The Arizona Housing Bubble

If You Bunched All The Foreclosed Homes Fannie Mae Has Taken Over It Would Be A ‘Top 100′ Municipality Bigger Than Dayton, Ohio And Almost Bigger Than Richmond, Virginia

MG — Tue, 11 Nov 2008 18:19:07 +0000

Wow.

It’s amazing to think in terms like this. Nowadays we all have foreclosures dotting, peppering, or downright plastering our neighborhoods. We have grown accustomed to terms like ‘loan modification’ and ’short sale’.

But if we looked at the number of foreclosures owned by just one entity such as Fannie Mae, the aggregate appearance is just pitiful. As Reuters put it:

Fannie Mae said on Monday that the housing finance company has taken over so many homes through foreclosures that if it were a town, it would be bigger than Dayton, Ohio.

It is also on track to pass Richmond, Virginia, this year in terms of the number of houses, and would crack the top 100 municipalities as ranked by DataPlace, a web-based source of housing and demographic data.

As a record number of Americans lose their homes during the worst housing crash since the Great Depression, Fannie Mae now owns 67,519 homes.

The company, which the U.S. government placed in conservatorship in September following record losses, said in its third-quarter earnings that its inventory of foreclosed properties rose by nearly a quarter in three months and more than double from a year ago.

That puts it on par with cities such as Chattanooga, Tennessee, and Providence, Rhode Island, in terms of number of households.

The company is working hard to clear the inventory. On its website it lists dozens of homes in Detroit selling for next to nothing. One listed at $1,900 entices buyers with “100 percent financing,” a ploy with what might be described as a tarnished reputation in the United States.

Yet it seems to be working. A two-bedroom, 1,900 square foot house on Seminole Street is listed as “under contract.” The price? $50.

Enter the world’s largest Ghost Town. Apply for your own zero-down, low-interest loan today! The home of other’s dreams can be yours today!

And if things keep up, someone else’s tomorrow.

Tags: Fannie, Mae, foreclosure, loan, modification

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How Has YOUR 401k Performed With Regards To Year-To-Date Earnings (Or Losses) In 2008?

MG — Mon, 06 Oct 2008 20:25:39 +0000

How much has YOUR 401k plan lost this year?

During a recent conversation, I was shocked to find that so many people were so far down in their 401k year-to-date totals. Having withdrawn funds and searched for a better way to invest a couple years ago, I’ve been somewhat sheltered from the hammer that’s smashed a lot of dreams for those either facing retirement, or hoping to in the near or near-distant future.

CDs and ING Direct “Orange” savings accounts have returned reliable returns for me, even if they paled in comparison to the people earning 10-15% or more on their 401k plans. Reading up on insurance investing (via “EIUL” plans or Equity Indexed Universal Life) and trying to decide whether a non-matching 401k would be best or something less conventional would be better, I’ve had my money in limbo so to speak.

It seems that the time I spent losing out on thousands in the market, has come to pay itself back in gold after the adjustments hits, the Dow crashed, and the bailouts started picking up steam.

But just like those who were shocked that a house could… LOSE value… I was no different when it came to 401k performance. I would have figured the smart guys in the expensive chairs had some backup plans to mitigate heavy losses, but it seems that my confidence was misplaced. My 3% interest on my savings account started looking very good compared to some of our below commenters.

So have you lost? Have you gained? How is the market treating your 401k, and will it affect retirement in your immediate future?

Tags: 401k, investing, economy, bailout, crash

The Real Reason A Bailout Won’t Work That Nobody Wants To Talk About - Housing Inventory And Empty Foreclosed Houses

MG — Wed, 24 Sep 2008 19:22:51 +0000

As we’ve seen the major banks start to fall apart or get bought by the government, we’ve been inundated with suggestions, opinions, and infighting between parties and ideologies.

However, what so many are forgetting about is that the crux of the issue regarding house pricing and the worth of derivatives based on home mortgages still revolves around one factor that is fixed and cannot easily change: Inventory.

If the goal is for house prices to stabilize so that folks so upside down on their homes they end up walking away will be able to stay in their homes, you won’t get there as long as there are empty homes littering every neighborhood out there.

If the plan works, it will attack the central cause of American economic distress: the continued plunge in housing prices. If banks resumed lending more liberally, mortgages would become more readily available. That would give more people the wherewithal to buy homes, lifting housing prices or at least preventing them from falling further. This would prevent more mortgage-linked investments from going bad, further easing the strain on banks. As a result, the current downward spiral would end and start heading up.

“It’s easy to forget amid all the fancy stuff — credit derivatives, swaps — that the root cause of all this is declining house prices,” Mr. Blinder [Binder is an economist at Princeton and a former vice chairman of the board of governors at the Federal Reserve] said. “If you can reverse that, then people start coming out of their foxholes and start putting their money in places they have been too afraid to put it.”

…

Yet these institutions are deeply intertwined with the American economy. When the financial system is in danger, it stops investing and lending, depriving people of financing for homes, cars and education. Businesses cannot borrow to start up and expand. [NYTimes]

The credit crunch recently has definitely been a problem. With it being harder to make money selling a mortgage off to other markets, banks are less apt to help people with money to purchase that house. However, as we realize what caused this, we’re also starting to see an aversion to 100% no-money-down lending. That will not change for the most part. While banks may be willing to lend again, they still won’t repeat at least one mistake and lend to those with no money to put into the mortgage loan. (more…)

What Does A State Do When It Loses Its Precious Tax Monies? Leverage A New Real Estate Tax! Why You Should Vote “Yes” On Proposition 100: The Protect Our Homes Act

MG — Tue, 02 Sep 2008 18:14:13 +0000

This could turn out to be a very bad thing. There has been a lot of coverage recently about the money that the Arizona government has “lost” or more appropriately, “not realized” due to the bursting of the housing bubble. As Arizona grew in leaps and bounds, so did the budgets based on estimations of future property taxes and other real estate taxes. However, now the state is left in a pinch and is looking to search YOUR couch cushions and pockets for the difference. But as foreclosures creep from the suburbs in BFE into the larger metro areas, is that wise?

This is where Proposition 100 comes into play. Dubbed the “Protect Our Homes Act”, Prop 100 aims to prohibit the government from charging new taxes on the sale or transfer of real estate in Arizona. Arizona currently has no real estate transfer taxes (RETTs), unlike 35 other states which do.

Here’s a link to the official PDF which gives more details on the amendment:

Be it enacted by the People of the State of Arizona:

1. Article IX, Section 24, Constitution of Arizona is proposed to be added as follows if approved by the voters and on proclamation of the Governor:

ARTICLE IX, SECTION 24, PROHIBITION OF NEW REAL PROPERTY SALE OR TRANSFER TAXES

THE STATE, ANY COUNTY, CITY, TOWN, MUNICIPALITY OR OTHER POLITICAL SUBDIVISION OF THE STATE, OR ANY DISTRICT CREATED BY LAW WITH AUTHORITY TO IMPOSE ANY TAX, FEE, STAMP REQUIREMENT OR OTHER ASSESSMENT, SHALL NOT IMPOSE ANY NEW TAX, FEE, STAMP REQUIREMENT OR OTHER ASSESSMENT, DIRECT OR INDIRECT, ON THE ACT OR PRIVILEGE OF SELLING, PURCHASING, GRANTING, ASSIGNING, TRANSFERRING, RECEIVING, OR OTHERWISE CONVEYING ANY INTEREST IN REAL PROPERTY. THIS SECTION DOES NOT APPLY TO ANY TAX, FEE,OR OTHER ASSESSMENT IN EXISTENCE ON DECEMBER 31, 2007.

The key reason this is so important is because while the government’s bills have grown, the average Arizonan’s wallet has not. Rampant inflation, mortgage loan fraud, and a growing credit crisis, simply do now allow Americans to take on more debt at this time, even in the form of increased taxes.

Additionally, as difficult as it is to sell a house in this market and as difficult as it is to avoid foreclosure right now, increased taxation on the transfer of property will add one more bill you have to factor in when you’re already more than likely to be well upside down. Not to mention that “transfer” is a very broad term which will include estates and further burden the family house as it’s passed down to the kids or other family members. There are already burdens in that process and the government should never find it in its own interest to make losing a home easier. (more…)

Tags: arizona, property, tax, foreclosure, fraud

Can You Remember How Many Homes You Own? How About How Many Homes You Have That Are Going Through Foreclosure?

MG — Mon, 25 Aug 2008 17:38:09 +0000

An interesting story came this way that sounds similar to the recent Barack Obama and John McCain political drama about how many homes McCain owned vs Obama’s mansion.

In a much smaller political battle, one where presidential candidates are replaced by smaller city positions like the Mayor of Lathrop, California.

It’s going to be curious, especially with the housing problem gaining more momentum and grabbing more national attention, to see if these sorts of events will continue to be used as weapons in heated political campaigns.

Tom Sayles makes no bones about it. He isn’t proud that one of his investments has gone south with the foreclosure mess.

The home that tripped him up in the 400 block of Gardner Place wouldn’t probably have earned even a footnote in the crush of bank foreclosures as well as big developers in Lathrop reengaging on their signed deals with the city due to the housing slump.

But because Sayles is married to Lathrop Mayor Kristy Sayles coupled with the fact she has become a target of a well-oiled attack machine this election cycle that has private investigators snooping into every aspects of her personal life is making the house the target of a lot of inquiries.

It doesn’t surprise the mayor who has had formal inquiries made requesting any personal e-mails she may have sent using city devices as well as a private investigator checking with animal control officials to see whether their family dog is licensed.

Someone - an individual, organization or even possibly a corporation - that doesn’t like Sayles has gone as far as to create a cutting edge website loaded with personal data on her divorces and personal life including civil cases that have absolutely nothing to do with her tenure or performance as mayor.

The house - which has a mortgage at 12 percent with Indy Mac and is headed for foreclosure - is already part of a whispering campaign especially since the couple had secured a $40,000 loan from her uncle, former Mayor Steve McKee, in an effort to fix-up damage done by a tenant and save it from foreclosure.

McKee, for his part, doesn’t want to go on record saying anything about the loan or the house.

The Sayles are current on their payments to McKee - about $850 a month - and vow to honor that obligation until it is paid off.

What tripped them up, though, is far from the typical story of greed connected with the current mortgage mess that includes people buying homes and trying to flip them or getting liar loans and then ending up not being able to meet their obligations.

The home - which now has a value of about $110,000 in today’s depressed housing market - was bought for $312,000.

…

The first renter in the home stopped paying rent. It took them months to get that tenant out. Then the next renter broke water pipes and did extensive damage.

(more…)

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First Magnus Financial Corp. Broke A Federal Law By Providing Incentive Payments To Mortgage Brokers

MG — Thu, 24 Jul 2008 16:42:09 +0000

First Magnus was covered here several months back when it refused, or stated it simply couldn’t, send paychecks it owed to employees. At that time, the lender was also filing for bankruptcy.

This was then:

“First Magnus Financial Corp. still is not sending out paychecks to its former employees. But the Tucson-based mortgage lender announced it is creating an assistance fund of more than $1 million to ease the burden.”

“In a news release, the company said paychecks have been delayed because its accounts were frozen by investors that provided capital to First Magnus to make loans. The company was forced to shut down operations last week because it could no longer sell the loans it originates on the secondary market.”

“Earlier, the company told employees to expect their checks by mail rather than direct deposit. Under both state and federal law, checks were due to employees on Monday.”

Seems things have caught up with them. Just released today, this is how things are looking for them now:

(more…)

Tags: tucson, first, magnus, mortgage, lender, illegal, federal, law

Arizona’s Foreclosure Creep Is Slowly Moving Inward From Out-Lying Areas To Metropolitan Areas

MG — Tue, 22 Jul 2008 20:34:15 +0000

Many buyers chose to move to out-lying areas in cities like Gilbert, Chandler, Queen Creek, and Mesa in the East Valley. In the West Valley, buyers moved towards areas like Anthem, Surprise, Cave Creek, and some further out areas of Scottsdale. As the foreclosure notices started going up on doors and in the mail, prices dropped, real estate sales all but stopped, and credit cards started carrying the brunt of what the paycheck no longer paid for, many said that these areas would be the most heavily hit.

And for the most part they were right. But the economy didn’t stabilize (even for agents) as hoped, mortgage rates were already too low, and many mortgage loans were wrapped into tricky packages like Option ARMs and other types of non-standard formats, some that enticed buyers solely on discounts. As these events took their toll, it was only a matter of time before the foreclosure creep started moving inland affecting larger metro areas of Phoenix, Tempe, and other long established markets.

Foreclosures across metro Phoenix number 16,647 for the first half of the year compared with 9,966 during all of 2007 and 1,070 in 2006.

Last summer, when foreclosures were just starting to climb, the highest rates of home defaults were found on the Valley’s more affordable fringes. The problem worsened, hitting a wider swath of homeowners who bought at the peak of the housing boom through subprime loans. Although some of the Valley’s fringe areas such as Surprise, Anthem and Buckeye continue to have high foreclosure rates, the problem has moved inward.

“It has become more of an equity problem than a subprime problem,” said Tom Ruff, a real-estate analyst with Information Market.

An equity problem is exactly what this is too. Many new home builders immediately started undercutting recent buyers by adding large incentive deals to buy new rather than slightly used. (more…)

Tags: foreclosure, arizona, mortgage, loans, prices

Bank Of America Completes Their Countrywide Purchase - Moves Onto Their Next Huge Mistake

MG — Wed, 02 Jul 2008 18:24:43 +0000

BofA has officially acquired Countrywide Financial - but not without taking on a surprisingly large amount of risk in times like these.

It’s official: Bank of America has acquired Countrywide Financial, marking the completion of an audacious rescue of one of the most troubled lenders in the United States. The deal will expand Bank of America’s reach in the mortgage business — but, in the current environment of rising defaults and delinquencies among American homeowners, the expansion obviously comes with serious risks.

Countrywide was among the largest lenders in California and Florida, two states hit especially hard by the housing downturn. Both states have sued Countrywide alleging it engaged in unfair and deceptive lending practices. What’s more, Countrywide has a big portfolio of home equity lines of credit, which some fear will be hit with a rash of defaults as borrowers run short of cash.

Some analysts had urged Bank of America to abandon the deal. And judging from the swings in Countrywide’s stock in the six months since the deal was announced, the markets have been questioning Bank of America’s commitment to buying it.

And yet Kenneth Lewis, Bank of America’s chief executive, has been resolute that the purchase would go through.

One of the biggest problems is that while Bank of America has said that the combined mortgage branch will no longer originate subprime mortgages and stop making Option ARM loans (which can be deadly), the amount of those existing loans it absorbs from Countrywide put BofA at considerable risk.

(more…)

Tags: countrywide, option, arm, mortgage, bofa, lending

Arizona Breaks Into The Top 3 Foreclosure States

MG — Mon, 19 May 2008 22:23:09 +0000

Not like it’s really a suprising fact, but definitely a sobering one. I previously wrote about the game my children and I play where we guess the number of “For Sale” signs we’ll count on a street as we’re driving. It’s times like that when you realize the housing bubble and credit crisis have seeped into our unconscious.

It doesn’t seem to be without merit either. If there’s a reason that it seems more real here in Arizona than in other places - it’s because it is.

The foreclosure crisis continues to gather steam, as April filings—defined as default notices, auction sale notices, and bank repossessions—spiked almost 65 percent from the same month last year, according to RealtyTrac’s most recent U.S. Foreclosure Market Report.

All told, 1 in every 519 American households received notice of a foreclosure filing in April, up from 1 in every 538 households in March.

RealtyTrac CEO James Saccacio had this to say in a statement:

The total number of U.S. properties with foreclosure activity in April was the highest monthly total we’ve seen since we began issuing the report in January 2005…. Areas of California, Florida, Nevada, and Arizona continue to be particularly hard-hit.

Here’s the official breakdown:

Top 10 Foreclosure States

Nevada - 1 filing per 146 households
California - 1 filing per 204 households
Arizona - 1 filing per 224 households
Florida - 1 filing per 242 households
Colorado - 1 filing per 349 households
Maryland - 1 filing per 380 households
Georgia - 1 filing per 422 households
Ohio - 1 filing per 432 households
Michigan - 1 filing per 440 households
Massachusetts - 1 filing per 539 households

Tags: foreclosure, arizona, filing

Using A Short Sale To Avoid Foreclosure - You Lose Your House But Save Some Credit

MG — Mon, 19 May 2008 22:10:46 +0000

Short sales aren’t as easy as they were a few years ago. With the banks now inundated with returned properties courtesy of increased foreclosures and jingle mail from owners abandoning their homes, there’s much more work done by the same amount of people in many cases.

Additionally, banks have yet to figure out how to handle the declining market and their financial loss on the loans made to those unable to pay.

Having been through a short sale myself, there is a lot that goes into one and they can be scary. Here’s a related story.

Homeowners unable to afford their mortgage payments can sometimes negotiate an agreement with lending institutions to sell their home for less than their mortgage debt — preventing foreclosure, a harrying process for both lenders and sellers — and, in many cases, absolving debt while preserving credit.

“Both short sales and foreclosures are considered ‘negative information,’ so they stay on the credit report for seven years,” said Patricia Guertler of Consumer Credit Counseling Services (CCCS), a nonprofit organization offering free counseling to homeowners. A foreclosure, however, is more damaging to credit than a short sale, she said.

While a short sale is still a mark against a homeowner, “credit is something that can be rebuilt — and if the damage is only on the mortgage and if [the homeowner is] in good standing, it is not going to destroy credit completely. … It will drop your credit score but not [to] the point where it is completely irreparable,” Guertler said.

As mentioned above though, this next part seems to have been the hardest for many. Getting the bank to accept the short sale isn’t always easy if they’re slow or require more information than you are able to provide in the time given:

(more…)

Tags: foreclosure, short, sale, credit, IRS