Residential Vacancies Rise in Third Quarter

The number of empty homes in the United States – including foreclosures, residences for sale, and vacation properties – rose during the third quarter, according to data released by the U.S. Census Bureau Thursday.

There were a total of 18.8 million vacant homes scattered across the country during the three-month period, the federal agency reported. That number is up from 18.7 million during the previous quarter and 18.4 million during the third quarter of 2008.

The record high for vacancies was hit in the first quarter of this year, when 18.95 million homes sat empty.

The Census Bureau lumps foreclosure vacancies together with vacation homes that are typically used year-round but empty, and properties that are unoccupied because they are the focus of a legal dispute. The federal agency documented 7.7 million of the homes in this group as vacant during the third quarter, up from 7.5 million a year ago.

For third quarter 2009, the regional homeowner vacancy rate was highest in the South, at 2.8 percent. In the Midwest, 2.6 percent of homes were empty, while in the West, that figure dropped to 2.4 percent. The Northeast part of the country had the lowest homeowner vacancy rate, at 2.0 percent.

Citing the census study, Bloomberg News reported that in total, there were 130.3 million homes in the United States in the third quarter.

Foreclosure Hot Spots Claim New Metros

Cities in California, Florida, and Nevada are still home to the 10 metro areas with the highest foreclosure rates, according to a new report released Wednesday by RealtyTrac.

But rising unemployment and a new round of mortgage resets have initiated a gradual shift in the nation’s foreclosure epicenters, away from the hot spots of the last two years, toward cities that, until now, could claim relatively small foreclosure numbers.

Based on RealtyTrac’s Q3 2009 Metropolitan Foreclosure Market Report, five of those top 10 metro areas in the Sand States reported decreasing foreclosure activity compared to the same time last year, while other metro areas in the top 50 reported especially sharp increases in foreclosure filings.

“While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option ARMs are spreading the foreclosure flood to more metro areas in 2009,” commented James J. Saccacio, CEO of RealtyTrac.

RealtyTrac’s market data shows that the three biggest year-over-year foreclosure increases popped up in Boise City-Nampa, Idaho, and Provo-Orem and Salt Lake City in Utah.

In California, the Chico metro area – not previously a focal point for foreclosure activity in the Golden State – posted the biggest year-over-year jump, with a 98 percent increase from the third quarter of 2008. The medium-sized metro about 100 miles north of Sacramento had a 12.8 percent unemployment rate in August, above the state and national averages.

A similar trend was seen in cities like Reno-Sparks, Nevada, with 80 percent year-over-year growth in foreclosure activity; Prescott, Arizona, where foreclosures are up 77 percent; and Jacksonville, Florida, posting a 64 percent increase. Rockford, Illinois also reported a 64 percent upsurge in foreclosures, and Lansing-East Lansing, Michigan posted a 41 percent increase.

Even though the foreclosure crisis seems to be dispersing, the usual suspects are far from out of the woods.

Las Vegas posted the nation’s highest metro foreclosure rate, with one in every 20 homes in Sin City receiving a foreclosure filing last quarter – an increase of nearly 9 percent from the previous quarter and up nearly 54 percent from the third quarter of 2008.

Despite a 13 percent decrease in foreclosure activity from the previous quarter and a 11 percent decline from a year ago, Merced, California posted the nation’s second highest foreclosure rate, with one in 27 of its housing units in foreclosure during the third quarter.

Foreclosure activity in the Cape Coral-Fort Myers metro area in Florida also decreased from the previous quarter and from the third quarter of 2008, but the metro area still registered the nation’s third highest foreclosure rate.

Fannie Offers Mortgage Forbearance to Real Estate Investors

Mortgage giant Fannie Mae said this week that it will retire its HomeSaver Forbearance (HSF) program and replace it with a new Payment Reduction Plan (PRP), which will extend the benefit to investors and owners of second homes.

Under HSF, which was introduced by the GSE in February of last year, mortgage payments can be reduced for up to six months for owner-occupants having trouble meeting their financial obligation. The PRP would make the same kind of mortgage relief available to property owners who do not live in the home.

The purpose of a PRP is to provide a borrower with temporary payment relief while the servicer and the borrower work together to find the appropriate permanent foreclosure prevention solution, Fannie said.

The GSE said servicers should first determine if a troubled borrower is eligible for the Home Affordable Modification Program (HAMP), but since property investors and second-home owners off-the-bat do not qualify for the government program, Fannie is hoping to offer them “new options of support” through the new PRP initiative.

Besides opening the benefit up to investors, the one significant difference between the two programs is that under HSF, the homeowner’s payments could be reduced by 50 percent. With PRP, however, the break is only 30 percent.

Servicers will be paid $200 for employing the new forbearance program upon the mortgage loan being brought to a permanent foreclosure prevention solution. This amount is in addition to the fee paid for the solution reached.

The HomeSaver Forbearance program will be officially terminated October 31, 2009.

GSEs' Regulator Reports Drop in Home Prices

U.S. home prices fell 0.3 percent from July to August, the Federal Housing Finance Agency (FHFA) said Thursday. The decline breaks a three-month streak of gains in the agency’s measurement of national housing prices.

For the 12 months ending in August, FHFA says home prices are down 3.6 percent, compared to the 12 months prior. Based on the agency’s market data, the U.S. index currently sits 10.7 percent below its April 2007 peak.

Only four of the nine census divisions in the regulator’s survey saw price increases in August. Home prices gained 1.2 percent in the Pacific, 0.8 percent in the Mountain region, 0.4 percent in the East South Central part of the country, and 0.2 percent in the West North Central.

Prices were flat in the West South Central, while falling 0.6 percent in both the Middle Atlantic and East North Central regions, 1.1 percent in New England, and 1.6 percent in the South Atlantic.

The FHFA’s monthly House Price Index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.

MBA Conference Attendees Blame Unemployment for Slow Mods, Slow Recovery

Whether they were put on the defensive by charges of inaction or whether they were simply telling it as it is, executives at the Mortgage Bankers Association annual conference in San Diego this week spoke with one voice when explaining why loan modifications weren’t happening faster – and weren’t helping the economy all that much.

It’s the unemployment, stupid.

Since before the federal government instituted its own plan with lenders and servicers to modify loans for troubled homeowners, the servicers have been under fire for not doing enough to keep struggling borrowers in their homes. But now the servicers are fighting back, saying that all of their best efforts can’t speed the recovery if the U.S. continues to flirt with double-digit unemployment rates.

“We will be dealing with a different kind of borrower,” MBA president John Courson said at his group’s conference. In effect, he was saying that a borrower’s mortgage terms mattered far less than his or her ability to stay employed, married and healthy.

But the government’s Home Affordable Modification Program “just doesn’t work for these people,” Courson told reporters. “You can’t go to 31 percent if there is no income,” he said, referring to a HAMP rule that requires a borrower’s mortgage debt not exceed 31 percent of his or her wages.

Also at the conference Tuesday, the MBA’s chief economist Jay Brinkman said unemployment likely would continue to rise above 10 percent through next summer, and delinquencies would continue to rocket through the end of 2010.

“The recession is behind us but the effects of the recession will linger for some time in the form of higher unemployment and lower levels of business investment and home construction,” he said.

“Even when unemployment comes down,” he continued, “it will come down very slowly.”

That pessimism was echoed at the conference by Freddie Mac CEO Charles Haldeman. Haldeman said even rehiring businesses were slow to add personnel, and unemployment was the key reason homes were still being lost to foreclosure.

He and Brinkmann predicted that all this would spell a longer, harder recovery for the housing industry than many market observers were now expecting. Brinkmann said median home prices likely would continue to decline through the beginning of next year.

FHA Commissioner David Stevens acknowledged as much at the conference on Monday. “We’re forecasting about another 10 percent, roughly, price decline between now and the first quarter next year,” he said.

Foreclosure Activity Sets New Record in Third Quarter: Report

Foreclosure activity in the United States set a new quarterly record in the three months ended September 30, increasing 5 percent from the previous quarter and 23 percent from the third quarter of 2008, according to new data released by RealtyTrac Thursday.

The online marketplace for foreclosure properties said that foreclosure filings – default notices, scheduled auctions, and bank repossessions – were reported on 937,840 properties in the third quarter. One in every 136 U.S. housing units received a foreclosure filing during the three-month period – the highest quarterly foreclosure rate since RealtyTrac began issuing its report in the first quarter of 2005.

For the month of September, foreclosure filings were reported on 343,638 properties in September, down 4 percent from August but up 29 percent from September 2008. Even with the decrease, however, September’s total was still the third-highest monthly total since the RealtyTrac reports began, behind only July and August of this year.

“Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters,” said James Saccacio, chief executive of RealtyTrac. “REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts, and high volumes of distressed properties.”

Nevada continued to lead the states’ foreclosure rates in the third quarter, with one in 23 housing units receiving a foreclosure filing – nearly six times the national average. Foreclosure filings were reported on 47,925 Nevada properties during the period, up nearly 10 percent from the previous quarter and up nearly 59 percent from the year-ago period.

Arizona posted the second-highest state foreclosure rate in the period, with one in every 53 housing units receiving a foreclosure filing. California was third, also with one in every 53 units receiving a filing. Other states in the top 10 were Florida, Idaho, Utah, Georgia, Michigan, Colorado, and Illinois.

Just six states – California, Florida, Arizona, Nevada, Illinois, and Michigan – accounted for 62 percent of the nation’s total foreclosure activity in the third quarter, with a combined 579,541 properties.

With 250,054 properties receiving foreclosure filings during the quarter, California alone accounted for nearly 27 percent of the nation’s total. Florida was second in number of foreclosure filings, with 156,924. Arizona was third with 50,342 properties, and Nevada, with 47,925 properties, was fourth.

Rules to Protect Borrowers May Keep Many Out of the Market

As new rules to protect borrowers come into effect, some prospective homeowners may find themselves protected out of the market.

On October 1, new Federal Reserve rules went into effect, requiring greater diligence on the part of mortgage lenders and brokers who make high-cost loans – those at least 1.5 percentage points above the average prime mortgage rate – for borrowers with weak credit.

“We’re going to have some consumers who are not able to purchase a home because of this, since most lenders don’t want to do high-cost loans,” Jim Pair, the president of the National Association of Mortgage Brokers (NAMB), told the New York Times. “There’s too much potential liability for them.”

Pair told the newspaper he was concerned that the rules would greatly curtail loan alternatives, especially for those who might qualify only for subprime mortgages.

The regulations, which were adopted last year but are only now coming into effect, prohibit lenders from making a high-cost mortgage without verifying that a borrower could repay the loan, the Times reported.

During the boom from 2003 to 2006, subprime borrowers could get loans without proving that they could make the monthly payments. In stated-income loans – the famous “liar loans” – borrowers could just make up income figures.

Such lies were mortgage fraud, but brokers and lenders often overlooked them in the interest of generating loan fees, the newspaper said.

Stated-income loans continued into 2007, but the volume had tailed off sharply. After the onset of the subprime crisis, borrowers who could not document their income, such as waiters or others paid in cash, were largely rejected by lenders.

While states such as Connecticut and New York had enacted laws requiring more due diligence in subprime lending, these applied only to state-chartered institutions and not to the national banks doing most of the mortgage lending.

For this reason, Uriah King of the Center for Responsible Lending told the Times, the new federal rules are “important, and they are good.” But, said King, the new regulations are “five years too late” to prevent the damage done in the foreclosure crisis.