Foreclosure Recap – Week #43
The foreclosure crisis for a lot of people actually started when they, as borrowers, were willing to take a risk on sub-prime loans. Today that crisis, as outlined in this story is reaching farther down the line to people who quite simply can’t find work. People who were at one time living well within their means making $60,000 dollars a year or more and living in homes valued at around $250,000. There is nothing out of the ordinary there. However when that worker loses his or her income by virtue of being laid off it doesn’t take long for the bills to far outweigh the available cash and with no income coming into the family economy it is only a matter of time before the cash reserves, if there actually were any, have been used up and another family is then on the risk of certain foreclosure.
One might wonder, with all the recent foreclosures and financial issues, what condition are the lending institutions in. We all recall earlier when several large banks like Wachovia experienced issues. Well according to this article the number is currently sitting at 106 bank closures this year and a staggeringly large number of others are teetering on the brink as we write this. According to sources dozens if not hundreds more are in similar shape. The regulators are not rushing to take them over for fear of triggering a chain reaction that could have devastating effects on the lending arena for decades to come. When a bank fails, the Federal Deposit Insurance Corp. swoops in, usually on a Friday afternoon. It tries to sell off the bank’s assets to buyers and cover its liabilities, primarily customer deposits. It then will tap into the insurance fund to cover the rest.
One of the largest real estate deals in the history of the United States now sits ready to fall to pieces. According to the Associate Press, at the height of the real estate bubble in 2006, an investment group led by New York City real estate firm Tishman Speyer Properties and Black Rock Realty Advisors paid $5.4 billion for a pair of gigantic Manhattan apartment complexes known as Stuyvesant Town and Peter Cooper Village. While the price was outrageous it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar. Now three years later, to the glee of many New York renters, the tactic has been a bust. The tenants fought back, conversions happened much slower than expected and a state court ruled Thursday that about $200 million in the company’s new rent increases were improper.
What if you gave an auction and nobody came? That is almost exactly what happened at an auction in Wayne County, which houses Detroit. The city is being called an Urban Wasteland and this past weekend less than one-fifth of 9,000 properties sold this weekend at Wayne County’s annual tax foreclosure auction, according to Reuters, despite a minimum bid of only $500. As the experts predicted, the auction was dominated by speculators — may from California and New York — who routinely outbid would-be residents for the few properties deemed habitable. "Why am I competing against a bank?" Ross Wallace, a lieutenant in the U.S. Army, asked Reuters. "It would be common sense to have a separate process for people who want to move back to the city or it’s going to stay empty."
These people are taking the call to fight back a little too seriously. Foreclosed on couple, Daniel Weston and Mary Ann Parmelee, charged with torturing loan modifiers. The couple and three other people allegedly sought loan modification assistance from the victims but believed that nothing was being done and wanted their money back," a statement from the district attorney’s office said. The couple, according to investigators, believed they had been swindled. Weston and another man, who previously served time for assault, are accused of carrying out the beatings in front of their three co-defendants, who prosecutors say had prior business ties with the two victims by having funneled loan-modification referrals to them.
According to the Associated Press, Sales of new homes dropped unexpectedly last month as the effects of a soon-to-expire tax credit for first-time owners started to wane. The Commerce Department says sales fell 3.6 percent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. Economists surveyed by Thomson Reuters had expected a pace of 440,000. It was the first decline since March. Sales in September were down 7.8 percent from a year ago. The median sales price of $204,800 was off 9.1 percent from $225,200 a year earlier, but up 2.5 percent from August’s level of $199,900. First-time buyers are taking advantage of low mortgage rates, discounted prices and a tax credit of up to $8,000 if the deal is completed by the end of November. That’s provided a big lift to the market, with home re-sales climbing more than 9 percent in September, the largest amount in more than 26 years.
We all know that there is potentially nothing scarier than the foreclosure. But if you step back a moment and look at the impact that the foreclosure is having on the neighborhoods. I think you can see that the sum of the parts is far worse than just the individual issues. As I walk my neighborhood this Halloween. Abandoned homes are the undead of the mortgage crisis, and they’re haunting peoples neighborhoods more than ever. It used to be that when a homeowner defaulted, the lender foreclosed and sold the home. Selling these homes has become a difficult task, though, and so some lenders don’t want the homes. Once a lender takes possession, it is responsible for taxes and fees, such as homeowner’s association dues. Real estate experts expect these vacant homes will eventually be gobbled up by investors – some of the same ones that got us into this mess. But the price has to be pretty low to make it worthwhile for an investor to improve the homes and sell them again. But in the mean time there are literally thousands of homes in almost every city across the country sitting vacant and though they look bad on the outside, the inside is often far worse. These homes will most likely all end up being sold although some of the ones in the worst condition might be better of to be bulldozed and sold as vacant land. People just don’t care. Once they are foreclosed upon, the houses often get trashed before they leave.
