Hidden ‘Second’ Foreclosure Crisis?

New Report Warns of Hidden ‘Second’ Foreclosure Crisis

An unpaid tax bill of just $400 could cost you your entire home in some states. A new report is calling such growing cases a second “foreclosure crisis.”

Local governments are stepping up their efforts to collect unpaid taxes from home owners, facing shortfalls in their budgets to pay for services like schools, road maintenance, and police and fire department costs.

So in some states, laws allow municipalities to sell tax liens to investors on properties of home owners who fail to pay their property taxes or other municipal bills, like for sewers. Until the home owner pays up on the overdue bills, the investors can own a claim to the property. If the home owner fails to pay, the investor can take possession of the home through foreclosure.

Investors are being drawn to buying up the tax liens on these properties because of the interest they can charge to collect on the overdue bills, sometimes at rates of 18 percent or more on the outstanding debt, according to a new report from the National Consumer Law Center.

“It’s a win-win for investors,” John Rao, author of the report, told CNNMoney. The investors stand to get their investment back with the high interest to boot, or they may get the entire home at a big discount.

The National Consumer Law Center says that states need to do more to warn home owners that this can occur. The center also is pushing for states to lower the maximum interest rates that investors are permitted to charge home owners on the back taxes. The center also says states need to allow home owners to set up a payment plan for paying back the taxes they owe, instead of requiring them to come up with a big lump sum.

Source: “The Other Foreclosure Crisis: Losing a Home for $400 in Back Taxes,” CNNMoney (July 10, 2012)

FHA Loans Post Higher Delinquencies, Foreclosure.

FHA Loans Post Higher Delinquencies, Foreclosures

At a time when the mortgage market is seeing steady signs of improvement, loans backed by the Federal Housing Administration (FHA) continue to see an increase in the number of borrowers seriously delinquent on their mortgage and falling into foreclosure, according to a new quarterly report issued by the Office of the Comptroller of the Currency.

For the year ending March 31, FHA loans delinquent 90 days or more increased nearly 27 percent, while foreclosures soared nearly 17 percent. Meanwhile, bank loans saw delinquencies decrease by 39 percent and foreclosures fall nearly 10 percent.

FHA loans tend to be attractive among first-time home buyers, since they offer low down-payments of 3.5 percent and require lower credit scores and incomes to qualify. The low down-payment requirements with FHA-backed loans, however, mean that borrowers have less cushion if their property drops in value and borrowers can quickly find themselves underwater on their mortgage, housing experts say.

The share of FHA loans in the mortgage market has drastically increased in recent years. Housing analysts warn of more FHA loan delinquencies over the next few years if the economy doesn’t improve, Inside Mortgage Finance publisher Guy Cecala told CNNMoney.

However, FHA says it has been trying to help offset losses in recent months by increasing its insurance premiums, ramping up its requirements for minimum credit scores of its borrowers, requiring larger down payments for any borrowers with credit scores below 580, and prohibiting home sellers from helping borrowers with the down-payment, CNNMoney reports.

“We expect the new books will continue with their better performance, primarily because of the steps that were put in place,” FHA officials told CNNMoney. “And we are benefiting from having more high-credit borrowers.”

Source: “Closer to Bailout? FHA’s Mortgage Delinquencies Soar,” CNNMoney (July 9, 2012)

Retail Real Estate Inches Toward Recovery.

Retail Real Estate Inches Toward Recovery

The rows of vacant shopping centers plaguing many U.S. cities may slowly be vanishing. For the second quarter in a row, vacancy rates improved while rents continued to inch up in the retail real estate market, signaling a recovery for the hardest-hit commercial sector, according to Reis, a commercial real estate research firm.

“Although we still remain hesitant to claim that the  retail real estate market has reached stabilization, two consecutive quarters of vacancy and rent improvement is the strongest evidence to date that the sector is on the road to recovery,” says Ryan Severino, Reis senior economist.

Vacancies in strip malls for the second quarter declined to 10.8 percent. Meanwhile, asking rents increased 0.2 percent. According to Reis, the decreases in vacancies and slight increases in rents were first recorded in the first quarter of this year, after nearly seven years of falling numbers for the sector. Reis predicts that vacancies will continue to gradually fall for the remainder of the year as new construction remains largely stalled in the retail real estate.

Source: “Retail Real Estate Recovery Taking Hold: Research Firm,” Reuters (July 6, 2012)

American Renters Getting Squeezed.

American Renters Getting Squeezed

Rents continue to inch upwards and many renters say they know it would be cheaper to buy a home than rent, but they can’t qualify for a mortgage, Reuters News reports.

With rising demand for rentals, landlords are increasing their rents and some cities are even posting double-digit percentage rental increases annually. Apartment rents have risen at their highest rate since 2007, with costs soaring over the last three quarters, according to the research firm Reis Inc.

Landlords feel they can charge more since vacancies have reached at a 10-year low at the same time that demand has surged. Asking rents have jumped nationally to $1,091 during the second quarter, the largest increase since the third quarter of 2007, Reis reports. The average effective rent is $1,041 for the second quarter, increasing 1.3 percent over the previous quarter.

“The improvement in rents is pretty pervasive,” says Ryan Severino, a Reis senior economist. “Even in places like Providence and Knoxville, which you don’t think of as hotbeds for apartment activity, landlords felt the market was strong enough to raise rents on their tenants.”

New York remains the market with the lowest number of vacancies and also the priciest place to rent by far. The monthly rent there averages $2,935, which is more than $1,000 higher than the second-priciest place to rent in the U.S., San Francisco.

Many finance experts recommend budgeting no more than 30 percent of household income to pay for housing costs. Yet nearly 40 percent of Americans are now paying more than a third, according to a U.S. Census Bureau survey. In New York, one-third of households spend more than half their pay on rent.

“We have falling incomes, rising rents, and nothing but substantial upward pressure on those rents,” says Chris Herbert, director of Harvard University’s Joint Center for Housing Studies. “And nothing in the cards suggests it will turn around anytime soon.”

Meanwhile, for those who are able, purchasing a home has never been more affordable. It’s cheaper to purchase a home than rent in basically every major U.S. city, according to John Burns Real Estate Consulting.

But securing financing remains a renter’s biggest obstacle to buying a home. Banks are pickier in what they require to qualify for a mortgage. Loans for home purchases reached a 12-year low last year as lenders tightened their credit standards, according to Inside Mortgage Finance. Now, potential borrowers often need an average credit score of 762 to get a mortgage backed by mortgage giants Freddie Mac or Fannie Mae, according to Morgan Stanley research.

Source: “Americans Squeezed by Higher Rents, Tight Credit,” Reuters News (July 5, 2012) and “U.S. Apartment Rents Rise at Highest Rate Since ’07,” Reuters News (July 5, 2012)

How Agents Are Investing in Their Business.

How Agents Are Investing in Their Business

Real estate professionals are investing in a number of tools to expand their reach to customers.

According to a new survey by ActiveRain of 2,000 real estate agents, 63 percent of respondents say they have their own Internet Data Exchange (IDX) Web site, which features home listing feeds from their MLS. Their average expenditure on an IDX Web site is $75 per month, according to survey respondents.

Additionally, 62 percent say they use tools that help them create comparative market analyses for clients (a $73 per month expenditure, on average), and 51 percent use customer relationship management software (a $46 average monthly expenditure) to help manage their customer leads.

The survey also found many agents still use direct mail for their outreach too. Forty percent say they rely on direct mail ($108 monthly expenditure), while about 45 percent say they use search-engine optimization, blogging, and social media (a $47 average monthly expenditure) for their real estate marketing efforts.

Also, 32 percent of respondents say they pay for online leads (a $155 monthly expenditure, on average).

Source: ActiveRain and “Most Agents Investing in IDX Web sites,” Inman News (July 3, 2012)