Massachusetts Foreclosed Homes

Lenders Fail To Modify, So Foreclosures Continue

President Obama's $75 billion plan to reduce the number of foreclosures sweeping the nation has been plagued with backlogs and delays, USA Today Reported June 19, 2009.

Many struggling homeowners have complained about phone calls not returned and inaccurate information from lenders, and others have said they were denied help for reasons that weren't clear.

The Obama plan's goal was to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments; however, since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to Treasury Department numbers. During that same period, lenders either have started or advanced foreclosure proceedings against more than 1 million homes.

"Homeowners who apply for mortgage modifications are finding that banks typically are taking 45 to 60 days to respond to inquiries, according to a report this month by NeighborWorks America, a provider of foreclosure-prevention counseling.

"Some homeowners who applied for mortgage modifications five months ago still have no answer on whether they will be able to arrange smaller monthly payments, leaving them uncertain whether they'll keep their homes or lose them shortly."

Some lenders blame the Obama administration for not outlining the details of the plan until March. These lenders now claim they are beefing up staffing to process modification requests.

"Bank of America reports that it modified about 232,000 mortgages last year. During the first four months of this year, it has completed about 157,000 modifications — all before the Obama housing rescue plan went into effect."

Read The USA Today Article

Find Foreclosed Property In Massachusetts

MA Foreclosure Deeds Down, Starts Rise

The number of foreclosure deeds recorded in Massachusetts declined by double-digit percentages in May compared to the prior year and prior month, The Warren Group, a publisher of real estate data, reported June 18, 2009; however, the number of foreclosure proceedings started by banks and other types of lenders dramatically increased during the same period.

There were 582 foreclosure deeds recorded in May 2009, a 58.6 percent drop from 1,405 in May 2008 and 24.3 percent below the 769 in April 2009. Year-to-date foreclosure deeds fell 26.3 percent to 4,110 from 5,576.

“The number of foreclosure deeds recorded in May was the lowest since April 2007. It is encouraging that foreclosures have declined for two months straight. I think lenders have realized how costly foreclosures can be and are taking steps to avoid foreclosure whenever possible,” Timothy M. Warren Jr., CEO of The Warren Group, said.

“But I remain concerned because unemployment has crept up, and many people who’ve lost their jobs will have trouble keeping up with mortgage payments. In addition, it also looks like the pace of initiated foreclosures has remained fairly steady over the last four months. Lenders have started over 2,000 foreclosures a month since February,” Warren said.

A total of 2,329 foreclosure petitions were filed in May, almost six times the 390 foreclosure petitions filed in May 2008. Foreclosure petitions mark the start of the foreclosure process in Massachusetts. In addition, the number of foreclosure petitions climbed 15.7 percent from 2,013 in April 2009. There were 10,978 foreclosure petitions filed from January through May 2009, 13.7 percent lower than 12,726 last year.

“The sharp increase in May foreclosure petitions year-over-year is due to the so-called 90-day right-to-cure law that went into effect last May. The state law, which requires lenders intending to foreclose to give delinquent borrowers in Massachusetts 90 days to catch up on missed mortgage payments, artificially depressed foreclosure petitions in May 2008,” Warren said.

Auction announcements fell 30.7 percent to 1,377 in May 2009 from 1,987 in May 2008, but climbed 26.8 percent from 1,086 in April 2009.  Year-to-date auction announcements dropped 34.7 percent to 5,825 from 8,916.

Find Massachusetts Bank-owned Properties - Free Listings

Banks May Have A Lot More Inventory To Sell

Are U.S. banks sitting on a lot of real estate inventory?

The Christian Science Monitor reported May 22, 2009 that only about 30 percent of the available bank-owned inventory is on the market in the United States.

The fear of real estate professionals is that this "shadow" inventory will further delay a housing recovery. For investors looking for bargains, the talk of excess inventory is music to their ears.

Real estate professionals believe that banks are holding on to about 500,000 properties that will eventually hit the market.

Of course, the vast amount of this inventory is likely in places such as Phoenix.

Read The Christian Science Monitor Article

Court Ruling Halts Foreclosure Sales

A Springfield, MA Land Court judge's ruling that two banks improperly seized two properties in foreclosure has halted the sale of many bank-owned properties across the state, the Boston Herald reported June 9, 2009.

"Experts say Land Court Judge Richard Long’s recent decision to void two Springfield-area foreclosures over procedural flaws has gummed up resale of foreclosed homes across the state."

One local listing agent that sells mainly bank-owned properties told the Herald that, "It’s just stopped everything," and 12 of her sales have been halted since the ruling.

Due to the judge's decision, title insurance companies are not willing to write lender's or owner's title insurance policies. Without the availability of a lender's policy, lenders are not willing to provide financing on such deals.

"The judge found that the banks held foreclosure auctions even though both lacked documents at the time proving that they really owned the homeowners’ mortgages. That 'clouded' each property’s title, discouraging any third party from bidding on the homes, Long ruled."

I have a similar situation regarding a sale of a single-family home in Tewksbury, MA. My buyer agreed to purchase the property from an investor who bought the property from a bank. For the same reasons as in the Springfield court case, the property has a defective title. We are waiting for the outcome of the case.

"Experts say paperwork flaws are common in foreclosures these days, as mortgages often changed hands over and over again during the 1998-2005 housing boom. Any missing paperwork can call into question whether a bank really owned a loan it foreclosed upon."

Read The Boston Herald Article

Is Debt Reduction The Answer To Foreclosure Mess?

Jim Randel, founder of The Skinny On, wrote an article June 6, 2009 for The Huffington Post suggesting debt reduction is needed to finally solve the nation's foreclosure crisis.

Randel wrote that other measures taken by the Obama Administration have not worked.

"The missing piece is debt relief ... not a reduction in interest rates, not an extension of the loan amortization period, not a temporary abatement in mortgage payments. We need to confront the problem head on and stop nibbling at the edges - we need to discuss principal reduction."

Randel goes on to write that too many homeowners are "under water" on their mortgage, i.e., they owe more than their home is worth.

Randel writes, "Why work your butt off to keep paying on a mortgage, even if your payments are reduced to where you can afford them, when all you are doing is treading water?" How about because it is the right thing to do?

"Today, about 1 in 4 houses with a mortgage are underwater and many more are close. Since about 2/3 of all homeowners have a mortgage, this means that almost 20% of our housing stock has more debt on it than value. That's 13 or 14 million homes. These residents are now quasi-tenants, paying 'rent' to a lender so they can stay in their home with little chance of upside. Obviously that was not the thinking going in when these homes were purchased. Many of these homeowners put in equity and hard work with the hope of cashing in someday. That dream is now gone."

For those responsible homeowners and taxpayers bailing out the nation's banks and every other deadbeat the American Dream is slipping away.

Read The Huffington Post Article

MA Foreclosures Decline Dramatically In April

Massachusetts foreclosures dropped significantly in April from April 2008 and also were lower than in March, The Warren Group, a publisher real estate data, reported May 21, 2009. 

A total of 755 foreclosure deeds were recorded statewide in April, a 43.8 percent drop from 1,344 in April 2008. April 2009 foreclosure deeds were also down 20.8 percent from 953 in March 2009

April was the first time that foreclosure deeds fell below 800 in six months. It also marked the steepest year-over-year decline in monthly foreclosure deeds. Year-to-date, the number of foreclosure deeds fell 15.9 percent to 3,510 from 4,171 last year. The number of foreclosure deeds recorded in the first four months of 2009 climbed only in Berkshire, Dukes, Nantucket and Norfolk counties.

Petitions to foreclose, the first step in the foreclosure process, plunged 39.5 percent to 2,013 from 3,328 in April 2008. The number of foreclosure petitions also fell 15.5 percent from 2,381 in March 2009, the first drop in month-to-month petitions in five months.

Foreclosure petitions hit a peak in April 2008, a month before a state law took effect that required lenders to give delinquent borrowers 90-days to catch up on missed mortgage payments. So far this year, lenders have filed 8,649 foreclosure petitions statewide, 30 percent fewer than 12,336 a year earlier.

 “The good news is that the number of foreclosure deeds recorded in April was the lowest for a single month in over a year, and lenders have been starting far fewer foreclosure proceedings this year compared to last year,” said Timothy M. Warren Jr., CEO of The Warren Group. “But I’m a little cautious about being overly optimistic with this latest report because the employment picture hasn’t changed much and mortgage loan delinquencies have been trending up.”

Auction announcements continued to decline year-over-year. The Warren Group tracked 1,004 auction announcements in April, a 45.7 percent decrease from 1,850 in April 2008 and 8.1 percent below March 2009 when there were 1,093 auction announcements. Auction announcements have fallen every month this year from their levels a year earlier.

You can receive the latest foreclosure listings from MassForeclosed.com for free.

Loan Modification Program Starts Slow, Helps Few

The Obama administration's plan to help millions of homeowners avoid foreclosure by reducing the size of their mortgage payments has had little impact so far.

"So far, two months after the program went into effect, about 55,000 homeowners have been extended loan modification offers, according to a senior administration official," The New York Times reported May 13, 2009.

The administration apparently is just now putting together the details of the plan; hence, banks have been slow to move forward on modifications.

The plan intends to lower monthly mortgage payments to 31 percent of the borrower’s gross income.  This would be done by either extending the loan term, reducing interest rates to as low as 2 percent or deferring principal; however, at this point not all loan modifications are reducing monthly mortgage payments.

Mortgage servicers can reduce principal, but are not required to, and most have not lowered the balance owed.  In April, 29 percent of mortgage modifications actually increased monthly payments and 12 percent did not alter payments.  Loan modifications reduced monthly payments only 59 percent of the time.

That mortgage modifications lower monthly payments is crucial for the plan’s success, as borrowers whose payments are not cut tend to default again within 6 months to a year.   

The Times reported that experts believe that reducing the principal amount would significantly help homeowners who are “underwater,” which those who owe more than their home is worth.  Being underwater is one of the most telling indicators of loan default experts believe. 

RealtyTrac, a publisher of foreclosure data, reported last week that there were 342,000 foreclosure filings in April, which represents a 32 percent increase from April 2008.  An estimated 2.1 million homeowners will lose their homes this year, Moody’s reported.

Read The New York Times Article

Changes To Making Home Affordable Program

The United States Treasury Department announced recently the creation of Foreclosure Alternatives and Home Price Decline Protection Incentives, two new components to the Making Home Affordable program, in an effort to stabilize property values in areas hard-hit by foreclosures, the Huffington Post reported May 14, 2009.

"Today we are announcing a new program component to help homeowners obtain [loan] modifications in areas suffering from home price declines," Treasury Secretary Tim Geithner said. "If a modification is not possible, we are also announcing steps to encourage the quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future.  These are critical steps in stemming the foreclosure crisis and stabilizing the housing market, both of which are critical to our economic recover,"

Foreclosure Alternatives aims to help homeowners who cannot afford to stay in their homes avoid foreclosure, which costs borrowers and lenders significantly more than short sales.  Although loan losses with foreclosures have been found to be much higher than those with short sales, lenders often reject offers, hoping to negotiate a slightly higher one until the deal falls through.  As empty properties await foreclosure, they bring down the value of real estate throughout the neighborhoods where the properties are located.

Foreclosure Alternatives will facilitate the short sale process for some borrowers by giving incentives to lenders and borrowers to complete short sales and deeds-in-lieu of foreclosure.  A deed-in-lieu follows a failed short sale, and is the process by which a borrower hands the keys over to the bank. 

The new program helps those borrowers who are eligible for a Making Home Affordable modification, but who are unable to maintain payments or complete the modification process.  Mortgage providers might receive as much as $1,000 for completing a successful short sale of deed-in-lieu, and borrowers might be compensated up to $1,500 to assist with relocation expenses.

Home Price Decline Protection Incentives, the second piece of this effort, is meant to, "address investor concerns that recent home price declines may persist."  To encourage lenders to proceed with additional modifications in areas where home prices are dropping, the Treasury Department has devised “an innovative payment that provides compensation based on recent home price declines.  Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed.”  The payments will be connected to the average cost of a home in the local housing market, and the rate of home price decline in that market.

The New York Times reported last week that the Making Home Affordable program had only assisted 55,000 Americans modify their mortgages.  Advocates for the program hope that Foreclosure Alternatives and Home Price Decline Protection Incentives will bolster the effectiveness of the program, stabilize property values and give a boost to the real estate industry.

Read The Huffington Post Article

NYT Reporter Covering Foreclosure Faces It

A New York Times reporter who covers economics apparently, despite his background, entered the world of subprime mortgages in 2004 and bought a home he apparently could not afford, the Huffington Post reported May 14, 2009.

"Two years later, he wound up with $50,000 in credit card debt, and the stress and panic attacks started straining his relationship with his new finacee, Patty."

The reporter, Edmund Andrew, is seven months behind on his mortgage, and he faces foreclosure proceedings.

Andrews has written a book (Busted: Life Inside the Great Mortgage Meltdown) about the ordeal. He apparently blames banks and federal regulators for the mortgage meltdown, not fraud.

Read The HuffPost Article

When Will Foreclosures Hit Bottom?

The Freakonomics blog added a post May 1, 2009 about foreclosures and interviewed Foreclosure.com CEO Brad Geison.

Geison was asked when we'll know foreclosures have hit bottom.

"When property values are cheap enough that they equal rental values. What I mean by that is when you can buy a property with very little money down and finance it at a good rate, and then rent it out for just enough to cover the mortgage, insurance, and taxes, then you’ve hit what I call 'economic value.' That’s when the property value is the same as its economic value. That’s pretty close to bottom. Now, when you have a pendulum swinging, and values are still dropping a bit, it may swing a little past that. If the property was already 30 percent less than market value, and property values are still dropping, and it gets down to economic value, then that’s when the pendulum will begin to stop and begin to swing the other way."

Read The Entire Freakonomics Blog Post

Tax Credit Helps With Homes In Need Of Repair

The following video created by Boston.com is of first-time home buyers that bought a home in Watertown, Massachusetts. The couple said that, among other things, the first-time home buyer federal tax credit influenced their decision to buy now.

The couple also mentioned that the $8,000 tax credit will help them make repairs to the home built in 1933.

The Biggest Myth About Bank-owned Properties

How many times have you heard something like the following? "Banks are not in the business of real estate. They want to sell these properties fast." Anyone who makes such a statement clearly has not recently been involved in negotiating any bank-owned home sales in Massachusetts.

The idea that banks are just giving away, or even selling for a substantial discount, foreclosed properties could not be further from the truth.

The fact is that banks will routinely reject offers of say $235,000 on a home listed for $250,000. Now, this does not mean that the bank will not eventually accept $235,000, but only after another month or two have passed and the price has been lowered. The banks typically employ one of two strategies.

1. Reduce the price of a property every month or so until the price results in one or more offers at or more than the list price. Along the way, the bank may reject several offers at or more than the ultimate sale price. It sounds crazy, but it is absolutely true.

2. List the property at below market value. This strategy usually results in multiple offers over the listing price. Multiple offer situations really put the banks in the driver's seat, as far as negotiations go. It's is not unusual for some bank-owned properties to have five, 10, 15 or 20 offers, most of which exceed the asking price. 

Home buyers interested in buying a foreclosed home need to know exactly what they want in home, have pre-approval letter for both a regular and rehab loan and be ready to act fast, if a potential deal comes along. Working with a real estate broker experienced in helping clients buy bank-owned properties and a real estate lawyer is an absolute must. 

Sign up for free to receive bank-owned property listings.

Foreclosure Deeds Decline In Massachusetts

Massachusetts recorded 823 foreclosure deeds in February 2009, a decline of 4.3 percent compared to February 2008 and a 16 percent decline from January; however, the number of foreclosures initiated has risen four consecutive months, The Warren Group reported March 31, 2009.

Lenders filed 2,295 petitions to foreclose in February, a 17 percent increase from 1,960 petitions in January; however, foreclosure petitions fell 19.1 percent from February 2008 when 2,838 petitions were filed. Foreclosure petitions are the first step in the foreclosure process.

The Warren Group tracked 917 auction announcements in February, down 27 percent from 1,256 in February 2008 and down 30.2 percent from 1,313 in January 2009. It was the first time that auction announcements fell below 1,000 since November 2007.

Foreclosure Prevention Workshop In Brockton, MA

There is a homeowner foreclosure workshop planned in Brockton, Massachusetts for April 3, 2009.

Get More Information

President Obama's Foreclosure Prevention Program

The $75 billion Obama foreclosure prevention plan, which the administration calls the "Making Home Affordable" initiative, runs through 2012.

Here are some highlights, courtesy of Boston.com and FinancialStability.gov:

• Mortgages for single-family properties that are worth more than $729,750 are excluded.

• Interest rates can be lowered to as low as 2 percent, and then, if necessary, the term of the loan can be extended to a maximum of 40 years.

• The home must be a primary residence (verified with tax return, credit report, and other documentation such as a utility bill). The home may not be investor-owned.

• The home may not be vacant or condemned.

• Borrowers must provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify.

• Borrowers in bankruptcy are not automatically eliminated from consideration for a modification.

• Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.

• Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on or before Jan. 1, 2009.

• Incentives are provided to extinguish second liens on loans modified under the program.

• Homeowners are eligible for up to $1,000 of principal reduction payments each year for up to five years.

• Separately, up to 5 million borrowers who have mortgages held by government controlled mortgage finance giants Fannie Mae and Freddie Mac should be eligible to refinance through June 2010, even if they owe more than the value of their home.

Check out the U.S. Housing And Urban Development Guide To Avoiding Foreclosure