NOD Upswing

N-O-Default notices rise

A report by RealtyTrac says first-time default notices were
filed on 78,880 homes last month, marking a nine-month high and
up 33 percent from July. It was the biggest increase since
August 2007. Even so, notices were down 18 percent from the same
month last year and were down 44 percent from the monthly peak
reached in April 2009 during the tail end of the recession. The
rise in default filings did not suggest that a new foreclosure
problem was on the horizon, but that some of the backlog related
to documentation problems was being worked out of the system,
said Mr. Sharga, senior vice president at RealtyTrac.
Foreclosure activity was halted temporarily late last year due
to claims that lenders relied on "robo-signing," where documents
were signed without reviewing the case files.

Total foreclosure filings—which include default notices,
scheduled auctions and repossessions—were sent to 228,098 homes,
a 7 percent increase from July but down 33 percent from August
2010. Bank repossessions fell 4 percent to a six-month low of
64,813 homes. Repossessions have come down 37 percent from the
peak of 102,134 hit in September 2010. Nevada once again had the
highest state foreclosure rate with one in every 118 homes
receiving a foreclosure filing in August. Nevada has held the
top spot for over four years. Even so, Nevada saw a 3 percent
decrease in filings as scheduled auctions and bank seizures
eased.

Foreclosure Freeze

Housing market faces long, cold winter: Altos

Low interest rates and a glut of inventory failed to
substantially stimulate a weak housing market this summer,
according to Altos Research. Based on summer statistics and shaky
economic indicators, Altos is predicting a "long, cold winter"
with nothing on the horizon to suggest improved housing market
activity through the fall and winter. Home prices in July rose in
14 of the 20 metro areas surveyed for the Altos Research
Mid-Cities Report and inventory increased in 12 of the markets.
"The housing market in the United States is in a constant state
of flux. Volatility is the norm and the rules of yesterday's
market no longer apply," Altos said. Eight of the 20 markets saw
their housing inventory levels decline, while six of 20 markets
noted a drop in median prices. The Federal Reserve Bank of Dallas
recently said it expects home prices to bottom out by early 2012,
with market volatility somewhat limited to certain hard-hit
areas, such as Arizona, California and Nevada. The Fed said
markets like Texas, where jobs have been created during the
recession, could see the tide shift by the early part of 2012.

Finally Some Good news

S&P: Mortgage default rate drops below 2% in July

The default rate on first mortgages dropped to 1.93% in July,
according to Standard & Poor's. S&P, in conjunction with the
consumer rating firm Experian, monitors the rate of defaults
within asset-backed securities. First mortgage defaults declined
from 2.02% in June and 3.24% one year ago. Second mortgage
defaults showed a steeper drop to a rate of 1.25% in July, down
from 1.4% the month before and 2.77% last year. Defaults actually
dropped across the entire ABS spectrum covered by the two firms,
reaching a composite default rate of 2.06% in July. It's down
more than a full percentage point from one year ago. While
defaults were down, delinquencies remained elevated. According to
Lender Processing Services, the delinquency rate on mortgages
went up by 2.4% in July. More than 4.4 million loans are
considered 30 days late or worse. Erkan Erturk, a credit analyst
at S&P, said "The firming of these rates suggests that consumers
continue to bolster their financial positions by paying down debt
and not incurring excessive charges despite elevated unemployment
and economic weakness, which we consider a positive for auto,
credit card, and other types of consumer ABS credit."

More Short Sales

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Short Sales on the INcrease!! :(

According to RealtyTrac, short sales are increasing as a
percentage of home sales in many states, helping some
neighborhoods and homeowners avoid the more devastating impacts
of foreclosures. The increases were sharper in some states,
including California, Nevada, Michigan, Georgia and Colorado,
the data show. In Colorado, short sales were 17% of all sales in
the second quarter, up from 10% a year earlier. In California,
they made up 25% of sales, vs. 18%. Bank of America, the largest
home mortgage servicer, expects to complete more than 100,000
short sales this year — more than double what it did in 2009,
the bank says. Wells Fargo Senior Vice President J.K. Huey says
short sales have been "steady to slightly" up in recent months,
partly because there are fewer bank-owned houses for sale in
some markets, and that has forced buyers to pursue more
short-sale properties.

In the second quarter, short-sale homes sold at a 21% discount
to non-foreclosure homes, while bank-owned homes went at a 40%
discount, RealtyTrac says. Short sales may also reduce losses
for loan owners because they avoid full foreclosure costs.
Borrowers may qualify for new mortgages sooner after a short
sale than after a foreclosure. peaked at 16% of the
market in early 2009, RealtyTrac says. Realtors say there should
be more short sales and that they should get done faster.

RealtyTrac

Second-quarter pre-foreclosure sales jumped 19% from the previous
quarter, suggesting more banks and distressed borrowers are
searching for efficient ways to offload properties that are near
foreclosure, RealtyTrac said. Third parties acquired 102,407
pre-foreclosures in the second quarter, while 162,680 bank-owned
homes were sold in the same period. Pre-foreclosure sales are
generally short sales and properties sold within the foreclosure
process. As for who is nabbing up distressed and bank-owned
properties, RealtyTrac said third parties acquired 265,087 homes
classified as in foreclosure or bank-owned in the second quarter.
That is up 6% from the revised first quarter figure and down 11%
from the second quarter of last year. The average sales price for
foreclosures or bank-owned properties hit $164,217 in 2Q, down
less than one percent from 1Q and 5% from the second quarter of
2010. The sales price for distressed real estate was 32% below
the average sales price of homes not in foreclosure. States with
the largest quarterly increase in pre-foreclosure home sales
included Nevada, which experienced a 43% increase; Washington
(39%), California (38%); and Texas (34%). The states with the
highest number of foreclosure sales included Nevada, Arizona and
California.

Freddie MAC dumps record #'s REO

Freddie Mac sold roughly 31,000 previously foreclosed and
repossessed homes in the first quarter, a new record for the
company as both government-sponsored enterprises shed inventory
from the end of last year. Combined, both Fannie Mae and Freddie
hold 218,000 REO properties as of the end of the first quarter,
down from roughly 234,000 at the end of 2010, according to their
filings. In the first quarter of 2011, Freddie holds roughly
65,000, compared to its larger sibling Fannie, which holds
153,000 REO in its inventory. While both GSEs made progress in
cutting down this portion of the nation's inventory of foreclosed
homes, which continues to drag down home prices, inventory has
elevated since one year ago. Both Fannie and Freddie held
163,000 properties in the first quarter of 2010, almost what
Fannie holds currently by itself. Repossessions at Freddie
increased by nearly 1,000 in the first quarter, and the holding
period for these homes averaged 191 days before being resold.
This varies significantly from state to state, especially as
servicers restart foreclosure processes in different areas of the
country. Servicers paused the process late last year to correct
procedural problems. "We expect the pace of our REO acquisitions
to increase in the remainder of 2011, in part due to the
resumption of foreclosure activity by servicers, as well as the
transition of many seriously delinquent loans to REO," Freddie
said in its financial supplement.

Cash is still King

For existing homes in March, the bulk of the market, 35% of all transactions were all-cash (that's a new record), and 22% were sales to investors; investors don't necessarily want to hold on to these properties for very long, so they may come back on the market again soon. But back to the distressed properties. While the National Association of Realtors says 40% of March sales were distressed properties (up from 39% in February and 35% a year ago), another survey from Campbell/Inside Mortgage Finance finds nearly half of all homes on the market are distressed. Short sales are 'booming' according to the same report up to nearly 20% of sales. But short sales are a double-edged sword. Yes, they're better for the banks and the sellers because there is less of a financial loss to the bank and less of a credit loss to the seller, but they make comps and appraisals even murkier than they already are.

From the Campbell/IMF report: 'Home values continue to decline, making normal sale homes worth much less than they should be. Appraisers continue to use foreclosed or distressed property sales to establish value on non-distressed listings. Further, these same appraisers will not make any adjustments for amenities, (pools, spas, solar, etc.), when compiling a normal sale vs. distressed comps. I have had at least one appraiser tell me that his firm has been given marching orders to calculate the current value based on all properties sold within the last 3 to 6 months and only use the average square footage minus 10% to establish neighborhood value comps. If this is indeed standard practice, it will take a mighty long time to realize any increases in property values,' complained an agent in Arizona. It's not just in Arizona either.