Archive for the 'Repo Homes' Category

It is not uncommon to see decaying house repos in between two prime residences in some neighborhoods in New York and New Jersey. The growing number of abandoned foreclosed properties has caused concern among residents who are aware of the devaluation and disorder caused by the problem on their neighborhoods.

Homeowners and local organizations in several cities and towns in New York and New Jersey have taken up the cudgel to fight the devastating effects of house repos on their communities.

Nonprofit housing group, Hands Inc. purchased the defaulted loans on 47 foreclosed houses in Newark area, for a total of $5.4 million. Hands Inc. executive director Patrick Morrissy said that abandoned homes are a menace to community stability. He noted that about 654 house repos were recorded in New Jersey in February.

According to Morrissy, the extent of the foreclosure problem has caused people to reinvent the way they approach community development, adding that the group saw the need to expand the coverage of its commitment, including helping homeowners save their properties from foreclosure, organize residents as neighborhood guardians and involve homeowners on the initiative.

In Long Island, Greater Bellport Coalition Chairman John Rogers said that results of his informal survey showed about 100 abandoned properties in some form of dilapidation in the area.

Meanwhile, Community Development Corporation of Long Island President Marianne Garvin said that the organization has pledged to refurbish 45 abandoned houses in Long Island. The organization is one of the almost 240 groups eligible to receive $120 million federal foreclosure prevention funds under the Neighborhoods Stabilization Program.

The organization also plans to spend its share in the $2 billion federal fund to purchase and renovate about 14 repossessed houses in at-risk neighborhoods in Babylon, Brookhaven, Islip and Freeport. The organization was among the few nonprofits that were given the task by Suffolk County to refurbish about 72 foreclosed houses.

Furthermore, the organization is also providing foreclosure counseling to distressed homeowners. In 2007, the organization provided counseling to 50 homeowners and 438 in 2008. So far, it helped about 300 homeowners in the first five months of this year.
Garvin said that the organization is exerting effort to help troubled homeowners avoid house repos through foreclosure counseling and prevention. But, she said that her group could not save everybody.

Homeowners with significant negative equity are 20-percent more likely to let their homes become repo houses in states that follow non-recourse laws than in recourse states, according to a study by researchers at the Federal Reserve Bank of Richmond.

Recourse states are states which allow lenders to pursue borrowers for complete payments of loans in case of default. A lender in a recourse state can collect from the borrower’s wages and other properties if the borrower defaults on a loan and the collateral is not adequate to pay the loan.

In states that follow non-recourse laws, lenders are not allowed to pursue the borrower for payments of loans. Lenders are only allowed to seize the loan collateral and they are prohibited from taking further legal actions after the collateral has been seized even if the value of the collateral is not enough to pay the loan balance.

In states that follow non-recourse laws, lenders take more risk. Typically, lenders in states that observe non-recourse law offer lower loan-value ratios because of the higher lending risk.

The researchers also found that the effect of recourse laws is substantial only when the homeowner has higher income or asset values.

For borrowers with assets below $200,000, the effect of recourse laws is not significant. For houses valued from $300,000 up to $500,000, homeowners in states that observe non-recourse laws are 59-percent more likely to let their homes turn into repo houses.

For houses valued from $500,000 up to $750,000, homeowners in states with non-recourse laws are nearly two times as likely to let their homes become repo houses. For homes valued from $750,000 up to $1 million, homeowners in states with non-recourse laws are 66 percent more likely to let their houses turn into repo houses than in recourse states.

The Federal Bank researchers also mentioned that the Boston Federal findings on the relation between repo houses and negative equity in Massachusetts in the 1990s do not hold through for the whole country because Massachusetts observes recourse laws.

The Richmond Fed researchers studied the foreclosure laws of the 50 states and found out that 11 states are non-recourse states – Arizona, Alaska, Iowa, California, Montana, Minnesota, North Dakota, North Carolina, Wisconsin and Washington.

These 11 states comprise 25 percent of the country’s housing inventory, with California accounting for 49 percent of the 25 percent share.

All in all, the researchers found that the link between the number of repo houses and price declines is significantly stronger in states which follow non-recourse laws than in states that implement recourse laws.

Soaring mortgage defaults due to increasing unemployment, drastic decline in home prices and expiration of moratoriums are identified as precursors of the impending second wave of repo homes that is expected to sweep the country still reeling and recovering from the impact of the first wave of foreclosures brought by the collapse of subprime lending.

Industry experts are concerned that the expected second wave of repo homes would inflict more sufferings to distressed homeowners, neighborhoods and the national economy.

Early this year, the number of mortgage defaults soared to a new high amid increasing unemployment.

Many banking institutions have delayed foreclosure actions on distressed properties partly because they participated in the home-stability program of the Obama Administration. The program required them to modify troubled loans to make them affordable for troubled borrowers.

And with the expiration of foreclosure moratoriums, many lending institutions have insinuated that they are going to aggressively pursue the clearing up of their backlog of delinquent loans.

Currently, nationwide home sales are showing signs of stabilizing due to the abundance of cheap repo homes, low mortgage rates and government incentives.

The pace of housing construction activity moves in such a way that it created a balance between supply and demand, while housing price drops slowed significantly.

However, industry experts believe that the projected increase in the number of foreclosed homes would pull down home values and may lead many homeowners to go underwater.

It is estimated that 15.4 million distressed homeowners or one in every five who have first mortgages would owe more on their mortgage than the value of their properties.

Tom Kelly of Chase Bank responded positively when asked about the possibility of a second wave of foreclosures. Since April 6, the bank was able to modify 138,000 troubled loans under the Obama Administration’s program.

However, a great number of Chase borrowers failed to qualify for modification and most of them are facing possible foreclosure.

Meanwhile, the Obama Administration is intensifying its efforts to avert another surge in the number of repo homes. So far, over 240,000 troubled homeowners have qualified on a trial basis for the Home Affordable Modification Program which involves alteration of their loans to make their monthly payments equal to 31 percent of their total income.

About 80,000 tenants in New York City are in danger of becoming victims of foreclosures as more and more affordable apartments are facing the threat of becoming repo homes.

Massachusetts has intensified its crackdown operation on fraudulent repo homes rescue services. H.O.P.E. Alliance Inc. Law and Associates LLC and Florida-based Thomas E. Law III were slapped with temporary restraining orders for alleged fraudulent activities.

Mayor Michael Bloomberg of New York City is planning to adopt a campaign used by the city of Philadelphia in Pennsylvania to contain the tide of repo home in his area.

To find use for repossession houses that blighted neighborhoods and to reduce their numbers, the city of Oxnard will purchase them and turn them into affordable housing for low income families.
The Ventura County Board of Supervisors have also approved a similar plan which would allow the county to join the city in applying for the [...]

Yields on mortgage securities of government-sponsored enterprises, Federal National Mortgage Association or Fannie Mae and Federal Home Loan Mortgage Corp. or Freddie Mac have increased to a record high since the Federal Reserve announced its plan to purchase bonds to reduce interest rates on loans for existing homes and repo houses for sale.

Repo homes mortgage default rates took a slight drop last April, prompting industry experts to hope that the housing market deterioration is slowing down.

Businessman Maurice Jenkins of Fayetteville, North Carolina has been sued for repo home listing fraud for the second time this month. Jenkins was sued at Cumberland County Superior Court by Latoya Haywood.