Foreclosures soar

Foreclosure action in Berkshire County has doubled so far this year, but it remains only a modest piece of a statewide foreclosure rate that has risen 1,000 percent since 2005. Full Story
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jbo

Holden, MA

#1 Jun 19, 2008
"All but a handful of foreclosures filed so far this year involve locally based banks; most are national mortgage companies."

What?
Allen

Buffalo, NY

#2 Jun 19, 2008
In calculus there is a term called the second-derivative. That measures the growth rate of growth.

Typically, if an economic trend grows - and grows at an increasing rate of growth - that means the problem is getting worse.

For example, if there were 101 foreclosures in 2007 and the current annual rate is about 130 foreclosures, the growth rate of growth is accelerating.

And that means more vacated and vacant homes.
Allen

Buffalo, NY

#3 Jun 19, 2008
jbo wrote:
"All but a handful of foreclosures filed so far this year involve locally based banks; most are national mortgage companies."
What?
Yeah, I didn't get that either.

I would have appreciated it if the author actually put together a table showing which local banks had foreclosures, and how many.

I don't do a lot of municipal research, but I'm sure that it is available information. They could have then written a separate sidebar on that.
Jeremy

Pittsfield, MA

#4 Jun 19, 2008
In economics, diminishing returns is also called diminishing marginal returns or the law of diminishing returns. According to this relationship, in a production system with fixed and variable inputs (say housing and interest rates), beyond some point, each additional unit of variable input yields less and less additional output.

With all the subprime rates adding to this variable input system home owners can not break into the return on investment bubble, it turns on againest itself and creates a black hole called foreclosure.

Ever hear of a short sell?
Allen

Buffalo, NY

#5 Jun 19, 2008
"Ever hear of a short sell?"

Actually, 5% of our portfolios have been short IYR for the last year. IYR is an exchange traded fund that tracks the commercial real estate sector (Dow Jones Real Estate index).

I SHOULD have shorted the homebuilders (bigger risk = bigger return), but the commercial side still appears to be in pain.

Speaking of the homebuilders, Roger Craig, the CFO of Pulte Homes, is on CNBC right now talking about the importance of liquidating homes now. He wouldn't touch the question regarding when we'll see the bottom of the housing market.

Nationally there is 11.5 months of housing inventory on the market, compared to a historical average of about 5 months. The market always overshoots. So just getting back to those ordinary levels of inventory probably won't signal the bottom.

And those folks (realtors) that believe that the bottom is in, they are woefully mistaken.

"...creates a black hole called foreclosure."

Every realtor I know tells me that things are getting better. I don't trust any of the realtors I know.

“What are you looking at?”

Since: Feb 08

Location hidden

#6 Jun 19, 2008
I will say the market depends on where you live and what house you have for sale or are looking to buy.

Here almost every property where the house was over about $400K, was purchased at above market and assessed value.
Homes that were in the $250K and under range, many are on the market, staying on the market or have sold at under assessed value.
I have seen some crazy sales this year,$680K going for $1.4MM.$500K teardown homes.
George

Tewksbury, MA

#7 Jun 19, 2008
Swinson wrote:
I will say the market depends on where you live and what house you have for sale or are looking to buy.
Here almost every property where the house was over about $400K, was purchased at above market and assessed value.
Homes that were in the $250K and under range, many are on the market, staying on the market or have sold at under assessed value.
I have seen some crazy sales this year,$680K going for $1.4MM.$500K teardown homes.
Easy money for the taking. Problem is you have to pay it back at some point. And, if you were foolish enough to purchase an over-priced property, and suckered into ARM's, well it was nice knowing you.

“What are you looking at?”

Since: Feb 08

Location hidden

#8 Jun 19, 2008
Here's a list of Central Berkshire Foreclosures

http://www.masslandrecords.com/malr/controlle...

“What are you looking at?”

Since: Feb 08

Location hidden

#9 Jun 19, 2008
Nothern Berkshires

http://www.masslandrecords.com/malr/controlle...

And there are three in Southern Berkshire

“What are you looking at?”

Since: Feb 08

Location hidden

#10 Jun 19, 2008
Ignore the above, the requests have timed out... You can go here and search for them.

http://www.masslandrecords.com/malr/controlle...

choose document search, recorded land, foreclosure, all towns.
Also check Registered Land (Land Court) same criteria.
Amused

Pittsfield, MA

#11 Jun 19, 2008
<<<All but a handful of foreclosures filed so far this year involve locally based banks; most are national mortgage companies.>>>

Another gramatical mis-step by the Eagle or intential play on words? It SHOULD read "ONLY a handful of foreclousres filed so far this year ......"

Nothing like a little fear-mongering to sell papers. Local banks are not experiencing what is being experienced across the state and country.
Allen

Buffalo, NY

#12 Jun 19, 2008
Swinson wrote:
I will say the market depends on where you live and what house you have for sale or are looking to buy.
Here almost every property where the house was over about $400K, was purchased at above market and assessed value.
Homes that were in the $250K and under range, many are on the market, staying on the market or have sold at under assessed value.
I have seen some crazy sales this year,$680K going for $1.4MM.$500K teardown homes.
"Here almost every property where the house was over about $400K, was purchased at above market and assessed value."

Is that for calendar year 2007? Or some other time period.
Amused

Pittsfield, MA

#13 Jun 19, 2008
There are typically significantly more filings then actual foreclosures. Most homeowners feeling the pinch will wait until the very last minute before paying up on their debt. Most banks will use a foreclosure filing as a tool to wake up a borrower in arrears who is ignoring all other attempts at settlement. If you look at actually foreclosures by local banks relative to filings, you'll see that the number is very low (and proportional - those who do the most mortgages wind up with the most filings.) None of the locals engaged in predatory or subprime lending. Most people falling into foreclosure locally have reached the end of their rope financially and had no alternatives....and neither did the bank. No local institution wants to "take" a house. They lose money.....and then have to live with those neighbors they foreclosed upon.
Allen

Buffalo, NY

#14 Jun 19, 2008
Amused wrote:
There are typically significantly more filings then actual foreclosures. Most homeowners feeling the pinch will wait until the very last minute before paying up on their debt. Most banks will use a foreclosure filing as a tool to wake up a borrower in arrears who is ignoring all other attempts at settlement. If you look at actually foreclosures by local banks relative to filings, you'll see that the number is very low (and proportional - those who do the most mortgages wind up with the most filings.) None of the locals engaged in predatory or subprime lending. Most people falling into foreclosure locally have reached the end of their rope financially and had no alternatives....and neither did the bank. No local institution wants to "take" a house. They lose money.....and then have to live with those neighbors they foreclosed upon.
"None of the locals engaged in predatory or subprime lending."

I have no proof whether they did or did not, so I won't get into that. But they certainly were guilty of "low-doc" loans, which shows that they were giving out loans without doing their own due dilligence.

I bought a house a few years ago and filled out a thing form (I think it was just 1-page) and the bank gave me a loan without even seeing any W2s (I didn't have any because I started my own company a few years before).

That was all good with me because I don't like to do paperwork. But when I was 16-years old I filled out more in-depth applications just to get fast-food and dishwashing jobs.

It worked out fine for the bank because they got all their money back, but I can't imagine that I was the only one at which they threw easy money.
Allen

Buffalo, NY

#15 Jun 19, 2008
Amused wrote:
<<<All but a handful of foreclosures filed so far this year involve locally based banks; most are national mortgage companies.>>>
Another gramatical mis-step by the Eagle or intential play on words? It SHOULD read "ONLY a handful of foreclousres filed so far this year ......"
Nothing like a little fear-mongering to sell papers. Local banks are not experiencing what is being experienced across the state and country.
"Local banks are not experiencing what is being experienced across the state and country."

Keep an eye on the stock prices of publicly traded regional banks.

In the last year the large, national money-center banks had "mortage-problems" because those mortgagse were package as CDOs (collateralized debt obligations), and we couldn't find clearing prices for those products, which affected tier 3 accounting and, thus, reserve ratios.

The regional banks are a different (non credit-crisis) story. Pain is coming.

“What are you looking at?”

Since: Feb 08

Location hidden

#16 Jun 19, 2008
This has the potential to be one of the best discussions on the forum, ever.

Some questions and answers:

In looking at sales in my town via an LA-3, I can run any year or any period. Typically I run the prior calendar year, sales greater than $1000, and look for what the state would code as "valid" sales.(willing buyer and seller, on the market, arms length etc).

In the last couple years our Assesment to Sales Ratio has been very much out of whack with regards to second home purchasers "overbuying" property.

My cousin for example: Owns a 1700 sq ft home, on a 5000 sq ft lot in Queens (Ozone Park). The assessed value for that property is approaching $500K. Their neighbor just sold the same house for $560K. So up here a second home, with "lots of land" seems like a bargain.

There will always be people that are not affected by mortgage rates, market conditions, etc. It seems a lot of those people are still buying homes up here.

Some Observations:
Many of the retail appraisals I have seen seem to be very much out of whack. In the last few years (say 2007 to about 2002/3) often times the appraisals would come out VERY high and the comps would seem to be "wrong". It seems that in the past few years appraisals were done such that the person could get the loan they wanted, and the value and comps were sort of "fantastic".

Recently it has been exactly the opposite, the comps end up being more realistic, but the values are depressed based on "the market" when in fact "the market" for many of these homes is still strong.

I have heard that in past years there was a big push, with points back and such to clear :low income loans", anyone know if that was true?
Tough times

United States

#17 Jun 19, 2008
What does anybody know about reverse morgages?

“What are you looking at?”

Since: Feb 08

Location hidden

#18 Jun 19, 2008
Reverse mortgages take the equity that you have built in your home and pay it to you (lump sum or monthly check) until that equity has expired. Typically you can borrow 5% less than your age based on the assessed or appraised value of your home. An 85 year old can borrow 80%, 75 can borrow 70% etc and so on (minimum age is 60 or 62). There are certain age requirements etc and effectively you have a life remainder rights to the home as long as it is your primary residence. If you die, move into assisted living, etc...the house is then turned over/sold to satisfy the money taken out.

You have to be VERY careful with reverse mortgages.
Allen

Buffalo, NY

#19 Jun 19, 2008
Tough times wrote:
What does anybody know about reverse morgages?
I've gone through the pros and cons of reverse mortgages with maybe 5 or 6 people. They were obviously attracted to the idea because of the cash flow.

But they were not appropriate for any of the folks I worked with. The up front cost are way too high and these folks just didn't need them.

And that, in my ammateurish opinion, gives you a good rule of thumb: If you don't need the cash flow, don't even bother looking into it.

If you do need the cash flow, it becomes a next-to-last-resort to consider.(You can also consider just selling your house and downsizing).

But you should also, for comparison's sake, look into Rex Agreements (from Rex & Co.- http://www.cnbc.com/id/25246270 ).

In the above linked article they mention Equity Key & My Equity Freedom, but I don't know anything about those.
Allen

Buffalo, NY

#20 Jun 19, 2008
From Swinson - "Here almost every property where the house was over about $400K, was purchased at above market and assessed value."

From Allen - "Is that for calendar year 2007? Or some other time period. "

From Swinson - "In the last couple years our Assesment to Sales Ratio has been very much out of whack with regards to second home purchasers "overbuying" property."

This is interesting to me because just yesterday I heard someone from the city (someone deeply involved the city's housing) talk about how for twenty years the property stock did nothing. Then "all of a sudden" the $350,000 market just went through the roof over the last few years.

This person seemed adamant (and maybe I just misunderstood) that this recent trend would remain a persistent trend that should be addressed.

It was upsetting to me that such a simplistic extrapolation was being used forecast the direction of the housing market and, as a consequence, was being used (to some extent) to justify proposed building incentives.

Maybe said proposed building incentives are the right thing, but that would be the wrong justification.

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