It will take nearly four years to clear the shadow inventory of foreclosed (or nearly foreclosed) homes given the number that are delinquent, recently caught up, or bank-owned.  This can not be good news for a full housing recovery, but at least it’s a start.  From DS News.com,

To put the shadows into perspective, S&P says this latest number, which is based on the original balances of the loans, represents slightly less than one-third of the outstanding non-agency residential mortgage-backed securities (RMBS) market in the United States.

The New York City metropolitan statistical area (MSA) has the highest months-to-clear in the nation, at 202 months.

The good news is the rate in which shadow inventory is occurring has slowed.

There is a new kind of investor on the block – one that is stepping in to help homeowners in trouble with their mortgage. They want people who purchased their homes seven’ish years ago and have some equity built in.  They are there to take it off the homeowners hand and will in turn lease it to someone else until the housing market return.  From Jeff Pearl, a RE/MAX agent in Leesburg, Virginia,

They claim that there is no need for owner to worry about the ” Due on Sale” clause which is usually in mortgage docs. And in some cases they claim they will pay the owner $5000.00 to help them move out of the property. Oh, and their sales pitch to real estate agents is that they will let the agents that find them properties list the properties for sale 3-5 years down the road when they’re ready to sell.  I see many risks for both investors and owners. I think any owner that is approached with this should consult with an attorney…

Seeking legal advice is an outstanding suggestion, sir. Especially given the desperate state the homeowners must be in to prevent them from making a rash decision they’ll regret later.

Any time I go into a foreclosed home, I can’t help but wonder about its story. What were the people like who lived there before? Were they happy? Why did they leave?  Agent Linda Murphy of Reno, Nevada had one of these questions answered at a recent showing,

“Hope You Will Love This Home as Much as We Did”
No, this was not the parting sentiment from seller to buyer at a happy closing. It was wistfully painted above the front door, surrounded by an artistic vine of leaves and flowers, of a bank-owned property I showed to some first-time buyers. We didn’t notice it until we were leaving, where it stopped us dead in our tracks. No one spoke for a long time as we resumed our places in the car for the ride to the next potential home.

It is so true that we all sometimes lead lives of quiet desperation.

I akin this to sending a collection notice – spending 44 cents, plus paper and staff time – to collect a 20 cent overdue amount.  A guy hit the “0″ button on his phone instead of the “8″ and now may lose his home.  From ABC News.com,

He said he was advised to send a check for 80 cents to try to resolve the issue, but both that check and his second payment were returned to him in the mail.

A few days before Christmas, he said he received a letter that read: “Your loan is not eligible for the Fannie Mae modification program because you did not make all the required trial period plan payments by the end of the trial period.”

Mudie said he was alarmed that the letter said loan modification was not an option anymore and the only option was a short sale.

The bank has promised to clear up the confusion. Hopefully they will.

With 25 percent of delinquent mortgages across the nation belonging to investors, flippers played a big role in the housing implosion that began in 2006. According to MSNBC.com, purchases by people who owned other homes contributed significantly to the inflating housing bubble – ramping up prices across the nation.

By that same inflation of prices, values dropped just as precipitously when the bubble burst.

Investors defaulted in large numbers after home values began to drop in 2006. They accounted for more than 25 percent of seriously delinquent mortgage balances nationwide, and more than a third in Arizona, California, Florida, and Nevada from 2007 to 2009.

As a result, millions of homeowners saw their home values decline so that they were worth less than the original purchase price. Foreclosures skyrocketed as people couldn’t or refused to pay their underwater mortgages. Residential construction also languished, putting hundreds of construction workers in the hardest-hit states out of work.

Cash buyers are best positioned today to step in and save the housing market.

It’s that time of year again.  Santa Claus is coming to town, Rudolph’s nose is blinking, and we want to let it snow let it snow let it snow!  It’s also time for what’s becoming an annual tradition – a foreclosure moratorium by Fannie, Freddie and banks … a holiday reprieve if you will. From CNN Money,

For homeowners with loans through Fannie Mae and Freddie Mac, the moratorium will run from Dec. 19 to Jan. 2. During this time, legal and administrative proceedings for evictions may continue, but families will be allowed to stay in their homes, Fannie said in a statement.

“No family should have to give up their home during this holiday season,” said Terry Edwards, an executive vice president for Fannie Mae.

In addition, Wells Fargo, Chase, and Bank of America are not kicking out homeowners for several weeks.

While I do not believe my family is underwater in the value of our home, after almost nine years of living here, we are only at the “break even” point.  That is absent any real estate agent fees that would be paid if we chose to sell.  That is if there is no further job loss.  That is barring any major medical problem and falling behind on payments.

According to MSNBC.com, 29 percent of all homes are now underwater.

Homes with underwater status are often considered risks for future foreclosure, since owners could have trouble refinancing or selling and may opt for a foreclosure via “strategic default” if they feel they will never regain their lost equity.

[Stan] Humphries estimates that home values will bottom out in 2012 at the earliest and said the foreclosure market will remain “robust” for the next two to four years.

There are a lot of unknowns in this  never-before-seen housing market, but it will eventually return to normal.

However, in the informal world of the feel of everyday man on the street, there actually has been a peep of consumer confidence by some long-time businessmen in my community. There is now talk of developing a small shopping area behind one of our local grocery stores.

Dressing as homeless people and mocking the predicament of the nearly 20,000 homeowners they foreclosed on in 2010, New York law firm owned by Steven Baum apologized today for its poor taste.

After denying to the Times that employees had mocked those who had lost their homes, the firm has in recent days acknowledged the costumes were inappropriate and apologized for last year’s Halloween party.

The news comes as foreclosures continue to create a drag on the American economy and protests have erupted around the nation to protest what activists say is rampant corporate greed and influence on government that maintains a crippling disparity between rich and poor.

When a primary component of a business is to handle a large volume of foreclosures (especially when many homes have been lost due to the bad economy) and employees laughingly mock the misfortune of the people they play a role in evicting, then yes… an apology is in order. Given the thousands of people who stood in line today in middle Tennessee for a job fair… an apology is in order. If it was me – and this is only my personal opinion – I would be mortified to be seen in the law firm Halloween photos that are all over the Internet.

I have had only one experience with dealing with a bank to contact the unknown owner of a home.  The person had lost her job and was behind on both home loans.  Foreclosure was imminent.  The bank I worked with was the second lien holder and in the end they lost everything – except the ability to sue the homeowner for breach of contract.

I had nothing to offer the homeowner and the lien holder really could not offer anything either.  However, if a  bank holds the FIRST lien on a property, they have more room to negotiate.  And what they banks are negotiating is “cash for keys” where they pay homeowners to move out without destroying the house.  They turn in the keys of a home in good condition for cash.  From MSNBC,

[A real estate agent] She’s typically able to offer them between $500 and $2,500, depending on the lender, if they agree to move out within 30 days, leaving the place “broom-swept” clean.

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Foreclosure experts note that “cash for keys” may become more mainstream not just for foreclosures but also for short sales, where an owner is trying to sell their home for less than they owe. In those cases, the lender must agree to accept the sale price.

It makes good sense to take the money and run, especially if you’re going to be evicted for non-payment of mortgage anyway.

I once listed a house that was terribly vandalized, but not by the owner (as so many are these days as an angry reaction to foreclosures).  The home had been vandalized by neighborhood teens after it sat empty for several months.  They’d set off fireworks (it’s a wonder it hadn’t burned to the ground).  There were huge holes in the walls.  And there was paint on carpets.  The damage was so severe that the seller allowed a renter to come in for free for several months to make repairs in lieu of a lease payment.  Repaired, it sold a year later.

Today, though, finding damaged homes is common.  Fixtures are stripped from the home (lighting and plumbing), holes in walls, mold, the list goes on. From Zillow.com,

According to data from a survey by Campbell Communications, 13.9 percent of all real estate owned by a bank or agency in 2010 was so damaged by deliberate vandalism or harrowing neglect that the property would not qualify for a standard home loan. That has pushed the market for damaged properties toward investors, who often obtain the house at a more significant discount than undamaged foreclosures or short sales, according to the Campbell survey’s analysis.

“It’s been quite severe and drastic because so many homes don’t qualify for FHA (loans), which is the loan most people have,” explained Shaffer.

It hearkens – for me – back to why I will always leave a house clean when I move away… I don’t want my neighbor friends to hear about how awful I left my old house!  Today, though, perhaps this is no as important to people.

Note: The photo caption from Zillow says the homes in the wall were damage from a hammer.