May Housing News

Good numbers, bad lenders

On Monday, May 6, 2013, Lender Processing Services reported that troubled home loans have hit a six year low as of March, the lowest since 2007. Negative equity has also dropped 41 percent since 2012. These numbers are nearly pre-crisis and are quickly approaching the conditions from the period between 2000 and 2004.


“There has always been a clear correlation between higher levels of negative equity and new problem loan rates,” Blecher said. “Looking at the March data, we see that borrowers with equity are actually outperforming the national average — at 0.6 percent, this group is quite close to pre-crisis norms. The further underwater a borrower gets, the higher those problem rates rise. Borrowers with loan-to-value (LTV) ratios of just 100-110 percent are actually defaulting at more than twice the national average. For those 50 percent or more underwater, we see new problem rates of 4 percent.


“Still, the overall equity trend has been a very positive one,” Blecher continued. “LPS’ latest data shows that the share of loans with LTVs greater than 100 percent has fallen 41 percent from a year ago. In total, there were approximately 9 million such loans, or about 18 percent of active mortgages. Some states, including the so-called ‘sand states’ (Arizona, Florida, Nevada and California), are still well above the national level, at an average 28 percent, but they, too, have seen improvement over the last year, with negative equity dropping over 40 percent across those four states since January 2012.”


Loan Processing Services also released data that shows the March numbers revealed an 8.2 percent month over month decrease in national foreclosure starts while foreclosure sales rose 10.1 percent. Recently, here in California, the Homeowner’s Bill of Rights was passed. The bill has limited certain troublesome lender practices such as dual tracking, requires a single point of contact to proceed with home foreclosure, and insures tenants’ rights if a lease is present. The California Homeowner’s Bill of Rights has contributed to the fall in foreclosure sales by 35 percent but has not affected the number foreclosure starts, which is on par with the rest of the country.


While California has a reputation for litigiousness and excessive legislation, the HBoR, as it is referred to, is a big help. Recently the New York Attorney General, Eric T. Schneiderman, announced that he plans to sue both Bank of America and Wells Fargo for violating terms of the National Mortgage Settlement.  The Attorney General of Massachusetts, Martha Coakley, has also complained of violations and has written a letter to Joseph A. Smith, Jr., the man who oversees the National Mortgage Settlement. Over 304 “Servicing Standards” were agreed upon in the settlement but most servicers have not yet implemented all of the procedures. Many of the “Servicing Standards” are similar to the California HBoR’s requirements but are not yet enforced.


Previously we discussed that investors are purchasing homes in Sacramento and a recent development in this arena is the initial public offer of shares of Colony American Homes. While we hear more about Blackstone group in this area it should come as no surprise that other investment firms are buying up homes. With Colony American Homes going public the tenant landlord relationship may grow even more depersonalized. What was once a mom and pop operation for most renters is now turning into a professional, retail experience more like renting an apartment or multi-dwelling unit. Time will tell how well this model works for single family homes. The public offering is also good news for investors who would like to invest in real estate but may not have sufficient means to purchase a home at this time.


The housing market is still volatile. While certain regional markets are recovering and many national statistics are appearing more favorable, we must be cautious as many are still unemployed. If you have any questions or concerns about your own personal situation I would be happy to give you a FREE one on one legal consultation. You can call me at 916.442.6400 or send me an email at