House Flipping Staging a Comeback?

House Flipping Staging a Comeback? Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

More Americans are once again on the hunt to snag a home at bargain prices, fix it up, and then try to resell it for a quick profit. Home flippers mostly vanished from the market during the housing downturn a few years ago. But with home values inching up, flipping is coming back.

RealtyTrac says house flipping increased for the second year in row, rising a slight 0.33 percent in 2012 from 12 percent in 2011. The company defines flipping as buying and selling a property within six months.

RealtyTrac reports the average gross profits for these types of transactions was $37,375 in 2012. According to the company, some of the best places to flip homes in 2012 were Orlando, Fla.; Richmond, Va.; Tucson, Ariz.; and Charlotte, N.C.

For example, homes flipped in Orlando were purchased for $100,397, on average, and then for $174,895 — earning a gross profit, on average, of nearly $75,000, RealtyTrac reports.

Investors are showing signs of being more cautious with  house flipping than they were during the housing boom. More investors are coming in with all-cash deals to purchase the homes. They also are holding onto the properties longer than they once did. On average, the flipping time from purchase to resale stands at about 106 days today, according to RealtyTrac.

“That seems to be the sweet spot for a profitable deal,” says Daren Blomquist, vice president at RealtyTrac. “Back in the housing bubble, many flippers were solely relying on price appreciation, sitting back and selling for big profits within a month or two.”

Source: “The New Rules of House Flipping,” Reuters (April 18, 2013)

Lenders Embrace Home Equity Loans Again.

Lenders Embrace Home Equity Loans Again. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

As housing values rise, home-equity loans and lines of credit are staging a comeback, MSN Money reports.

In late 2008 as the housing market slowed dramatically, home-equity borrowing came to nearly a standstill as lenders became cautious because values were falling so quickly. By late 2011, nearly a third of U.S. homes with mortgages owed more on their loan than their house was worth.

In markets where home prices are rising, though, lenders are starting to issue equity loans once again. New players have jumped in too. For example, Discover Financial Services announced in March that it will offer fixed-rate home-equity loans of $25,000 to $100,000. The offer is for current customers, but eventually will be extended to others.

While lenders may be more willing to extend a home-equity loan, they are being more cautious than they were in the past. Lending on 100 percent of owners’ equity is now rare, and borrowers won’t likely get more than 85 percent of that amount.

Source: “Home-equity loans make quiet comeback,” MSN Money (April 23, 2013)

Report: ‘Alarming’ Rate of Re-Defaulters With HAMP

Report: ‘Alarming’ Rate of Re-Defaulters With HAMP. Image courtesy of Pixomar / FreeDigitalPhotos.net

A new report finds that borrowers who had their mortgage payments reduced as part of the Home Affordable Modification Program are still failing at an “alarming rate” to stay current on their mortgage. The borrowers had their mortgage payments reduced, on average, by more than $400 a month.

For example, 46 percent of a few thousand permanent HAMP modifications issued in 2009 during the third quarter have re-defaulted. Nearly 40 percent of those made in the fourth quarter of 2009 also have re-defaulted, according to the report from the Troubled Asset Relief Program or Sigtarp.

The longer home owners remain in HAMP, the more likely they are to re-default out of the program, according to the report.

Under HAMP, banks aim to reduce borrowers’ monthly payments to around 31 percent of their current income. This often occurs by extending the term of the loan and dropping the interest rate. On average, the modifications have reduced monthly mortgage payments by $545 or $400.

To date, about 860,000 borrowers have active HAMP modifications. Around 290,000 have been removed from the program.

However, the report notes recent HAMP modifications have shown better results and are performing better than ones issued years earlier.

“Around 11 percent of HAMP modifications made in late 2011 have defaulted after one year, compared with more than 20 percent for those made when the program launched in mid-2009,” The Wall Street Journal reports.

The report also notes that HAMP modifications tend to outperform privately issued loan modifications.

Source: “Despite Improvement in Loan-Mod Defaults, Report Raises Alarms,” The Wall Street

Banks Increasingly Turning to Deeds-in-Lieu of Foreclosure

Banks Increasingly Turning to Deeds-in-Lieu of Foreclosure. Image courtesy of digitalart / FreeDigitalPhotos.net

Short sales and loan modifications have grown to help offset foreclosures, but banks are also turning to deeds-in-lieu of foreclosure more too. Slightly above 20,000 deeds-in-lieu of foreclosure occurred nationwide in 2012, which is up nearly 40 percent from 2011, according to RealtyTrac.

Some states are even seeing larger increases. For example, deeds in lieu of foreclosure skyrocketed 76 percent year-over-year in California, 53 percent in Nevada, and 49 percent in Florida.

Deeds-in-lieu of foreclosure permit a lender to take possession of a home without having to undergo the foreclosure process. The home owner is allowed to leave their mortgage debt and avoid foreclosure by turning over the home to the bank. Often times, a deed- in-lieu of foreclosure offers “cash for keys,” providing a cash payment to the distressed home owner in order for them to vacate the home, without letting the home fall into foreclosure.

Source: “Deeds in Lieu of Foreclosure: Naughty or Nice?” Forbes (April 23, 2013)

Foreclosure Crisis Melting Away?

Foreclosure Crisis Melting Away? Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Foreclosures are falling quickly as more borrowers keep up with their mortgage payments and banks complete more loan modifications or approve short sales to avoid foreclosures on their books.

For the first time since 2008, the number of borrowers who are behind on their payments or in foreclosure dropped below 5 million, according to a new report reflecting March data by Lender Processing Services.

The number of mortgages in foreclosure dropped to below 1.69 million in March, which marks the lowest level in nearly four years and a drop of nearly 20 percent compared to one year ago.

About 3.4 percent of all U.S. mortgages were in foreclosure by the end of March, which is a decrease from 4.2 percent a year ago, Lender Processing Services reports.

In March, about 6.6 percent of all borrowers were in some stage of delinquency, excluding those in foreclosure. That percentage is down by 3 percent from a year ago, but is still high by historical standards. Prior to the housing crisis, about 5 percent of all borrowers were delinquent on their mortgages and 1 percent of loans were in foreclosure, LPS reports.

Source: “Bad Mortgages Hit Lowest Level Since 2008,” The Wall Street Journal (April 23, 2013)