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:

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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. Continue Reading »

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.

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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

1. Nevada – 1 filing per 146 households
2. California – 1 filing per 204 households
3. Arizona – 1 filing per 224 households
4. Florida – 1 filing per 242 households
5. Colorado – 1 filing per 349 households
6. Maryland – 1 filing per 380 households
7. Georgia – 1 filing per 422 households
8. Ohio – 1 filing per 432 households
9. Michigan – 1 filing per 440 households
10. Massachusetts – 1 filing per 539 households

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:

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