The proposal – which would sell foreclosure homes, often in bulk, to private investors from government inventory – is set to go live in the “near term”, according to the Federal Housing Finance Agency. According to reports, the two government-sponsored enterprises will allow pre-qualification for investors and third parties who want to bid on foreclosure properties owned by the government. This effectively opens the doors for foreclosure investors to get in line for bidding and save time before the full allotment of government foreclosure listings becomes available.

Government foreclosures come from several sources, most notably Department of Housing and Urban Development (HUD homes) and the Department of Veterans Affairs (VA homes). These homes come under government ownership when the federal government – due to its role as the guarantor of the mortgage secured by the property in question – takes possession of the home due to the homeowner’s default.

The hope is that investors and private equity firms will want to capitalize on a large inventory of cheap residential real estate properties that can be converted into income-generating rental properties – which are in high demand and have been for the past two years from previous homeowners, those looking to avoid buying a house in this climate, and those relocating for jobs.

As it stands now, the rental market suffers from a lack of supply while the housing market suffers from a glut of supply – a glut that has kept prices going down more and more with each quarter.

Already several major private equity firms have thrown their hat into the ring and announced intentions to actively participate in the government program. Some estimate that the foreclosure-into-rental market could be worth billions in the long run, and could deliver economic benefits to the economy as a whole beyond the profits obtained by investors if mass purchases cause home values to rise throughout the country.

The timeline for the full implementation of the program is still unclear, but the FHFA is seeking to make this a reality sooner than later – especially given the political pressure from the White House to bring stability to the housing market before presidential elections in November. Chances are the housing market will be a key issue.

Federal Foreclosure-into-Rental Program Picks Up Steam is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

That something – an impending foreclosure settlement that could finally resolve the issue – may be at hand.

According to some sources, the Department of Justice, state attorneys-general, and the banks are in preparations to wrap up talks and announce a settlement regarding robo-signing and other fraudulent mortgage loan practices. The settlement has been quoted as being worth as much as $20 billion split between the banks, and could or could not include a controversial release of liability from future lawsuits against the banks once the agreement has been reached.

The most apparent result from any pending settlement is the change to foreclosure laws and how banks are allowed to process foreclosures and mortgages in general. Of course, robo-signing still continues, so action will need to be taken to clear up that unsightly aspect of the industry, but a settlement could provide a shot in the arm to the market and to investors looking for some stability.

Of course, the year-long settlement negotiations have been near this point before, always ending in no action being taken and the deal falling through at the last minute due to one or both sides balking at some proposed measure. For banks, it has long been the idea of immunity from future legal entanglements stemming from the mortgage loan fraud; for the states, it has been the distasteful idea that big banks can get away from serious malfeasance without serious consequences.

Even with this proposed settlement, critics are not happy and do not think the settlement goes nearly far enough. These critics include state attorneys-general from California, New York, and Massachusetts (Kamala Harris, Eric Schneiderman, and Martha Coakley, respectively).

Still, there is no doubt that the nation’s backlog of foreclosures exists in part because banks, by and large, have stopped processing foreclosures or have seriously closed the amount of foreclosures they have processed as a result of potential legal trouble brewing due to foreclosure practices – akin to a diver not wanting to dive into a murky pool because he is unsure of its depth and hidden dangers.

What this settlement will probably accomplish is similar to floodgates opening – allowing tens of thousands of foreclosures to flood the market over the next six months as banks eagerly seek to unload these non-performing assets from their ledgers. Expect prices to fall substantially, opening up the market for foreclosure hunters looking for bargains.

Could We Be Seeing A Foreclosure Settlement Soon? is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

News came today that the coalition of state governments fighting with five big banks at the heart of the robo-signing and mortgage-backed securities scandals in the real estate industry over the past year offered the banks a new deal containing limited liability for their past wrongs from future lawsuits.

The deal would give banks part of what they desire: Some legal protection from future lawsuits from individual states and class action groups for their role in wrongfully and illegally seizing homes from borrowers without doing due diligence and ensuring all the paperwork was in place.

The deal would also call for $10-25 billion in fines and restitution from Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and Ally Financial as a way to both punish the banks and help the victims of the scandals.

Naturally, the banks are said to have balked at the offer, probably in belief that the liability release didn’t go far enough. Of course, this is a high-profile negotiation, and you never accept the first offer tendered. Some actually believe the language is too broad in favor of the banks, but that could change as negotiations go on.

This entire situation is very curious. The housing market, arguably, cannot really move forward until some kind of agreement is reached. But, at the same time, banks cannot be allowed to do whatever they want and get away with it. That would destroy consumer confidence and put banks in the driver’s seat for another crisis down the road.

Yet if banks are pressed too hard and don’t have the liability release they want, they could curtail lending and keep the real estate market in the same position it’s currently in – with an excess of supply but not a lot of buyers.

Pressure is mounting on both sides; the public is still engaged in the issue and the share value of the big banks has dropped steadily over the past six months. Foreclosures continue to enter the market and buyers continue to see great values on the table. It’s now just a matter of whether or not this mess will be concluded so banks can fund new purchases – purchases needed to get the real estate market back up and running.

Governments Propose New Deal to Banks; Banks Balk for Now is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Today, the bank is making more news in the real estate world, involving both foreclosures and an ambitious real estate transaction that could see the corporation remove itself further from the real estate markets.

We all know that Bank of America is one of the main banks being targeted in a year-long probe by the federal government into the foreclosure quagmire that is the robo-signing scandal. The settlement is still pending; it could ultimately cost the five banks over $20 billion. The uncertainty also continues to wreak havoc with BoA’s stock price, which is why leadership in the bank want a settlement to be reached sooner rather than later.

The bank got a reprieve from New Jersey yesterday, freeing up the corporation to resume foreclosures in that state. BoA is also pushing for a resolution with not just the federal government, but also many of the 50 state attorneys general that have sought legal action against the bank as a result of the foreclosure scandal.

A previous deal worth $8.5 billion has yet to be approved by New York courts. Most of the exposure in this settlement and other cases stems from the beleaguered Countrywide Financial Corp and several toxic assets that this company – now a subsidiary of Bank of America – had on its ledgers.

To free up some cash to deal with this problem, Bank of America is contemplating selling approximately $1 billion worth of real estate to the Blackstone Group. Much of the property that would be sold includes commercial property, but a fair amount are residential properties from all over the world. This comes a week after the bank unloaded a credit card business from Canada for $8.6 billion – signs that the bank is trying to shore up its stock value by selling assets (and also to pay for the impending settlement).

It’s hard to read about some rotten part of real estate without coming across Bank of America’s name. The bank has had a deep presence in virtually every aspect of real estate in this country, and was rocked as hard as any other bank in the foreclosure crisis and collapse of the housing market. It is very possible that this spells the end of BoA’s involvement in real estate altogether; while it may continue to make mortgage loans, it has already sold $500 million worth of mortgages to Fannie Mae and can’t be eager to leap back into the business.

Will other large banks follow suit? Perhaps – and in the short term, at least, it may mean that local banks and credit unions will be the go-to sources for home loans for investors and homebuyers alike. That approach actually makes sense because these units are less likely to engage in robo-signing and other disputed practices like the big boys who, in many cases, had too many assets going bad all at once.

Bank of America Making Real Estate News Today is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Bair stated that banks demonstrated "a stubborn refusal to deal head-on with past-due and underwater mortgages" and should write off, en masse, thousands of mortgages that are "uncollectible". She also said that new terms should be reached with homeowners of distressed properties that "reflect today's lower property values."

Bair didn't outright say that banks should step up foreclosures, but since her statement, some have come out to say that heading in that direction may be better for the real estate industry and economy as a whole. After all, the longer foreclosures and distressed properties stay on the books, the longer they have a negative impact on banks and local home prices.

The impact on banks is bad because it reduces the amount of funds available for investors and homebuyers who want to purchase property – which is essential to clearing out foreclosure inventory and helping prices rise. The impact on current homeowners is also bad because home prices have been depressed by these foreclosures.

In the end, while Bair probably doesn't believe more foreclosures are the solution, her statements on the crisis are definitely fertile ground for that discussion. And in a way, perhaps that line of thought deserves more attention. It would be the equivalent of taking off a Band-Aid slowly or just getting it over with and ripping it off.

The pain is sharp and instantaneous, but it is better to endure that than to unnecessarily drag out what is, for many, an inevitable conclusion.

Foreclosures Viewed As Solution, Not Problem, By Some After Former FDIC Head Speaks is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Both non-judicial and judicial foreclosure cases rose in almost all parts of the country, resulting in huge declines in housing prices. In the latest S&P Case-Shiller Index report, prices were reportedly down in 19 of the biggest 20 U.S. markets by over 3% in January of this year compared with one year ago. When compared with the peak price level of 2006, nationwide residential prices are off by almost 32%. Prices of homes have declined in the country in the past six consecutive months.

As listings of houses at auctions continue to rise, the U.S. government found it necessary to enact new regulations to address problems in mortgage financing, the area deemed to have played a major role in starting the housing market crisis. One of the rules, approved by the Federal Deposit Insurance Corp. (FDIC), will force Wall Street firms to retain a share of ownership in mortgage bundles sold as bonds in secondary markets.

According to legal experts, the FDIC rule will help restore the trust of investors in secondary markets which are considered important to mortgage lending. Bundling mortgages into complex bonds that are then sold to investors through the secondary market has been largely blamed for the rise in the number of foreclosure home properties and distressed real estate in the country. Most analysts believe that the recent rule will hold Wall Street companies more accountable.

Meanwhile, the U.S. Federal Reserve also introduced new rules, with most of them expected to have a more direct effect when it comes to controlling further increases in foreclosures and cheap distressed homes that have dragged down the prices of residential properties in the country. In one of the rules, mortgage brokers will soon be disallowed to receive lender-provided bonus which are given when these brokers are able to convince borrowers to secure a loan with an interest rate that is higher than the level for which they are qualified.

According to analysts, part of the reason for the rise in the number of distressed and foreclosure home numbers was brokers pushing borrowers into securing predatory loans in the hope of getting a bonus from lending institutions. The Federal Reserve rule, analysts have added, will help stop such practices.

Foreclosure Home Problems Gave Rise to New Mortgage Rules is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

According to industry analysts, this has resulted in diminishing the number of homebuyers in the country. They stated that even buyers of low-priced bank owned homes and townhouse foreclosures have started to reconsider whether it is worth purchasing a home at the current condition of the market. The U.S. federal government has recently called for a gradual increase in down payments until they reach the 10% minimum on conventional mortgages. This, analysts have stated, resulted in private lending institutions following the government's lead.

Nationwide housing data showed that median down payment required in several major cities in the U.S. increased by 22% in 2010. The increase was applicable to all properties, even those priced as low as a repossession house for sale, as long as they are purchased using conventional loan. The increase was reportedly the highest ever recorded for down payments since 1997 and was double the figure recorded just three years ago. Analysts have explained that the demand for higher down payments has been highly favored by banks, with most of them trying to protect their real estate interests.

They explained that the higher the down payment, the less likely that a borrower will become delinquent and lose his property to bank home foreclosures. This is because the homeowner's loss exposure will be greater. Analysts also stated that requiring a bigger down payment helps banks minimize the effects of further declines in housing prices. Lenders have asserted that homebuyers who provided lower down payments have been known to default more often, particularly during economic downturns and job market turmoil.

Analysts have also reported that homebuyers who cannot afford the required down payment have turned to alternative financing programs like veterans' loans and mortgages supported by the U.S. Federal Housing Administration. For those who have cash to buy fixer upper homes for sale; paying hard money is another option.

Housing industry observers have stated that increasing down payments might prove more detrimental than beneficial since it will discourage a lot of potential homebuyers from securing a purchase. With inventories of bank home foreclosures and unsold residential properties at an all time high, some analysts stated that encouraging buyers should be a priority for the government and for industry lenders.

Bank Home Foreclosures Precipitated Rise in Down Payments is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Bank foreclosures short sales and heavily discounted distressed properties accounted for a huge percentage of total housing sales made in the October-December 2010 period. This resulted in the price of single family houses to decline by 2.6% compared with the third quarter of 2010. When compared with the 2009 fourth quarter, the price decline was 5.9%. Houses sold during the last three months of last year had a median price of $175,200.

With properties from lists of repo homes for sale dominating sales transactions, prices were off last quarter by 27% from the peak value recorded in June of 2006. Moreover, the huge amount of foreclosed properties also helped increase the number of underwater mortgages in the U.S. According to fourth quarter housing data, over 15 million borrowers had underwater loans, representing 27% of total loans owned by single family dwelling owners.

The number of homeowners with negative equity or underwater loans during the fourth quarter represented an increase from the 2010 third quarter, when 13.9 million underwater mortgages were recorded in the country. According to housing market analysts, the number of households with negative equity will likely increase again this year as listings of foreclosure homes are expected to increase further in 2011.

Analysts stated that aside from heavily discounted foreclosure home auctions for sale and declining housing unit prices, underwater mortgages also increased because of the high unemployment level of the country. For the fourth quarter of last year, unemployment in the U.S. was around 9%.

Despite the discounted selling prices of properties in listings of foreclosure homes, the problem of job loss has contributed to lowering homebuyer demand last quarter. Analysts expect the values of properties to decline by another 5% this year as more foreclosures flood the housing industry.

Listings of Foreclosure Homes Pulled Housing Prices Down in 4Q is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

In Glendale, the average home price increased slightly last year. Average home sale was recorded at $560,000 against $538,000 in the last month of 2009. Meanwhile, in Burbank, average home sale price dropped to $484,000 from $516,000 the previous year. Such drop showed how the market is actually vulnerable to the huge volume of foreclosures for sale.

When it comes to the 2011 market conditions, realtors differ in their views. But all agreed that there is nothing much to expect in terms of improvement, especially if the market is still brimming with bank foreclosures and the economy is still sluggish. Most believe that the high unemployment rate plays a major role in the situation.

The short sale situation, on the other hand, is the same in Glendale and Burbank. Short sale transactions involved homes being sold for less than what the owner owes in mortgage. Glendale short sale activity rose 6 percent from 2009 figures, while Burbank increased by 3 percent from the same period.

Sales of bank owned foreclosures also increased slightly in Burbank to 24 percent from 23 percent in 2009. A lot of buyers were investors who chose to rent out the homes or treat them as fixer uppers.

Most real estate agents are having a hard time selling properties with list prices of $800,000 and higher. The sellers of these properties, although looking to prevent the home from ending up as bank foreclosures, are adamant against bringing prices down.

Despite all these misgivings, many agents are in agreement that the worst is over. And with Burbank and Glendale having a sound reputation, fiscally speaking, the real estate values will more likely to stabilize.

Bank Foreclosures Affect Burbank Home Prices is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Housing market analysts are predicting that the home building industry will need two or three more years before it can return to normal levels. According to them, the presence of pre foreclosed homes and distressed residential properties is aggravating the problems of the home building market by taking a chunk of its market share.

Furthermore, high unemployment rates all over the country are resulting in lack of buyers interested in purchasing new houses. Experts stated that for the very few willing to go into homeownership, most are opting for cheaper properties offered at foreclosure auctions. Also, majority of the unemployed in the country are from the building sector and other industries related to the housing market.

Economists revealed that in the past, home building is often at the forefront of pulling the country back from a recession. However, this time, the same might not be possible. According to real estate experts, house builders are unable to mount a sustained recovery because of high unemployment rates and oversupply of foreclosure homes for sale, which prevent home builders from finding markets for any structures that they can build.

To top it all, lenders repossessed homes at record rates last year, and these unsold properties remain in their books with nowhere to unload them. Activities in the home building sector recorded their lowest levels in 2009-2010 since the late 1950s. Last year, builders started construction on over 587,500 residential properties, a slight improvement from the 2009 total of 554,000, but sill way below healthy levels. Under normal conditions, home building projects total around one million and a half annually.

Analysts stated that the problem of the U.S. home building industry will not be alleviated by mere decline in foreclosure homes for sale. The unemployment level should also decline and the national economy should recover enough to finance home building projects all around the country.

Foreclosure Homes for Sale Continue to Hold Homebuilders Back is a post from: Foreclosure Magazine - Read more about how does foreclosure work.