Big Cities Buck The Foreclosure Trend For Now

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Big cities buck the foreclosure trend, for now

A few of the country's worst-hit spots in the first three months of 2010 have shown decline in foreclosure filings, but it is still a long way before healing happens. Foreclosure filings declined in 14 of the top 20 cities year-over-year, most of which are concentrated in the Sunbelt "bubble" states of California, Arizona, Florida and Nevada. But the improvement during the first quarter, compared with 12 months earlier, may have been a statistical glitch, not evidence of a real trend. Plus, those improvements bucked the market's general trend: Nationwide foreclosures rose 16% during the quarter. Much of the improvement may be attributed to government-led foreclosure prevention programs, especially a new program encouraging banks to facilitate short sales. Banks have figured out that short sales are less costly to them than foreclosures because they save on a long list of expenses, including legal fees, taxes and maintenance, and brokers' commissions.

Las Vegas has been the hardest hit market, which had one foreclosure filing for every 28 households during the quarter, roughly five times the national average of one filing for every 128. Modesto, Calif., was the second hardest hit metro area, with a rate of one filing for every 34 homes, down more than 13% year-over-year. Cape Coral, Fla., was third, with one in 35, down 26% year-over year. Tied for fourth at one for every 36 homes were Riverside, Calif., (down 19%) and Stockton, Calif., (down 25%). Miami had the steepest year-over-year increase for any top 20 market. There were over 71% more filings during the first quarter of 2010 than it recorded during the same quarter in 2009.

Senate Ends Financial-Bill Standoff

Lawmakers ended the three-day standoff holding up action on the financial-overhaul bill, leading to a new government authority to wind down failing financial firms. Democrats, in a concession, agreed to kill a proposed $50 billion fund to break up large, failing financial companies. The move gave Republicans an opening to end their opposition to moving the legislation. But in other areas, notably derivatives regulation—which will be debated Thursday—and consumer protection, the sides remain divided. Administration officials and lawmakers of both parties were already turning their attention to the coming floor debate, especially a series of populist amendments that could be difficult to defeat.

Lawmakers from both parties have said the government needed new powers to avoid a repeat of the 2008 financial crisis, when regulators allowed Lehman Brothers to fall into a messy bankruptcy, bailed out American International Group Inc. and then asked Congress to approve a $700 billion rescue package. But there has been disagreement about how best to create a new regimen for breaking up failed companies that averts chaos in the market, and that doesn't put taxpayers on the hook or suggest that the government will come to the aid of creditors and investors. Other key parts of the Dodd-Shelby agreement would make it harder for top executives at failed financial firms to claim large compensation packages. It would restrict the ability of the Fed and Federal Deposit Insurance Corp. to act independently in an emergency. And it would give the government power to limit payments for certain creditors of failed firms.

More Mid-Size Banks Facing Closure

Ailing mid-size banks face closure as souring commercial real estate loans are taking a disproportionate bite into their balance sheets. Last week, regulators shut down seven more banks in Illinois, three in Florida and two in California. The total cost to the Federal Deposit Insurance Corp. Deposit Insurance Fund (DIF): $974m. According to the analytics firm, Trepp, the latest moves by the FDIC indicate the agency is focusing its resources toward one problematic region at a time. According to Trepp partner, Foresight Analytics, the next region of interest could be Puerto Rico, where seven banks made it to the watch list. Through Q110, more than 2,100 banks reported quarterly financial reports, and 14 of them are considered undercapitalized, significantly undercapitalized or even critically undercapitalized. The common malady of each troubled balance sheet is toxic commercial loans. According to Trepp, these loans account for an average of 51% of the banks’ non-performing assets – a disproportionately high percentage.

More bank closings could be on the way. Failures in 2009 reached 140, an increase of almost 500% from 2008, according to research from Grant Thornton. At the end of 2009, the FDIC “Problem List” had grown to 702 insured institutions. Trepp had earlier reported that problematic commercial loans spreading through commercial mortgage-backed securities (CMBS) would plague small and mid-sized banks more than the larger ones. The firm forecasts 200 of these banks will fail in 2010.

Diana Olick – Home Buyer Credits Live Past Friday

“Fannie Mae announced this week that it would extend its 3.5% seller assistance on its REO properties (foreclosures) to June 30, 2010. It was originally supposed to expire May 1. "We are happy with the results of the program, which has helped us to sell properties quickly, thereby stabilizing neighborhoods and property values," said Terry Edwards, Executive Vice President of Credit Portfolio Management. This program gives buyers back 3.5% of the final sales price to be used toward closing cost assistance or their choice of selected appliances. Obviously it's been helping Fannie unload its large load of foreclosures. No surprise that with the home buyer tax credit expiring and foreclosures rising, Fannie would choose to extend a program that's working like this. Of course, remember, Fannie Mae (along with sister Freddie Mac) is under government conservatorship and is being fueled by billions of taxpayer dollars, so this program is nothing short of another government housing bailout. - FHA's Delinquency Rate Falls Below 9%

According to FHA’s March operations report, loans that are 90 days of more past due dropped to 8.8 percent at the end of last month – down from 9.2 percent in February. The March rate equates to 536,858 mortgages in arrears. In February, the agency counted 553,929 mortgages that were in seriously delinquent status. While the short-term improvement is notable considering delinquencies industry-wide are still climbing, FHA’s past due loans last month are still 1.7 points higher than the 7.7 percent delinquency rate recorded by the federal insurer in March 2009. So far this fiscal year, FHA has paid 129,503 claims — 75,466 of which were loss mitigation retention claims, and 47,458 were claims for property conveyances. Buyer demand for government-backed mortgages has yet to wane.

FHA said its annual application rate jumped 18.3 percent in March. The agency attributed the surge to prospective mortgagors racing to beat the planned increase in FHA’s upfront mortgage insurance premium – from 1.75 to 2.25 percent – which took effect April 5. FHA received a total of 246,406 applications in March, up from 165,239 the previous month. This included 163,467 purchase cases, 75,541 refinances, and 7,398 reverse mortgages. Fifty-four of the refinance applications submitted to the federal agency were Hope for Homeowners (H4H) cases. During the month of March, FHA insured 132,301 single-family mortgages for $24.1 billion, bringing the federal insurer’s total mortgages in force to 6,114,452 with a scheduled aggregate outstanding balance of $805.6 billion.

Above Post Written by: Chris Mclaughlin with Short Sale

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