Nice post.  Obviously all banks and the government are seeing the same thing and trying to figure out a solution for 2010.....or beyond.  We are likely to see a double dip unless we start seeing actual job growth. That is not looking so promising.  All I can say is that the market tends to prove us wrong most of the time. The question is what is the definition of wrong?  I guess we will see....

Wow. That's great info and will help with my buyer and seller clients alike. Thanks!

Don't over complicate this mess.  Nor should anyone spend too much time trying to dechiper how to mend the credit market.

We all know that creative financing, over zealous lenders and mortgage brokers were largely responsible for causing the market to bubble.  The solution lies in creating similar conditions with true limitations.

Longer mortgage terms, much tighter, more meaningful appraisals and more intense yet flexible underwriting guidelines.  Then you would see a loosening of the credit markets into the residential market place.

Until that happens, all Realtors will have to suffer through a down cycle that may last for many years.

Mike

Jeff - we have a subdivision with 40 new homes (5 to 2 years old) in the $200 to $250k price range in a "top ten in the country best places to live" community. We have already had 4 foreclosures - so that is 10% - I know of two more that are going to happen soon - Mine and a neighbor down the street. I've heard horror stories of how people are getting any help. I was only one payment behind - Countryiwde sent me a Modification agreement and we said - cool - it was about the same deal and it caught us up. We sentit in - they lost it - Countrywide then told us they were going to combine our 80/20 and put it on about a 6% rate. But it would take two months to do the paperwork - in two months we called and they sent us out 4 weeks later a new modification that had (now 5 months) interst rolled on top and actually had raised my rates on both mortgages. So I called them and they said they would re-review. They sent us new modification papers - higher rate and payment again. We said to heck with it and just sent them in to stop the late payments on our credit file. They lost those. Now they say with the new OBAMA plan we don't qualify - they have jacked our first mortgage rate to 11.5% and our second to 14.5% and we are now paying for a Home that should cost $1500 a month $3000 a month. We are in a declining market - but we see no choise but to try and short sale if they don't foreclose first. We can't pay $3000 a month. No way - and I hear this story all over the place. I have heard some good stories. One thing to keep in mind - it's the investor that ok's or structures the modification - not the lender. A lender will have pools of loans with different investors. So they would rather raise my payment - and get the house back than give me a lower rate and make the payments affordable. It's a travisty!

Great info, i would like to see the media tell a more realistic story -- I will continue to dream!

All agents need to be informed about the real data and educate clients accordingly. 

While the future looks like a bumpy road for many, thoses that learn to adapt to the market conditions and remain informed will be just fine---may need to work a little harder and smarter---

Jeff, thanks for sharing with us the "true picture" of whats going on in the marketplace. Unemployment and lenders INABILITY or LACK OF COOPERATION to modifiy loans are a big issue. It appears to me that we will have to more proactive and aggressive in working with lenders. Someone has to be accountable to our homeowners, perhaps we should get lender management more involved and make sure they are doing all they can to help, aid and assist our homeowners. Lenders losing paperwork ALL the time is not acceptable! Once I had to scan documents and email it to management and stay on the phone with him to enusre that they had all the paperwork they needed since they lose the fax on 3 seperate occassions. I finally got the loan worked out for my client, technology does work, we just have to be creative with its use. Let's continue to educate the consumers and provide resources to help them in their homeownership journey.

 Why does it take 3-5 months to workout a short sale? Do you really want to sell the house or what? Come on lenders let's work together...................

Great article and good visuals that tell a picture of "facts".  We are in un-charted waters and the un-employment rate is the un-known factor.  I'll keep doing all I know to do and hope for the best.  Let's hope the mortgage companies make loan modifaction a priority.

Jeff,  Excellent post. The writing has been on the wall for a long time and it looks like a long slow road to recovery. It is hard to swallow all of this but it is reality.

Jeff, Great information. I have to agree that the foreclosures will probably get worse. I also believe most are due to loss of employment. I am just across the river from you in York. The morning paper had 22 pages of foreclosures.

JEFF,

HAVE NOT SEEN ANYTHING MUCH REGARDING CREDIT CARDS.  I THINK THE MESS MAY HAVE STARTED WHEN OUR CLOWNS IN WASHINGTON CHANGED THE BANKRUPTCY LAWS.  PREVIOUSLY, PEOPLE COULD DUMP THE CREDIT CARDS AND KEEP THEIR HOMES.  THEN CAME THE 125 PERCENT LOANS THAT DID NOT HELP THINGS. 

Jeff,  Excellent! I agree and Florida #1 is really challenging.  A lot of the people in my area have stopped paying on their loans because of the negative equity as well. (scary)  Would love to see that next post!

Greta post, Jeff.  It really tells the story.  We all need to face these present realities head on in our day to day.  Thanks!

I also read the article in the New York Times.  This blog is put together really well and is easy to understand.  Graphs are great!  You are a fantastic role model for blogging.

Dee Dee Hanson, CPM, CCIM, CRS, Associate Broker, CBWoodland Schmidt, Saugatuck, Mi

again - great post!  the graphs and the stats are very informative.  Personally, I feel lucky, my bank just agreed to modify our loan - we were in a 10 year term (at the time we thought we were rich!), they agreed to go to a 40 year term and dropped our rate to 2% (I am in real estate and my husband motor vehicle sales - we are now poor!).  thanks Harris bank!  they saw the light that they didn't want to foreclose on a house that was $75,000 upside down. 

We were in foreclosure court this week, and the judge offered extension after extension for home owners that were in the process of modifying their loans.  one perspective is that foreclosures are taking longer, so things are going to get worse. another is that modifications are starting to happen - things might get better...

Sometimes I believe that there is no intelligent life at the banks. Why would a bank want to foreclose on a property that has negative equity but the homeowner is willing to continue making payments? If the homeowner was a few payments behind (IE $5000 or less) the bank could recast the loan and just put those payments on the back of the loan or put the buyer into some payment plan.

If a bank forecloses then it cannot sell the house for more than its market value. I have seen multiple properties where the bank would foreclose on someone that was $3k behind on payments but then they would take the property back and sell it for an $87k loss.

In my area one property that sold for $126,000 in 2006 was foreclosed and the banks sold it for $39,000 to get it off their books.

In my books it would be better to take a $3000 hit than to take an $87,000 hit.

Am I missing something here?

Unfortunately, there are far too many in this business who think the solution of the problem is that we just need everyone in the industry to talk up the market, and suddenly buyers will once again start acting emotionally and impulsively and overpaying.

Unfortunately, those people think the problem is people who think, say, and write things like this.

Unfortunately, those people are still a majority, allthough there are less and less of them lately, and more and more of them seem to always dissapear shortly after the board sends out invoices.

I rarely post a comment after reading a blog but your article was SO insightful and relevant that I just wanted to say "Thank You" for taking the time to share this with us.

You put into graphs and concise analyses what I have been thinking, and what my gut has just been telling me, for months.  I think it's important to remember that delinquencies lag behind unemployment data.  People may lose their jobs, but their savings in reserve (if they have any) will get them by for a while.  Eventually it runs out.  After these liquid funds dry up, it's a decision to tap into retirement (assuming they have any) and pay severe penalties for doing so (adding insult to injury), or not paying on a house that they now hold little to no to negative equity in anyway. 

Until I start seeing unemployment figures going the other way, we're in for another year of a worsening real estate market.  That's just the tip of the iceberg...

...then mortgage rates will go up....YIKES!

Excellent info Jeff.  Thanks again for the time it took you to share that with all of us and the graphs are outstanding.  We are certainly in a mess........Good Luck to you all!!

Let's get real now....Do you honestly believe Obama can fix this housing and mortgage crisis? Jobs losses keep on mounting and when people have no jobs and income is absent, the people can't get a loan. Interconnection on jobs/income is a major link for loan approvals. We need to demmand they fix this housing/mortgage issues to get the economic engines re-started once more. Oh, by the way, the Stimuls plan has stalled, not working !

Tony D

Great information... I have seen some homeowners too, in my opinion, taking advantage of the entire market, they are just walking away from their responsibility and saying it is the market..

Jeff

This is the best and most truthful factual assessment on the state of our Real Estate market here in our country.  Thanks for taking the time to put out the cold hard facts.  People needs to know the facts, sad as they are so they can plan the rest of their lives.  Outstanding job and God Bless you and your success.

Wow doom & gloom, certainly need more of that, NOT!!! You do know that a lot of these foreclosures are caused by the doom & gloom reporting. People are just giving up. It's an easy trap to fall into. Though I understand fluffy good news stories don't sell, can you at least put some type of a positive spin into your posts in the future? Geez!

This is well written and accurate.  While we may not like the news, it is best to keep reality in mind while planning for ourselves and our clients.  Every bit of research we have done brings us to the same conclusion for the near future.

Patti Mazzara  http://www.ventureloanapp.com/

Minnesota Mortgage Broker|MN Home Purchase|Minneapolis Refinance

Awesome article...thanks so much for the time and effort you put into it! Your timing was perfect, as I've been concerned about the slow process of loan modifications and was wondering if I had really missed something. Everyone I talk to that is in a distress situation says they have tried for months (one person for two years) to get some relief with their mortgage and no one is helping them. I've tried to tell them there is such a high demand that banks can't keep up with the new procesdures and staffing to accomodate modifications. I hope that is the case! Also, I recently started working with a home retention company that contacts homeowners for their servicers to verify the loan modification packages are processed quickly, so they don't lose the opportunity to participate. I thought doing this would help me learn a new perspective on the whole problem. As a professional, I feel I should have good information when homeowners call me for help. It seems the answers are not there, so again, your article really helps!

Hi Jeff,   I think you are correct and it will be interesting to see how it all plays out.  In Washington, it has been helpful that the first time homebuyers have stepped up to take advantage of the rebate being offered.  What they can afford doesn't buy them a lot, but I was raised in a house in CA that was 1000 sq. ft with 1 bath and we didn't know the difference.  Our parents were more conservative and didn't have to have all the bells and whistles at the start.  I think the mortgage industry played all of us and we bit on it.  However that being said, the people that I have been working with on short sales have tried everything to get their loans modified and the banks are not responsive.  They don't want to lose their home, their credit and their savings. 

Joyce

Hi Jeff your article was well done and so informative about what we can expect. Now we need someone to article how we help those homeowners get through the inevitable. I"m sure they bought their home as to not only shelter their family but also to shelter and enhance their finances> and now this> what words can be said< what context can be given? where is the hope? What encouragement can be given?

Jeff, you're right, loan modifications certainly are not the answer ... especially when more than half of distressed homeowners who actually do get assistance redefault several months later. If lenders and cash-strapped homeowners want to avoid foreclosure they should be realistic and focus on improving the short sale system. Let's eliminate the credit impact on homeowners facing foreclosure and reward them for selling their homes before they get repossessed. This way people can relocate to homes that they can afford, banks can better balance their books, and buyers and agents benefit from homes that are priced right to sell. www.quicksale.com does this. I registered as a broker after attending the Five Star trade show and hearing about the automated program they offer. It's seems like a smart step in the right direction -- a good solution to a problem that will keep recurring if we don't switch gears. Loan mods are not the answer ... short sales are. But the process has to be simplified and improved like the solution www.quicksale.com offers.

Thanks for the great article, it was short and to the point.  FYI: The state of California passed a law requiring that all lenders submit their loan modification programs to the state for review.  Upon approval of their program they receive an exemption allowing them to process their foreclosures using the existing time periods.  If their program isn't approved the lender is required to add 3 months to the 90 day period that occurs between the recording of the Notice of Default and the recording of the Notice of Trustee Sale.  This applies to primary residences only.  Also, when they implemented this change they placed a 30 day moratorium on foreclosures for primary residences.  On the surface this seems like a good idea however unless they're willing to give loan modifications to people who are unemployed I don't expect to see much if any improvement.

Excellent Information! Thanks!

A few points to consider: (and the start of my own blog)   #1 - Where do these numbers of loans resetting come from?  Is it originations during a certain period?  Is there a chance that many of these loans have been refinanced, sold, or already foreclosed?  Is it also possible that many of these adjustments may result in lower payments because of interest rates?   #2 - Federal monetary policy will continue to be aggresive to help stave off a depression.  Government is incenting America to buy homes with a tax credit, and agreeing to help with some of the losses banks obtain, because they are the only ones with the pockets deep enough to absorb some of this lost equity.  I am not a big govt guy, but I see this as a helpful solution if governed appropriately (big IF).  But this is why the public needs to get involved to ensure this is done correctly.   #3 - Lets hope banks do begin to wisen up to the fact that modification is better than foreclosure.  Loss agreements with the govt that are too large prevent this incentive.  Currently they can sometimes make more foreclosing.  (Different topic all together)   #4 - People have been hearing the bad news for along time, and some have begun to dig in.  In all reality, if you haven't had a overhaul of your financial plan recently, your head is buried in the sand.  These people are interested in protecting their credit and living up to their agreements.  IMO, these are the majority.   #5 - This is the really big one, foreclosure losses are not really that high.  I know this is completely contrarian to what everyone is saying, and percentages are higher than they have ever been.  What I am saying is the total number is not that high.  10% delinquency means 90% current.  These payments ve revenue to the banks who may not be making as much as they used to, but can still operate a successful business.  Especially when you have govt assistance in the losses.  Also 3% foreclosure does not seem catastrophic to me.  I am sure that the bright minds of banking CEO's had a foreclosure allowance when they decided to enter the lending arena.  It must have been 1-2%.  therefore, things don't seem all that apocolyptic to me.  

Factual information is always hard to look at, but necessary.  Real estate sales has never been easy, but thoughout the years, I've noticed lots of people find a way to see the opportunity and take advantage of it.  My advice is to try to find the way to be in that group.

HI Jeff,

This is by far the best illustration of the market condition as they are and what's coming. Your post is honest and suggest what we all know as the obvious. Banks need to see the reality of the situation and act responsibly. You may want to consider sending this post and all it's graphs to major and minor news media sources. Especially Fox News which may be more ready to pick up the story.

We just had an article in the Arizona Republic about a contractor who could not find work being shot after he refused to leave his home after it was sold at auction.  Very sad!

In AZ we started tanking earlier than most of the nation and I am hoping that with 5 consecutive months of home prices rising we will come out of it quicker.  Thanks for the excellent statistics.

Jeff thanks for the great article I think we definitely have a long road ahead of us ~ I have a client that got a loan modification of a fixed rate 3.5% for 40 years ~ they used the services of NACA ~ check out www.NACA.com ~ this organization was started by a man that testified before congress in the year 2000 of the troubles that we would be facing in our future based on the loans that were being allowed at the time ~ congress did not listen ~ my client had to move out of the area for his job but wanted to keep the house even though he is upside down because he sees himself moving back to the area and likes the home ~ he is attempting to negotiate a short pay off with the second ~

It is crazy what the FDIC is doing though with the loss share agreements with banks ~ see this blog for information on that http://activerain.com/blogsview/1260138/is-the-fdic-broke-how-could-that-be-

Also on how they are killing short sales ~ see this blog for information on that http://activerain.com/blogsview/1243528/is-the-fdic-killing-short-sales-

Thanks again!

some scary stuff athough in regards to loan mods some banks actually have an incentive via the govt to not even consider offering a loan mod and reap more profit going to foreclosure sad but true.   I Calif and Oregon and other states had to put in place new laws that should of been common sense.  So some of the foreclosures are actually what the banks want.  I posted a blog on the share loss provision of the FDIC

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I'm in Northern California, we were hit very hard by foreclosures in my area. We have several properties vacant, some have been vacant for almost a year. And the Banks have not foreclosed on them yet. They are just sitting empty, bring the neighborhood values down. There are several properties in my MLS that have been short sale contingent for months without approval. I know some banks are holding on to nonperforming loans and assets to keep their balance sheets somewhat  balanced but I can't figure out why it would take so long to approve a short sale that in most cases in my area would net them 10-25% more than foreclosing. I  wonder if the share holders approve of their business model?

Jeff, finally some one to report (with proof) the real facts. Thank you for your time and efford you put into this post. Hopefully the lenders will wake up. These are bad times but the truth and clear information makes it easier for for us to do our job.

Keep your good work up. I will watch for more from you.

Janice Snell

AWARD REALTY

Jeff, finally some one to report (with proof) the real facts. Thank you for your time and efford you put into this post. Hopefully the lenders will wake up. These are bad times but the truth and clear information makes it easier for for us to do our job.

Keep your good work up. I will watch for more from you.

Janice Snell

AWARD REALTY

Jeff,

It has already been stated that you have written an excellent article giving both relevant and important insight to the current market. In writing my blog I have included your link into my message because I think you have clearly addressed the issue at hand.

As a Loss Mitigation and Short Sale Negotiator it is always good to show someone elses opinion especially when it is in line to our own messages.

I will send you a link to my blog when it is complete.

Best regards,

Duane Murphy

National Foreclosure Prevention Services

Great post!  Really puts things into prospective.  I suspect if we all want to stay in business next year, we had better pay close attention to the graphs and stats for our particular states and create a plan to weather this ongoing storm.  I too have tried to stay on the positive side, however, have found that our little town of Houston, Missouri(population of about 2000) is seeing the ever increasing number of foreclosures which are driving our re sale market to a stand still, along with the foreclosures are competing with each other and selling for lower values that they should have just 4 months ago.  Great stats and I say, keep them coming.

Jeff,

Great info and graphs.  The banls are complaining about the residential foreclosures...wait until the commercial foreclosures start to hit.  We haven't seen anything yet!

Nancy Parker, M.H.S.

Business Empowerment Coach

Wha this all means. Unless you have a cash buyer a Lender will not lend on a property that has a default rate higher then 15%.

This is the TRUTH-folks are living in a dream world if they believe things are getting better and we're past the worst-I agree. I have friends and family who have gone to their lenders for modification help and NOTHING! NOT EVEN A RESPONSE! One friend begged his lender to work with him when he got behind (he's a superintendent for a builder) he got no help-then vacated his home and moved his family to a rental house since he had to live somewhere-right before his house went to the court house steps they called him to try to make a deal! It was months too late. The banks and our government have done nothing to help the regular folks! How can we make them listen?!

If you like no nonsense charts that are backed up by the unpleasant facts you guys might "enjoy" the data presented by the good Dr. here.

http://www.doctorhousingbubble.com/

Really excellent post with the graphs to make the message clear. 

I just talked to one of my past customers who successfully refinanced to get rid of an adjustable rate loan and to get a lower rate. The first thing that the lender asked them was if them were up to date on their payments. They were, and they got a great deal, and reduce their payment by more than $400 per month.

On the other hand, several of my short sellers, who got behind in their payments, tell me that they tried to get help from their lenders, the lenders agreed to modify the loan, but they required more money up front than the borrower had.  

Jeff,  Great post and so timely.  I would have to agree and add that many homeowners who have negative equity would make payments if the banks would reset their adjustable rates to current rates rather than reset them to 11%, etc.  Many are paying on ARMs that were at current rates and probably expected to sell within the 3,5, or 7 year adjustment periods but now cannot do so since they are negative.  Some owners who are slightly negative have offered to bring money to the table to "save their credit scores".  While I have had others tell me that credit scores are a thing of the past and therefore they don't care about their credit anymore.  I guess everyone has their own level of comfort and denial.

In the same sense, there are those owners that refuse to make payments on a home that is not worth what they owe on it and either want the bank to reset their loan to current market value and remove any accountability for the price they paid or owe or worse will walk away or go short as they don't want to make payments on a home that isn't worth what they paid for it a few years ago.  Plus, many are seeing the "steals and deals" out there on the market and are buying the new home first and then defaulting on the other once they have secured a new home.  I have had several buyers come to my listings who are in default and want to purchase my listing or do a lease option thinking in a few years they will qualify for a loan once Obama resets the credit of those effected by this mess.

Either way, I think this mess is far from over and have to say it is hard to see it finally hit those who had good credit to start and are just vitims of this whole ordeal. 

Hi Jeff - great post and very informative.  I did note your souce dates though as July and August.  Anything more recent?  Thanks so much for posting this invaluable information.  Really gets the thought process pumped!

Great post Jeff, I especially liked the graphs since I am a visual person. As a previous commentor said A picture DOES say a thousand words.

Hi Jeff.

I love a truthful blog! Your kind but cut to the chase presentation is refreshing and the graphs really put things into proper perspective for us visual people. Scary to see this happening, but great to get such solid data. Bravo.  Will bookmark your blog.