Raiders vs Chiefs
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Foreclosure inventory continued to diminish in September, but the delinquency rate saw a sudden month-over-month surge, according to the “first look” mortgage report from Lender Processing Servicers (LPS), which has a loan-level database covering about 70 percent of the market.
The delinquency rate, which stood at 7.40 percent in September, hiked up 7.72 percent from August, but is still down by 4.19 percent from a year ago. The delinquency rate includes loans 30 days or more past due, but not in foreclosure. The rate actually increased in April, May, and June before falling in July and August.
The foreclosure inventory rate dropped further, falling to 3.87 percent, the first time in nearly two years the rate was below 4 percent. The foreclosure inventory rate was down from the previous month by 4.05 percent and down from a year ago by 7.37 percent.
As of September, there are 5.64 million properties that are 30 days or more past due or in foreclosure.
Loans that were 30 days or past due but not in foreclosure totaled 3.7 million; in that group, 1.53 million were 90 days or more past due, or on the verge of going into foreclosure. Foreclosure inventory numbered 1.94 million.
The states with the highest percentage of past due loans were Florida, Mississippi, New Jersey, Nevada, and Louisiana.
The states with the smallest percentage of loans still unpaid were Montana, Alaska, South Dakota, Wyoming, and North Dakota.
CAR: Lenders short-sale performances improve
Inflated appraisals were identified as one of the causes of the housing bubble, and now undervalued appraisals are viewed as a reason for a stalled recovery.
In a September National Association of Realtors (NAR) survey related to home appraisals over the past three months, 11 percent of Realtors said a contract was cancelled because a home was appraised at a value below the negotiated price.
Another 9 percent said a contract was delayed, and 15 percent said a contract was renegotiated to a lower sale price.
A much larger majority, 65 percent, reported no contract problems stemming from home appraisals.
One reason for the low values, according to the NAR, is because some appraisers are not taking into account the difference between distressed and non-distressed homes when making comparisons.
“Some appraisers are using foreclosures, short sales and run-down properties as comparable homes, and are not making adjustments for market conditions or the condition of the property,” the group stated in a release.
Compared to traditional sales, a foreclosure sells for a 20 percent discount on average and a short sale for a 15 percent discount.
NAR acknowledged issues appraisers deal with, noting “appraisers have faced undue pressure – whether from a lender or an AMC – to complete appraisals using distressed sales as comps, to complete an appraisal in an unacceptably short time frame, and to complete a scope of work that is not justified by the fee being offered.”
NAR further added some appraisers have to use eight to 10 comparable sales when previously, three comparable homes were sufficient and the norm.
When using a high number of comps, discounted, distressed homes end up in the equation. NAR explained this can lead to traditional homes in good condition being compared to distressed homes without appropriate adjustments.
However, with the distressed market share decreasing, the impact of distressed inventory on appraisals should also subside.
According to the NAR, distressed sales accounted for about one-third of all sales in 2011, and by 2013, the association expects to see the share of distressed sales fall to 10 to 15 percent.
Even if the issue of distressed properties starts diminishing, there are still other issues in the appraisal industry NAR addressed, including out-of-town appraisers who are not familiar with the area or local market conditions, slow turnaround times, and inconsistencies and fluctuations in appraised values.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, explained the NAR’s position on the issue.
“Our long-standing policy is that all appraisals should be done by licensed or certified professionals with local expertise, which also is what Fannie Mae and Freddie Mac recommend, but clearly this isn’t practiced universally,” he said.
“In the meantime, buyers, sellers and real estate agents need to be aware that there are problems with some real estate appraisals, but also be aware of their rights to communicate with appraisers and lenders about errors or concerns with individual valuations,” he added. “In some cases, a second appraisal may be justified.”
In the second quarter of this year, filers submitted 17,476 Mortgage Loan Fraud Suspicious Activity Reports (MLF SARs), marking a 41 percent yearly decrease, according to a report from Financial Crimes Enforcement Network (FinCEN) Tuesday. Even though reports of MLF activity made a steep drop and continue to fall year-over-year, reports of foreclosure rescue scams have been increasing.
A foreclosure rescue scam is counted as any scheme targeting homeowners facing foreclosure or default on their mortgages.
During second quarter of 2012 (April through June), FinCEN saw 1,325 MLF SARs containing the term “foreclosure rescue” in the narrative part of the form. The figure accounts for 8 percent of all 17,476 MLF SAR reports.
If foreclosures rescue SARs continue at the current pace into the remainder of 2012, the yearly total for foreclosure rescue reports will be significantly higher than 2011.
Based on the 2,360 foreclosure rescue SARs received in the first half of this year, FinCEN estimates 4,720 foreclosure rescue SARs for 2012. In 2011, there were 2,782 foreclosure rescue SARs and only 554 in 2010.
California had an especially high concentration of foreclosure rescue SARs. About half (49 percent) of the second quarter foreclosure rescue SAR subjects were in California. The state also accounted for 37 percent of all MLF SAR subjects.
FinCEN offered explanations for the national spike in foreclosure rescue SARs, one of which was increased awareness through reports, bulletins, and guidance from various government agencies. FinCEN also encouraged filers to use “foreclosure rescue scam” in the narrative portion of the report in its June 2010 advisory, and explained the effort “facilitates the identification and isolation of pertinent SARs by FinCEN analysts and agencies with access to FinCEN’s database.”
In addition, trends in the real estate market may have created opportunities for fraud as homeowners in distress seek relief.
FinCEN also noted suspicious activity amounts ran much higher for foreclosure rescue SARs compared to general MLF SARs in the second quarter. The report revealed foreclosure rescue related SARs had a median amount of $345,000 compared to $265,500 for all MLF SARs.
Bank of America announced that it will be eliminating second-lien mortgages for about 150,000 eligible borrowers.
The bank mailed 150,000 letters to home owners who are eligible for the program, which is aimed at providing relief to home owners also facing trouble with making their first mortgage. The program is also to help more struggling home owners obtain equity in their homes quicker.
Home owners who are eligible will have the entire unpaid principal balance removed on their BofA owned or serviced second lien mortgage.
The relief will be automatic to borrowers who are eligible, unless they choose to “opt out” of the program.
“The elimination of the second lien mortgage is completely separate from any actions being taken regarding the first mortgage,” BofA said in a statement. “If the first mortgage is in foreclosure, those foreclosure activities may continue.”