are already gearing up to take more foreclosures to court. Oregon is currently one of 24 states that do not require a foreclosure to be heard by a judge. It is cases like the ones mentioned above that are leading banks to seek foreclosure rulings in court instead of through the current non-judicial system available in Oregon. If the foreclosure process starts in court then banks are only required to provide the original note not a history of all subsequent owners of the loan. It will be interesting to see how all this shakes out. In the mean time expect foreclosures to proceed more slowly in Oregon and as long as there is a substantial number of foreclosed homes on the market they will continue to be a drag on the prices of all homes for sale.

Are Oregon Foreclosures Moving to Courts?

Oregon is one of 24 states where foreclosures are not required to be heard before a judge. According to a story in The Oregonian that could be changing. At this point there is no new law in the works to force foreclosures to be handled in the courts but there have been a number of rulings by federal judges saying that lenders in many cases must go through the courts because they did not file the mortgage’s ownership history in county records. In the first three months of this year more than 300 foreclosure notices in Deschutes County were withdrawn by lenders because of concerns about their legality. Around the state and the country this has forced banks to reconsider how they have been handling non-judicial foreclosures creating a “shadow inventory” of homes that are in foreclosure or nearing foreclosure but have not been listed for sale.

In Oregon that number is estimated to be 26,000 homes. No one knows for sure how many of those foreclosures will end up in front of a judge especially since the Oregon Supreme Court could take as long as a year to decide how to handle the situation. If it is decided that foreclosures will be required to go through the courts then it will be a bit of a good news/bad news situation. The good news for home owners is that they will be able to contest a foreclosure in front of a judge. Currently that option is not available without filing a lawsuit. Another piece of good news would be that borrowers whose homes are foreclosed will have a right of redemption. This means for six months after the home is sold in foreclosure the person who lost the home will be able to repurchase it for the same price it sold at the foreclosure sale. Few people will be able to do that but it is an interesting option. In the bad news department is the fact that in a judicial foreclosure, lenders only have to provide the original mortgage, not the complete history of ownership. A couple days ago I wrote about how a lender can come after a borrower for the amount that is short when a home is sold in a short sale. In a judicial foreclosure something similar can happen if you move out of the house before a foreclosure complaint has been filed in court. Finally, in the “wait and see” pile is that judicial foreclosure sales are required to be handled by the local sheriff’s department. They would likely be ill-equipped to handle the burden.

What is certain is that the uncertainty will slow the process of getting through the backlog of homes in foreclosure and ultimately work to keep home prices low. Good news if you are a buyer and bad news if you want to sell your home. Keep in mind, though, that not all housing markets are created equal. For example, over the last four months Bend has seen a steady rise in average price per square foot of homes sold. That rise hasn’t been dramatic ($107/sqft to $120/sqft) and I don’t know if it will continue but it does indicate that there is demand for homes in Bend. There appears to still be an especially strong demand for bank owned homes as they often have multiple offers within the first 24 hours.

If you would like to be made aware of new homes for sale, whether they are bank owned or traditional sales, we can set you up to be emailed as soon as a home that meets your criteria comes on the market. The service is free and it ensures that you don’t miss that perfect house. Call or email to let us know what kind of house you are interested in.

New Law Affects Sellers of Homes in Short Sale

This summer Oregon Governor John Kitzhaber signed House Bill 2916 into law. Big deal, right? Well, if you are trying to sell your home at a price “short” of what you owe your lender then it is a big deal. One of the little known facts of short sales before this law was that even if your lender agreed to let you sell your home at a price below what was owed the lender could still come back to you to try to collect the difference. So just when you thought you were finally out from under that house that wasn’t even close to being worth what you paid for it you get a letter in the mail from your lender that says, “You still owe us for the house you just sold.” Now, with the passage of this bill, if the lender writes off the residual debt from your short sale and reports it to the IRS as being canceled then your lender is prohibited from seeking payment from you for that debt. The key word is “IF.” The lender now has a decision to make. Do they write of the debt as an expense or come after you for the balance? Before this bill passed they could do both.

If you find yourself in a short sale situation there are two people you need to talk to in addition to your bank. One is your realtor and the other is your accountant/tax preparer. A short sale is not a simple transaction and is not without consequences for the seller. It is important that you make an informed decision because whether you short sale or let the bank foreclose the outcome can follow you for years.

Banks Slower to Foreclose

Do you have money coming out your ears? — image courtesy MS Clipart

The number of foreclosures last month in Oregon fell below 1000 for the first time since February 2008 according to ForeclosureRadar. The number of properties sold back to the bank were down 34.7%, while properties sold to third-party investors fell 17.8% from June. This drop in foreclosures doesn’t appear to be because there are fewer homes in default but because of a conscious decision by banks to put foreclosed homes on the market more slowly. This strategy has two benefits for banks. Fewer foreclosed homes for sale puts less downward pressure on prices meaning banks will make more money on each sale. It also allows banks to postpone booking their losses on these homes. Spreading their losses over a longer period of time improves banks’ apparent financial health to investors and regulators. The longer they postpone defaulting on a loan, the longer they can maintain it on their books at above-market value. In banking circles this is referred to “extend and pretend.”

There is another factor affecting foreclosures nationally, legal challenges by homeowners. In some states bank repossessions has been all but shut down by homeowners who are disputing the practice of “robo-signing” in which lenders process large numbers of foreclosure filings with little or no formal review. Homeowners are also challenging, and halting, foreclosures by questioning transactions where the paper trail by banks is so poor that there is no longer a clear title to a property.

So what does all of this mean for buyers and sellers? On a national level, it likely means that the real estate market will be fairly flat for the next few years. Lenders currently have 850,000 foreclosed homes on their books with another 1.1 million in the early stages of foreclosure. Some experts estimate there will be an additional three million homes facing foreclosure before this mess is over. Locally things may not be so bleak. At least one market index expects home values in Bend to appreciate 11% annually over the next five years. Whether or not we actually see 11% a year remains to be seen but this is definitely a buyer’s market with prices and interest rates as low as they are. Have you thought about buying a home in Bend? Take a peek at Bend homes for sale in your price range.

Home Ownership Declining

I mentioned in a previous post that now is a great time to own a rental. The demand for rental homes has been rising because so many people have lost their homes to foreclosure, lost their jobs, and/or are having a tough time qualifying for a mortgage because of the more strict underwriting standards. On July 29th the U.S. Department of Commerce’s Census Bureau released a report showing that the number of Americans who own their own homes has declined to a level not seen since 1998. Currently 65.9% of Americans live in a home they own. Interestingly, Morgan Stanley analysts say that there are 7.5 million home owners who are delinquent on their mortgages. If those people were to be removed from the equation the home ownership rate in the United States would only be 59.7%. The lowest recorded rate of home ownership (62.9%) was in 1965 when the Census Department began keeping records. Analysts say that the level of home ownership could decline another 1% – 2% depending on what happens with our current economic situation.

These numbers are great news for people who own rental properties and for people who are looking to buy either a primary residence or an investment property. Add to that the fact that late last week mortgage interest rates hit an all time low and now is a great time to buy a home. Give us a call for a complete list of Central Oregon homes that are for sale in your price range.

Foreclosure Notice via Facebook?

It sounds as if lenders in the United States could be sending foreclosure notices via Facebook in the not so distant future. There have already been instances of borrowers being served with foreclosure notices this way in Australia, Canada, and the United Kingdom.

My first thought was, “Are they going to do this with a post to someone’s wall?” I read a number of articles and blog posts on this subject and couldn’t find one instance where a person had been notified by any means other than an email. Can you imagine getting a notification from Facebook that Bank of America has posted on your wall? Mortifying to say the least. It is easy to have a knee-jerk reaction to this and say, “Hey, how dare they notify me that they are foreclosing on my home through Facebook!” My first reaction when I heard of this was fairly similar but then this article in Time points out that foreclosure notices are already public record in the United States. Taking it one step further, these notices are also posted in the local newspaper. Not that anyone reads the print version any more. Most people quoted in the stories that I read said that there are already many privacy complaints about service of foreclosure notices in person and through the mail and they don’t think that serving notice via Facebook creates any new issues. Here’s a helpful hint, if you are in default on your home, don’t throw a cocktail party at said home.

If you are concerned about being served a foreclosure notice via Facebook there are a couple things you can do to make it difficult for your lender. Tighten up your privacy settings. Tell Facebook you don’t want anything from anyone who isn’t your friend, you don’t want anyone who isn’t your friend to see any part of your profile and don’t accept friend requests from people you think you know but really aren’t sure. One thing that is interesting is in some of these cases all it took for the court to agree that notice had been served was a change in the privacy settings of the person who was being served.

For the time being electronic service of foreclosure notices is generally only permitted by courts when the party being served has agreed to it in advance. I’m going to go out on a limb and say that this means if you said they can notify you by email then they can notify you through Facebook.

What do you think about this? Do you think that sending foreclosure notices through Facebook would open a whole new can of worms? Would it just be speeding up the inevitable? Are there privacy issues that aren’t being considered? Please feel free to post a comment below or where you found this link on Facebook.

Homeowner Associations and Foreclosures

I came across an article about homeowners associations foreclosing on their constituent’s homes. This is especially relevant in Bend because there are so many subdivisions that have homeowners associations (HOA’s). Nationwide, one in five homeowners (24.4 million homes) is subject to the rules of a HOA. More than 80% of the homes being built today will be subject to a homeowners’ association.

The general premise behind a HOA is a good one or at least well intentioned. If you own a home in a particular neighborhood or community, take Broken Top for example, you get many services and ammenities for paying your monthly dues. At Broken Top, among other things, you have a gate attendant, access to swimming pools and tennis courts, landscaped common areas, and road maintenance. The HOA also sets rules for things like what color your home can be painted, where you can park your car and what kind and color for sale signs can be placed in your yard. Those are the good things.

The article in USA Today also highlights some of the bad things about HOA’s. In the past, housing associations have gained infamy for dictating everything from the weight of your dog (one mandated a diet for a hound) to whether you can kiss in your driveway (not if you don’t want a fine in one). Homeowners’ associations have served as the behavior police, banning lemonade stands, solar panels and hanging out in the garage. One ordered a war hero to take down his flag because of a “non-conforming” pole. Another demanded that residents with brown spots on their lawns dye their grass green. And most importantly, that they can foreclose on your home if you don’t stay current on your monthly dues.

Before you purchase a home in a neighborhood with a HOA make sure that you read the fine print. In most cases the association has the right to foreclose on your home even if you are only a few hundred dollars behind in your dues. All it takes is a phone call to the HOA attorney who can start the process of foreclosure by placing a lien on your home. Making matters worse is that the homeowner usually doesn’t even have the right to a hearing.

The moral of the story is, if you are going to buy a home in a community that has a homeowners’ association do your homework. Your realtor can help. Make sure that the rules of the HOA are rules that you can live with. Make sure that you can afford the dues. And finally, ask the board how many of the homeowners in the association are making their dues payments. Currently, approximately 50% of all HOA’s are facing “serious financial problems” according to the Cumminity Association Institute. The last thing you want when you buy a house is to have a surprise special assessment from the HOA because your neighbors aren’t paying their dues.