Strategic defaulters beware: banks coming after those with deficiency judgments

Well this is interesting. Although we've been hearing over the last couple of years that lenders are too swamped with defaults to consider pursuing borrowers who can't re-pay the mortgages, that is now changing. In those states in which loans are recourse -- meaning they can come after you personally even after the mortgage lien has been released -- borrowers who walk away or complete a short sale are finding out that banks aren't happy until the entire amount borrowed has been paid.

And for those who think walking away through a strategic default is about the same as using a coupon in a store? Banks are combing through payment histories to make sure that if you walk away that it's because you can't pay any of your bills and not just your mortgage.

Of course in recourse states such as California, lenders can only take back the property used as collateral for the loan. But if you've refinanced or placed other debt on that property, watch out! From a CNN.com story:

Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth...

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them...

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims...

Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale..

Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."

New realities for Baby Boomers

Question: what happens when you're a Baby Boomer, your home equity evaporates and the value of your retirement savings plunges?

Answer: You work longer!

Such are the findings from a survey conducted by pollster Harris Interactive retirement community builder Del Webb/Pulte. From a BigBuilderOnline.com story:

The study, which polled Boomers in two specific age groups--those turning 50 this year, and those turning 64--found that the average anticipated retirement age has been extended by about four years. Whereas a majority of 50-year-olds polled in 1996 said they planned to retire at 63, those turning 50 today said they expect to retire around age 67.

But what is retirement? The research also suggests that today's definition does not necessarily exclude professional pursuits. In the latest survey, 41% of 50-year-olds and 18% of 64-year-olds who are still working said they don't anticipate ever retiring. Boredom, self-satisfaction, and enjoyment were among the reasons cited for staying employed, but the No. 1 factor was financial stability.

Sobering as it may be, more Boomers are economically unstable now compared to a decade and a half ago. In 1996, roughly 11% of 50-year-olds reported they had not even begun saving for retirement; today that number is double. The study also found that nearly 40% of older Boomers who have already technically "retired" are continuing to work on some level...

Click here for entire story.

New home architecture as a competitive edge

With steeply discounted foreclosures taking a huge bite out of the potential demand for new homes over the past couple of years, the nation’s home builders initially reacted with a combination of incentives and price cuts to stay competitive. Yet as the recession has worn on, the building industry has managed to find another trump card up its sleeve that will stay with us even as the economy rebounds: compelling architecture. Ranging from the practical and sustainable to the purely aesthetic, new home design is here to stay as a primary means for builders to stay competitive.

At the most recent Gold Nugget Awards in San Francisco, the one common element among the award-winning projects was not only offering attractive exteriors and an efficient use of space, but also incorporating designs into the scale and look of the surrounding area.

For example, Barry Berkus’ Yarnolani Court won Project of the Year for what is in fact a small, five-unit infill project in Santa Barbara not just due to its LEED Platinum certification and its unique way of combining interior and exterior spaces, but also due to its attention to detail. While remaining true to the city’s Spanish architectural traditions, Yarnolani Court offers a slimmed-down scale to accommodate less than 2,000 square feet of living space while still paying attention to details such as cantilevered wooden alcoves, wrought iron railings and arched windows and doors.

In areas throughout the Sun Belt, smaller interior square footages can be balanced by a more artistic approach to bringing in the outside. That’s how a project such as Shapell’s Grand Award for its Belmaison in San Jose can be recognized for its use of double courtyards that allow natural light and passive ventilation to maximize the impact of what nature has to offer on a very narrow lot.

For a high-density urban development, paying attention to the scale of the surrounding neighborhood is critical. In the case of Grand Award-winner The Renaissance by Signature Properties in the City of Concord (a suburb of the Bay Area), connections to the immediate area – including transit stops – are enabled by a scale friendly to pedestrians and enhanced by exterior articulations that underscore the high quality of materials used. The result is a project that won’t seem trendy five years from now and has become an integral part in the city’s revitalization plans.

Even for an infill project in an existing suburban area, sensitivity to local history and architectural norms is critical. When SummerHill Homes built Lane Woods in Menlo Park -- once known as a weekend getaway for residents of San Francisco and San Jose – the builder preserved 96 existing trees, oriented lots around a central park, and offered up traditional wood siding, large porches and balconies. Suddenly a project with just 32 homes could lay claim to its own version of an ‘old growth’ neighborhood while still providing the environmental and technological benefits of new construction.

As builders – and their buyers – continue to embrace the advantages of green building, even small changes can make a difference. For example, porous pavers can assist water run-off during storms while re-charging underground aquifers, roof-integrated solar panels can help reduce power bills while minimizing the aesthetic impact to the exterior look, and specially treated paint applied to just about any surface can act as an insulator capable of cutting energy use by 20% to 40%.

On a national scale, the days of the ever-present stucco home may even be numbered. According to a recent survey conducted by Harris Interactive, 59% of homeowners with a preference for siding would choose brick, followed distantly by vinyl with 37%, stucco with 19%, fiber cement/composite with 14% and ‘other,’ with 11%. It looks like more sophisticated and traditional exteriors – those which win awards -- are here to stay.

BofA breaks logjam, signs up for piggyback loan modification program

Here's hoping that lenders are just as much as lemmings as other businesses and join Bank of America in signing up for modifying 'piggy-back' loans as part of President Obama's $75 billion foreclosure prevention program. This is a big step in preventing foreclosures, as these lenders have traditionally been stuck in second place behind first mortgages and didn't want to take huge losses on short sales. From BuilderOnline.com:

Mortgage companies are finally starting to sign up for a long-delayed piece of the Obama administration's $75 billion foreclosure-prevention program.

The administration had been offering lenders who made so-called "piggyback" mortgages - second loans that allowed consumers to make a little or no down payment - incentives to lower payments or eliminate the loans entirely.

But no one signed up until Tuesday when Bank of America became the first to do so.

During the housing boom, lenders readily gave such second loans. While home prices soared, such mortgages were even extended to borrowers with poor credit and people who didn't provide proof of their incomes or assets.

Those loans are now an obstacle to alleviating the housing crisis. That's because piggyback lenders - fearing they won't be repaid - can veto a borrower's efforts to modify their primary mortgage..

If more lenders follow Bank of America it could clear the way for more mortgage companies to cut borrowers' principal balances on their primary loans. But administration officials appear wary of subsidizing such reductions with taxpayer money.

That could spark a backlash from critics who claim it's unfair to people who are still paying their mortgages on time and a bailout for banks that made reckless loans.

With foreclosures still at record-high levels, The Obama administration's program to aid homeowners has been a disappointment. Only about 66,500 borrowers, or 7 percent of those who signed up, had completed the program as of December.

The Treasury Department plans later this week to announce a streamlined process designed to get more borrowers to complete the loan modification program. The program reduces mortgage rates to as low as 2 percent for five years.

But many experts say more dramatic changes are needed.

"Unless you modify principal, there is absolutely no hope of restructuring mortgages on a mass scale to keep people in their homes," Daniel Alpert, managing director of the New York investment bank Westwood Capital LLC said earlier this month. "Eventually their hand will be forced."

U.S. new home sales fall by 7.6% in December

Not surprisingly, new home sales fell by 7.6% during December 2009 to a seasonally adjusted rate of 342,000. The entire fourth quarter of the year is generally a very slow time for home sales of all types, which were likely boosted for the existing home market by tax credits. From the L.A. Times:

The seasonally adjusted annual sales rate for single-family homes in the U.S. was 342,000, down from a revised November rate of 370,000 and 8.6% below the December 2008 estimate of 374,000.

The median sales price of new houses sold in December 2009 was $221,300. The median is the point at which half the homes sold for more and half for less.

The seasonally adjusted estimate of new houses for sale at the end of December was 231,000, a supply of 8.1 months at the current sales clip.

For the year, an estimated 374,000 new homes were sold in 2009, a decline of 22.9% from the 2008 figure of 485,000.

Mortgage defaults drop 24% in California

Could the worst be over for California's housing market? During the last quarter of 2009, mortgage defaults in the state -- which is a precursor to foreclosure proceedings -- fell by 24%. From an L.A. Times story:

The number of homes entering the first stage of foreclosure, or receiving notices of default, declined 24.3% during the fourth quarter from the prior three months, according to county data collected by MDA DataQuick, a San Diego research firm. The decline in the default number is significant because any new wave of foreclosures will first be detected by that measure, according to the firm...

At the same time, big banks are feeling intense pressure in Washington to work with troubled borrowers through the Obama administration's Making Home Affordable program. Much of that relief has been temporary. Through December, banks had lowered mortgage payments for 172,288 California borrowers, but only 7.8% of those modifications were permanent, according to government data.

Many experts consider that record a failure and fear that if the government doesn't improve its performance, those loans eventually will go into foreclosure and put pressure anew on the state's housing market...

Those figures indicate that the Obama administration's efforts to help troubled homeowners have allowed some borrowers to stay out of default but kept many in a kind of late stage of delinquency limbo, said Celia Chen, senior director of Moody's Economy.com. If the majority of borrowers who have received temporary loan modifications under Obama's program are unable to get permanent changes to their mortgages, another wave of foreclosures could follow, she said.

754,000 new housing starts by 4Q 2010?

At the 2010 International Builders Show this week in Las Vegas, the NAHB's chief economist David Crowe is predicting a rise in home starts for the spring, a dip mid-year (as tax credits expire) and then another rise by the end of 2010. From BigBuilderOnline.com:

The pace of housing starts will speed up this spring, slow and perhaps reverse course at mid-year, and then re-accelerate next winter and into 2011, the National Association of Home Builders' chief economist forecast today.

David Crowe said the number of combined single and multifamily housing starts will rise from an annual rate of 565,000 in 2009's first quarter to 677,000 this quarter. He forecast starts would climb to 688,000 in the second quarter of 2010, slip to 669,000 in the third quarter, and then rebound to 754,000 in the final three months of 2010.

Starts will keep escalating robustly in 2011, he predicted, climbing from an annual rate of 870,000 in the first quarter of that year to 1.22 million in October through December 2011...

Click here for entire story.

SoCal housing market improves in December

Owing to a combination of low interest rates and a tax credit that was extended until April, housing sales in Southern California showed additional strength in December. But is this the sign of a genuine rebound based on market fundamentals or a temporary blip riding on the training wheels of federal stimulus? From an L.A. Times story:

Rock-bottom interest rates and stronger sales in higher-priced neighborhoods helped Southern California's housing market post robust gains in the typically sleepy month of December, new data show, and experts say the momentum is continuing -- ushering in an early start to the spring home-buying season.

The median price paid for a Southland home rose 4% to $289,000 last month from December 2008, the first time the closely watched figure has posted a year-over-year gain since the region's real estate market took a nose dive 2 1/2 years ago, according to data released Tuesday by MDA DataQuick, a San Diego real estate research firm.

Rebounding home prices could help the Southern California economy recover from its slump, as a stronger housing market could lead to hiring on construction sites and in real estate sales, title and escrow offices, said Esmael Adibi, director of Chapman University's A. Gary Anderson Center for Economic Research.

"The worst is behind us for sure," he said. "For the economy, the implication is, at least on the residential side, we don't expect more layoffs, and you might actually see some pickup in employment."...

One thing driving sales is the April 30 expiration of tax credits for home buyers. First-time home buyers can get up to $8,000 in credit on their federal income taxes, and current homeowners can qualify for up to $6,500.

Low mortgage rates are also a factor. Thirty-year fixed-rate loans were below 5% through most of December and haven't risen much.

The role of the federal government in the housing market remains key. Some experts worry that once certain policies and programs wind down -- among them low interest rates, tax incentives for buyers and an increased accessibility of mortgages backed by the Federal Housing Administration -- the housing market could falter.

Christopher Thornberg, principal of Beacon Economics, predicts home prices will drop once those policies and programs expire.

"The bounce in the housing market is due to government policy, not due to fundamentals," he said. "None of these programs fix the underlying problem. They only delay the solution -- they only delay the healing process."...

Richard Green, director of the USC Lusk Center for Real Estate, said buyers have sensed more security in Southern California's real estate market in recent months and have begun to get off the fence.

"We are getting a little bit of what we had six or seven years ago, where people are worried if they don't get in now they are going to miss out on an opportunity," Green said. "In a decent neighborhood, in the half-a-million-dollar range, we are back to lots of offers."

Housing Chronicles blog launches new logo

A couple of weeks ago, I was approached by a logo design company called Logo Design Consultant for The Housing Chronicles Blog. Although I had been approached in the past from overseas companies, in between language barriers and poor design work, I just never managed to pull the trigger.

This company, however, based on Virgina, relies on a team of over 20 designers who managed to convert their original idea into a final design in just one or two iterations, and in just a few days I had a new logo! Whaddya think?

If you're on a budget and looking for a new logo for your company, blog or Web site, try out Logo Design Consultant.

Introducing HousingStorm.com

Some of you may have noticed a new feed from HousingStorm.com, which replaced the old one from L.A. Land once that blog of the L.A. Times was absorbed into Money & Co. In addition to offering the most recent 5 posts from HousingStorm, I'll also be contributing to their site, started by Danville real estate agent (and technology wiz) Greg Fielding.

So what is HousingStorm all about? In essence, community plus honesty. But I'll let Greg tell you himself:

I wanted to share with you some thoughts about the variety of topics and opinions expressed on HousingStorm.com, and how we can embrace that variety to create a powerful and educational community atmosphere.

One of the great things about HousingStorm.com is that, not only do you have the ability to share your thoughts in your blog, you have the ability to directly engage the public and other members in healthy debate and discussion.

This is a community where ALL opinions are welcome…meaning, it is a virtual guarantee that another member or contributor will write content or express an opinion that you disagree with.

For example, someone might say that home prices are going down when you think they are going up. Someone might give mortgage advice that you think is irresponsible. Someone else could give remodeling, investing, or home-selling advice that is just flat-out wrong.

The beauty of this community is that you have the ability to respond and share your position. Then, someone else could respond to your thoughts and agree or disagree with you…and so on.

Through this process of healthy debate and discussion, the consumer gets an education and you get a chance to show your mettle.

This concept of having local professionals and members, directly engaging consumers and each other about today's critical real estate issues, is unique to HousingStorm.com. As the community continues to grow, this engagement will give you a dynamic way to share your expertise with the public.

In the current economic climate, not all topics will be fun to discuss. Some debates will get heated. It is in these circumstances that the best of us can get involved and make a positive impact. The public desperately needs your perspective and expertise.

We have the amazing opportunities to engage a public in need of answers and set new standards for what it means to be an engaged, informed, and professional.

Let's make a difference!

Please visit HousingStorm.com regularly, and you can also find the feeds from their most recent postings here on The Housing Chronicles.