Doesn’t get worse than West Orange

Posted on June 26, 2010 by grim

From the NY Times:

Property Taxes Inhibit Sales in West Orange

FOR many years this community enjoyed popularity as a less expensive alternative to those Essex County towns on the direct train line to Manhattan. These days, however, something uncomfortably close to gridlock has the real estate market in its grip. The cause seems to be runaway property taxes.

There are currently 533 homes listed for sale, according to Realtor.com. In April, the last month for which sturdy statistics are available — and a very strong month for sales statewide — West Orange had just 47 sales.

The backlog of homes would take eight and a half months to sell if no new listings were added, according to the Otteau Valuation Group, a market research company. That compares with a little over six months for the county, less than three months for nearby Glen Ridge and Livingston, and less than four months for Maplewood and Millburn.

Meanwhile, brokers say, prices are off 20 to 25 percent from the heights reached in the housing boom. “I can’t believe what some of these same houses that I have sold in the past are going for now,” said Roberta Plutzik Baldwin, a broker with Keller Williams Towne Square of Montclair. “Incredible deals. And yet, I have sold fewer houses in West Orange this year than I have in any of the last 15 years.”

Many brokers, buyers and sellers echo the people who protested on the steps of Town Hall during the municipal election in April: Property taxes are farther “out of whack” in West Orange than almost anywhere else.

“The taxes are breathtaking,” said Scott Hazen Mueller, who with his wife, Marty Mueller, recently bought a three-bedroom ranch in the Rock Spring neighborhood as a short sale from a bank for $280,000, taking on an annual tax bill of $13,000.
…
In the same West Orange neighborhood, Adam and Ruth Kraemer own a four-bedroom house they bought six years ago, newly built, for $699,000. It is worth perhaps $500,000 now, Mr. Kraemer said. They paid $25,972 in taxes this year. Taking into account the newly adopted town budget, they expect to pay $27,300 next year.
…
Jeffrey G. Otteau, who heads the market research firm that calculated inventory levels, did a calculation to illustrate the heavy impact that this tax burden can have on home value:

The monthly tax bill on a $350,000 house in West Orange would be $286 greater than in Livingston. The yearly tax bill would be $3,432 greater — $10,012, as opposed to $6,580. Assuming the house had a 30-year mortgage, that would mean $48,000 more in taxes over the life of the loan.

“Theoretically, at least, that means that much off the market value for the West Orange home,” Mr. Otteau said.
…
Mr. Kraemer said he felt the middle class was being forced out of West Orange, which also has some exclusive sections, including the historic gated community of Llewellyn Park, where the comedian Whoopi Goldberg bought a house earlier this year. (Mr. Kraemer looked up her tax bill: $72,000 a year.)

“I love my neighborhood, and I love my town,” he said. “But with our equity declining, and tax bills like this, my wife periodically sits me down in the kitchen, and asks, ‘Can we really afford to stay here?’ ”

Posted in New Jersey Real Estate, Property Taxes | 120 Comments

Here she comes. Watch out boy she’ll chew you up.

Posted on June 25, 2010 by grim

From the NY Times:

Analysts Question a Threat by Fannie

Fannie Mae’s decision to begin punishing people who walk away from their unpaid mortgages could prove difficult to sell to the public and might be impossible to execute, housing and lending experts said Thursday.

The big mortgage financing company, which owns or guarantees millions of mortgages, announced on Wednesday that it would sue homeowners who have the capacity to pay but default anyway, David Streitfeld reports in The New York Times. It also said it would prevent these strategic defaulters from getting a new Fannie Mae-backed loan for seven years, which could potentially shut millions of buyers out of the market.

But it was unclear, the experts said, why Fannie Mae was threatening delinquent owners and what it hoped to achieve. The new direction seems to run counter to the Obama administration’s efforts to reinvigorate the housing market. And there were basic questions about how Fannie would be able to distinguish between those homeowners who defaulted intentionally and the unfortunate ones who had no choice.

“How are they going to do this, and for what result?” asked Grant Stern, president of the Morningside Mortgage Corporation on Bay Harbor Islands, Fla. “So they can find the people who have a little money left after their house crashed and take it away from them?”

A Fannie Mae spokeswoman said that the goal of the new punitive policies was to force defaulting homeowners to work with their servicers to surrender their houses through either a lender-approved short sale or by formally giving up the deed.

“We really want to encourage borrowers to pursue alternatives to foreclosure,” said the spokeswoman, Janis Smith.

Posted in Housing Bubble, National Real Estate, Risky Lending | 221 Comments

Another painful decline for housing?

Posted on June 24, 2010 by grim

From Bloomberg:

Betting Who’s Right on Housing: Baker-Whitney vs Maki-Harris

Dean Maki, chief U.S. economist at Barclays Capital, says the worst is over for the U.S. housing sector. Dean Baker, co-director of the Center for Economic and Policy Research, expects another painful decline.

They reflect an almost even split among forecasters on the outlook for residential real estate, and whichever side turns out to be right will have made a call on more than just home prices. Housing will play a crucial role in the direction of the nation’s economy and global financial markets, just as it triggered a two-year recession that erased more than 8 million U.S. jobs and $37 trillion from world stock markets.

“There is real destruction when housing demand declines because to most American families a home is their most important asset — a very significant part of their wealth and retirement savings,” Joseph Stiglitz, an economics professor at Columbia University in New York and a Nobel Prize winner, said in a telephone interview. “When they feel insecure about its value there obviously is a very big impact on their quality of life.”
…
The May home-sales declines lend at least temporary credence to housing bears like Baker, a University of Michigan Ph.D and author of “False Profits: Recovering From the Bubble Economy” (PolipointPress, 2010). Baker, who is based in Washington, estimates that home prices will fall 12 percent this year, wiping out a 9.1 percent gain in the median price over the past three months, as gauged by the National Association of Realtors.

Meredith Whitney, founder of Meredith Whitney Advisory Group in New York, told CNBC this week that another housing recession is likely.

Also in the bears’ camp: Joshua Shapiro, chief U.S. economist for MFR Inc. in New York, who is calling for a 10 percent decline in prices; and Nariman Behravesh, chief economist of IHS Global Insight in Lexington, Massachusetts, who expects a loss of 7 percent.
…
About half of 106 U.S. forecasters in a study published yesterday by MacroMarkets LLC expect price declines in 2010 and half anticipate either little-changed or increasing values. The estimates in the study range from Baker’s 12 percent drop to the 3.4 percent gain forecast by Bill Watkins, executive director of the Center for Economic Research and Forecasting at California Lutheran University in Thousand Oaks, California.

Posted in Economics, Housing Bubble, National Real Estate | 158 Comments

Home prices to continue decline

Posted on June 23, 2010 by grim

From Bloomberg:

Whitney Says She Sees ‘Double Dip’ in Housing Market

The U.S. housing market will experience a second recession, forcing banks to post additional loan-loss reserves, analyst Meredith Whitney said.

“Most investors are not baking in a double-dip in housing,” Whitney, founder of New York-based Meredith Whitney Advisory Group, said today in an interview on CNBC. “You’re going to see banks post additional reserves associated with this double-dip in housing, and that means weak performance going forward.”

U.S. home prices fell more than 30 percent from their peak in 2006 through the first quarter of 2009, prompting banks to take writedowns on mortgage loans. Housing starts have increased 24 percent since the low in April 2009 as mortgage rates remained near record lows and the U.S. government offered tax credits to homebuyers.

From the WSJ:

Outlook for Home Prices Grows Darker

Housing analysts have grown gloomier about the outlook for U.S. home prices as sales slump, a new survey shows.

The monthly report by MacroMarkets LLC, due for release Wednesday, found that 56% of the 106 economists and other analysts surveyed expect home prices to decline this year. That is up from 40% a month ago.
…
Since April 30, new purchase contracts have plunged as buyers no longer have the incentive of a federal tax break, builders and real estate agents say. Lawrence Yun, chief economist for the Realtors, estimated that contracts signed in May were 10% to 15% below the weak level of a year earlier.
…
Ronald Peltier, chief executive officer of HomeServices of America Inc., which owns real estate brokers in 21 states, said new home-purchase contracts in May and June so far are down about 20% from a year earlier. The tax credit accelerated sales that otherwise would have occurred later in the year, Mr. Peltier said.
…
Terry Loebs, managing director of MacroMarkets, a developer of investment and hedging products based in Madison, N.J., said he believes housing analysts generally have grown more cautious because of the weak national employment data reported in early June and the sharp drop in sales and housing starts since April.
…
The analysts surveyed by MacroMarkets on average expect home prices, as measured by the S&P/Case-Shiller national index, to decline about 1.4% this year, then rise 1.3% in 2011 and 2.7% in 2012. For the five years ending Dec. 31, 2014, they see a rise of 10.5%. As of Dec. 31, the index was down about 28% from its peak level in mid-2006.

From Bloomberg:

Housing Market Threatens U.S. Recovery as Sales Slide Resumes

The U.S. real estate market threatens to undercut the Obama administration’s stimulus-driven economic recovery as home sales resume their record slide following the end of the federal homebuyer tax credit.

The end of the tax credit in April is putting a strain on a market still hurting from the worst collapse since the Great Depression. Foreclosures may reach 1.9 million this year after a record 2 million in 2009, according to Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. It would take 8.3 months to sell all available 3.89 million existing homes, the Realtors’ association said.

“We’re going to see a home-sales air pocket after the end of the tax-credit stimulus,” said Richard DeKaser, a former economist at the U.S. Bureau of Economic Analysis who founded Washington-based Woodley Park Research. “That means housing will be a drag on third-quarter economic growth.”
…
“If there is a sharp decline not only in housing sales but in housing prices, that could threaten a recovery,” said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia.
…
The median U.S. home price slid 29 percent to an almost eight-year low of $164,600 in February from a peak of $230,300 in July 2006, according to data from the Realtors group. Prices will drop 3.6 percent this year after falling 4.5 percent in 2009, the Washington-based Mortgage Bankers Association estimates.

Posted in Economics, National Real Estate | 283 Comments

May Existing Home Sales

Posted on June 22, 2010 by grim

From Bloomberg:

Sales of Existing Homes in U.S. Probably Climbed on Tax Credit

Sales of U.S. previously owned homes rose in May to the highest level in six months as buyers rushed to beat a June tax-credit deadline, economists said before a report today.

Credit-induced gyrations will make the underlying health of the market difficult to determine over the next couple of months. A slump in builder shares since early May signals investors are concerned the damage caused by the end of government stimulus, mounting foreclosures and unemployment will exceed the benefits of lower mortgage rates.

“There are still a lot of headwinds as we’re making this important transition,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The real key in all this will be the labor market. You’re not going to see a sustainable housing recovery without job growth.”

The report from the National Association of Realtors is due at 10 a.m. in Washington. Economists’ estimates ranged from 5.2 million to 6.5 million after a 5.77 million rate in April.

Demand last exceeded May’s projected level in November, the month the tax break was first due to expire, when sales reached an almost three-year high 6.49 million pace. The smaller jump last month shows the incentive lost power after being extended.

Posted in Economics, National Real Estate | 215 Comments

Lower cap looks likely, but will it be 2.9% or 2.5%?

Posted on June 21, 2010 by grim

From New Jersey Newsroom:

Sweeney to propose 2.9 percent cap on N.J. property tax hikes

Contending a cap on property tax hikes needs “realistic numbers,‘’ Senate President Stephen M. Sweeney (D-Gloucester) Monday will introduce a proposal to set a cap at 2.9 percent instead of the 2.5 percent sought by Gov. Chris Christie.

The cap issue is expected to be decided before the Legislature adjourns for the summer at the end of the month.

The Sweeney plan would allow for “cap banking,” meaning that communities that keep increases below the cap would be able to set-aside the difference for future use should an emergency arise that would require a budget to increase property taxes above the cap.

“Certainly, New Jersey needs a solid cap, but it has to be a realistic cap based on realistic numbers,” Sweeney said. “We have to accept that New Jersey is not Massachusetts, where their cap has been met with uneven reviews. We need a cap that will fit the needs of our state and our communities, and this is a proposal that does.”

Sweeney argues that since New Jersey implemented a 4 percent in 2007, property tax increases have dropped demonstrably. He said last year, property tax increases averaged 3.3 percent. Before the cap law was enacted, increases averaged roughly 7 percent.

“The current cap law has been a success, but that doesn’t mean we can’t improve upon it,” Sweeney said. “If the cap can contain property taxes to their lowest increases in a decade, then a tighter cap can definitely push increases well below the governor’s magic 2.5 percent goal.”
…
Sweeney said that allowing communities to bank against the cap would give them greater long-term flexibility. He said towns and school districts would be more apt to budget below the cap if they know they can tap into the difference should an emergency arise.

Posted in New Jersey Real Estate, Politics, Property Taxes | 193 Comments

NJ Sales Plunge – Realtors Beg For Bailout

Posted on June 19, 2010 by grim

From the NY Times:

Reviving a Housing Market in a Swoon

ACCORDING to the early evidence, the New Jersey residential market went a bit weak in the knees in May — or even swooned — after the federal home buyer tax credit expired on April 30.

ales statistics are not yet final. But in a sample study of multiple-listing data from nine counties done by the Otteau Valuation Group of New Brunswick, which reports on the state’s real estate industry, the pace of contract signings was found to be down in all of them, and in some cases sharply.

In Middlesex County, for example, four straight months in which sales outpaced those of the year before were followed by a month of May with almost a third fewer sales than last: 467 contracts versus 672.

On average across all nine counties, according to the Otteau data, there were 23 percent fewer sales in May than there were in May 2009. The counties were: Bergen, Camden, Essex, Hudson, Middlesex, Morris, Ocean, Passaic and Union.

Even before these numbers were in, however, state lawmakers were readying plans for a new statewide tax credit, described by some as a “bridge” to help the housing market along until the overall economy fully recovers.

On June 10, legislators gave overwhelming final approval to a measure that would provide buyers with a tax credit of $15,000 (or 5 percent of the purchase price, whichever is less) over three years, as long as they lived in their homes for at least that length of time. A total of $100 million would be allocated for the program, which would place no income limits on participating buyers.
…
It is now up to Gov. Christopher J. Christie, who was silent on the issue during debate, to decide whether the program would effectively jump-start the housing market once again, and whether it makes sense at a time of budget crisis and already-declining tax revenues for the state.
…
Among the nine counties surveyed, the biggest loser was Camden, to the south, which had a 40 percent drop in sales volume last month over the previous year. Southernmost Ocean County had a 23 percent decline, whereas Bergen and Hudson Counties in northern New Jersey had only 13 percent declines.

Essex County is home to Newark, one of the poorer cities in the state and its largest, as well as affluent Short Hills, where several local brokers said they had not sensed any lost momentum in May. In all, 349 contracts were signed in Essex, 22 percent fewer than last year.

Morris County had 17 percent fewer sales; in Union and Passaic, also in the north, declines were 24 and 27 percent.

Posted in Economics, New Jersey Real Estate, Politics | 224 Comments

Government plan to plug Gulf leak with bad mortgages fails

Posted on June 18, 2010 by grim

From CNN/Money:

75% of modified home loans will redefault

Most borrowers who have had their mortgages modified through a government-sponsored program will redefault within 12 months, according to a report released Wednesday.

Between 65% and 75% of loans that are modified through the Home Affordable Modification Program but not backed by the federal government are likely to go bad, according to the report released by Fitch Ratings, a N.Y.-based credit-rating agency.
…
The main reason these borrowers continue to struggle is that HAMP does nothing to solve the rest of their debt problems, the report added.

“Many of these borrowers still have very heavy levels of other debt,” said Diane Pendley, a Fitch managing director, “auto loans, credit cards and other expenses. The HAMP modifications reduce housing expenses down to 31% of income but do not touch these other obligations.”

On average, HAMP-modified borrowers, according to Pendley, have 64% of their monthly pretax income spent before they even buy a quart of milk. If even a small emergency arises — an unexpected car repair, a medical bill or a loss of overtime income — they’re in trouble.
…
Currently, according to the Fitch report, about half of prime borrowers who lose their homes now do so through foreclosure.

The other 50% go through short sales, in which they sell their homes for less than what they owe the bank, or deed-in-lieu, a transaction where the bank takes back the property directly and forgives the outstanding balance.

Posted in National Real Estate, Risky Lending | 131 Comments

Can’t go wrong with real estate in Jersey

Posted on June 17, 2010 by grim

From the Star Ledger:

Defendants in N.J. mortgage fraud ring tried to take more than $5M from banks, feds say

They applied for mortgages using phony pay stubs showing wages never earned. They forged tax documents and bank statements. And they assumed the identities of people who had moved out of the country, hoping to use their clean credit records to trick bank officials.

Those were among the allegations federal prosecutors outlined Wednesday as they unveiled charges against 28 real estate agents, investors, accountants and others caught in a sweeping mortgage-fraud sting in northern New Jersey.

Authorities said the investigation provided a window into shadowy criminal enterprises in which the defendants acted like con artists to dupe banks into loaning hundreds of thousands of dollars to people who had no intention of paying it back.
…
The investigation targeted a string of separate schemes involving more than 17 properties in New Jersey. But the defendants didn’t really want the property; they wanted the money, authorities said. In total, the defendants tried to bilk more than $5.5 million from lending institutions.

From the WSJ:

N.J. Woman Accused of $45 Million Fraud

Federal prosecutors charged a New Jersey woman with running a $45 million Ponzi scheme, alleging she raised millions of dollars under the pretenses of investing in real estate and instead, among other uses, gambled it away.

The Manhattan U.S. Attorney’s office says Antoinette Hodgson, a 58-year-old woman from Montclair, N.J., solicited tens of millions of dollars from New York and New Jersey investors, telling them she would buy and renovate residential real estate and either re-sell or rent it.

Ms. Hodgson, who was charged with one count of wire fraud and one of conspiracy, was to be released Wednesday on a $6 million personal-recognizance bond secured by 24 properties.

“If this was a Ponzi scheme, it was a pretty inept Ponzi scheme,” said Ms. Hodgson’s attorney, Jack Arseneault.

Prosecutors said Ms. Hodgson promised investors high rates of return, saying she “was an expert at purchasing foreclosed residential properties in New Jersey.” Prosecutors said she told one investor that if he and his son invested $2.8 million, they would get a 30% return.

Posted in New Jersey Real Estate | 206 Comments

Will consolidation ever happen?

Posted on June 16, 2010 by grim

From the Star Ledger:

Gov. Christie says property tax cap could force N.J. town, school district mergers

New Jersey’s notorious but beloved patchwork of towns and school districts could be transformed under a new limit on annual property tax increases, Gov. Chris Christie said today.

Speaking to a town hall audience in Perth Amboy, Christie said a constitutional amendment capping increases at 2.5 percent could force mergers that would reduce the number of local governments. The Garden State now has 566 towns and 588 school districts.

“There’s a lot of redundancy that goes on from district to district,” he told the crowd of about 275 people. “When Cap 2.5 comes into effect, those school districts are going to have to make choices, and some of those choices are going to be that they’re going to want to consolidate with other districts to be able to save their money. Right now, there is no incentive to do that and there is no imperative to do it, because all they need to do is just continue to raise property taxes.”

Posted in New Jersey Real Estate, Politics, Property Taxes | 283 Comments

Madoff victims screwed by NJ

Posted on June 14, 2010 by grim

From the Record:

Kelly: N.J. refuses to return Madoff victims’ overpaid taxes

If you invested with convicted Ponzi scammer Bernie Madoff and you live in New Jersey, you may have gotten robbed twice.

First, Madoff fleeced you.

Then, Trenton likely took a cut.

And Trenton isn’t in the mood to give back the cash.

One of the little-known stories to emerge from the Madoff scandal is the fact that New Jersey’s cut-the-budget government has so far refused to refund state income taxes paid by Madoff victims on investment income that turned out to be an illusion. Think of it as overpaying your taxes – but with this twist: You overpaid on income you never actually had.
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State Sen. Richard Codey, the former Democratic president of the Senate who introduced a bill last year to repay taxes to Madoff investors, says the total figure could be as low as $10 million. But Codey, whose bill was never taken up by the Legislature, is quick to add that the amount could be as high as $25 million.

Other estimates range from $48 million to $120 million.
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Ross, who says that he overpaid his New Jersey taxes by about $70,000, estimates that New Jersey probably owes about $30 million to Madoff investors across the state. But Ross is not sure and says the state should simply take the list of investors – easily obtainable from federal investigators – and run a basic computer check of state taxation records.

But the state has so far declined – a decision that Ross harshly criticizes.

“It is so immoral that the state of New Jersey should benefit from this,” said Ross, who achieved national fame as Fort Lee’s mayor in the 1970s for going undercover for the FBI and exposing a bribery scheme.

Posted in Politics | 240 Comments

Monday Open Discussion

Posted on June 14, 2010 by grim

In Vegas betting on the World Cup.

Open discussion!

Posted in General | 82 Comments

OMG! Realtors at risk of losing commissions!

Posted on June 11, 2010 by grim

At risk of losing credit: 55,000 – 75,000
Grim’s estimate of lost sales: 18,300 – 25,000 (~33.33% loss)
Median Home Price (April): $173,000
Average Commission: 5%
Lost Commissions: $158,295,000 – $216,250,000

Cost to us: $440,000,000 – $600,000,000

From the WSJ:

Congress Could Extend Home-Buyer Tax Credit Closing Deadline

What if the home-buyer tax credit worked too well?

That’s the latest concern from the real-estate industry, which says that a last-minute home-buying rush in April created bottlenecks at lenders and real-estate service companies that may not be able to finalize purchases in time for tens of thousands of buyers to receive a tax credit worth up to $8,000.

On Thursday, there were signs that the real-estate lobby had successfully communicated those concerns to Congress. Senate Majority Leader Harry Reid (D., Nev.) joined Sen. Christopher Dodd (D., Conn.) and Sen. Johnny Isakson (R., Ga.) in sponsoring a measure that would give buyers until Sept. 30 to close on sales that went into contract by April 30. That measure would be attached to a job-related bill before the Senate. It would need House and Senate passage before being signed by President Obama.

Congress last fall extended an $8,000 tax credit for first-time home buyers and added a smaller $6,500 credit for current homeowners. For now, buyers who signed contracts by April 30 have until June 30 to close on those sales in order to claim the tax credit.

One worry has been that short sales, where a lender allows a home to sell for less than the amount owed, won’t receive requisite bank approvals in time to meet the closing deadline. Short sales are “clearly at risk” because agents and loan officers have little control over getting those deals approved, says Tim Wilson, who heads the mortgage and title divisions at real-estate brokerage Long & Foster Cos. “I think you’ll see a lot of those not make the deadline,” he says.
…
The National Association of Realtors says 55,000 to 75,000 prospective buyers are at risk of losing their tax credit, but it’s unclear how many sales would actually fall through for those who miss out on the tax credit. Buyers could be hard-pressed to void signed sales contracts unless they’ve made their closing contingent on receiving the tax credit or are willing to forego any deposits.

Posted in National Real Estate | 415 Comments

June Beige Book

Posted on June 10, 2010 by grim

From the Federal Reserve:

The Beige Book Second District–New York

Construction and Real Estate

Housing markets have been steady to somewhat firmer since the last report, with the gains largely attributed to the soon-to-expire home-buyer tax credit spurring demand at the lower end. Realtors across New York State report that sales activity was roughly 20 percent higher in April than a year earlier and prices were up about 8 percent on average. Similarly, Buffalo-area Realtors report that home sales were brisk in April, and that prices were up more than 10 percent from a year earlier, though conditions are reported to have cooled off dramatically in May, due to the end of the tax credit. An authority on New Jersey’s housing industry also reports a moderate pickup in sales activity this quarter, particularly at the lower end of the market–again, largely attributed to the home-buyer tax credit. In other segments of northern New Jersey’s market, prices are essentially flat, and price trends are not as robust as builders and developers had expected, as a large “shadow inventory” of existing homes is said to be weighing down the market. There is concern that conditions will weaken again in the third quarter, without the support of the home-buyer tax credit. Housing affordability remains a major issue.

Activity in Manhattan’s co-op and condo market has leveled off, following a modest pickup in the first quarter. The pace of new contract signings has retreated a bit in recent weeks, while prices have held steady at about 20-30 percent below their peak. There remains a large supply of units on the markets, though one contact notes that the inventory of competitively priced units is fairly lean. While the home-buyer tax credit has had little impact on Manhattan’s high-priced market, it has reportedly had a positive effect elsewhere in New York City, where prices are considerably more moderate. Manhattan’s apartment rental market has strengthened since the last report. Rents have recovered modestly, and landlords are offering less generous concessions than last year or even a few months ago. The inventory of available rental units has stabilized.

Posted in Economics, New Jersey Real Estate | 275 Comments

BoA moves towards short sales

Posted on June 9, 2010 by grim

From HousingWire:

Bank of America Puts Short Sales Ahead of REO

Bank of America, one of the largest lenders in the U.S., has instituted a policy of liquidating as many assets saddled with defaulted loans as possible before repossession, said Matt Vernon, the short sale and REO executive at BofA.

Vernon took the position at BofA in February. He has since announced plans to add 1,000 employees to the short sale staff. BofA currently holds more than 477,000 loans eligible for the Home Affordable Modification Program (HAMP), and has provided more than 600,000 modifications through HAMP and its own programs.

But Vernon said BofA will continue to make the short sale push when he spoke on a panel at REO Expo, being held this week in Dallas.

“We’re going to do everything possible to liquidate property prior to foreclosure,” Vernon said. “REO will still be available, but we will do everything we can to do short sales.” Vernon said the goal is to get as close to market value as possible, or even over market value. “Short sales is not an investment strategy to get homes on the cheap,” he said.
…
The Treasury Department launched the Home Affordable Foreclosure Alternatives (HAFA) program in April to provide incentives to servicers to provide short sales and deeds-in-lieu of foreclosure.

“Because of programs like HAFA, the process is getting easier,” Washburn said. “But they remain very complex. There are sometimes 10 decision makers with just one transaction, the lender, the buyer, the seller, mortgage insurer, investors and more. Just one of them can stop the whole deal.”

Milton Shaw, senior vice president of LPS Asset Management Solutions, said modifications and short sales through HAMP or HAFA could just be delaying the inevitable foreclosure and REO process, and the real estate business is growing frustrated with the delays.

“There’s just been an incredible amount of frustration,” Shaw said.

Posted in Housing Bubble, National Real Estate, Risky Lending | 236 Comments