Wednesday, October 22, 2008

Foreclosures to Become the Norm on the Westside

As reported yesterday by Dataquick, the tide is turning as foreclosure sales reach 50% of ALL resales in Southern California during September. What this demonstrates is, buyers are willing to wait on the sidelines until prices drop into being affordable. It appears that 50% off of peak pricing could be a jumping in point. So far, most of this has happened in the Inland Empire and outlying areas of Los Angeles. However, it is creeping closer and closerto the Westside as the San Fernando Valley and Downtown areas are now rapidly declining. Marginal areas of affluent neighborhoods have begun to adjust, as toxic loans are float to the top like dead fish. The Westside has just begun to feel the pain and will experience more in 2009 as Alt- A Loan resets become the big story. Just today, Wachovia (Master of Alt-A Financing) reported a $24,000,000, 000 loss today for their recent quarter. A record loss for any lender in U.S. history. And guess where the bulk of their loans are? Thats right, Alt-A in California. Something to the tune of $118,000,000,000.



The ball really gets rolling on the Westside, as toxic loans begin working their way up the real estate food chain. With buyers able to wait for deep discounts, and renting being cheaper than a mortgage, the writing is on the wall.

19 comments:

Anonymous said...

No, Latesummer, you are an alarmist and there are programs out there to help the strapped homeowner...

No worries current homeowners....no need to foreclose/short sale. Ask bank for a loan modification on your current mortgage. I did and got my mortgage payment reduced 50% until I can prove I can afford higher payments. (Debt to income ratio must not exceed 38% of income for mortgage payment)

The government doesn't want you to foreclose...its asking the banks (along with Barak Obama's support) to do anything they can to keep homeowners in their homes....people have to start using this resource...its as simple as calling your bank....can't believe how easy it was.

latesummer2009 said...

A few questions you might ask your loan company.

1) Is your loan negatively amortizeed where they add on principal for not making the required payment?

2) What is the LTV (Loan to Value Ratio) since prices are now declining?

3)What is the value of your property now compared to when you first bought it?

4)Why are they merely adding on months of low payments to the loan when they could refinance it? (if possible....)

The banks want you to stay in your loan because:

1) They know prices are declining
2)They know foreclosures are looming therefore depressing prices even more
3)They have a slew of their own foreclosures and can't afford to take any more on their books

Of course they want to "modify" your loan. It is in their best interest.

Best of luck on your loan situation.

kangs said...

anon 0841 - latesummer2009 may be a little alarmist but your anecdote barely passes the smell test.

You don't have to tell everyone your address, but where in SoCal is your home located? What was the LTV before and what is it after the modification? What terms did you have before and what terms do you have now? (Some of these are duplicate of what latesummer2009 asked above). Y'know details. Otherwise, you're just some anonymous punk saying whatever.

It may very well be true that you did get your loan modified as you claim, but you need to give us more details so that it's believable. Right now, I don't believe you. And if you did, I don't believe you're anywhere in the westside.

While you may argue the merits of the conclusions and statistics that latesummer2009 uses (and I believe he welcomes such discussion)... he at least provides some numbers. Ie he has much more credibility than you.

Anonymous said...

If you're a struggling homeowner and can't make your mortgage payments, my opinion is that the BEST thing you could do for yourself and this economy is WALK AWAY FROM YOUR MORTGAGE. By accepting the bank's terms and modifying your mortgage (continuing to make "affordable" payments until your verifiable income goes up, then your payment increases to match your "new" income level) you're merely maintaining your slavery to your home. In other words, your payment goes down temporarily so that you're continuing to barely making ends meet, then when your income goes up, you payment goes back up so you continue to barely make ends meet.

If you walk away from your mortgage, you can rent a home for much less money, your current earnings will actually allow you to SAVE money, then when the housing market finally falls to a sustainable level again you can buy a new home. With a DOWN PAYMENT, because you actually have savings.

You may ask: How is this good for the economy? Simple. If you accept the banks terms and stay in a home that you can't really afford, you likely have little or no discretionary income with which to buy goods and services. So, even though you have a pricey house, you can't afford to go out to nice dinners, spend money on furniture, etc. BUT, once the economy resets and housing is affordable again, people will be able to own their houses AND have the additional money to do things like, say, buy a new car. Which boosts our economy because you're purchasing a real manufactured product, which in turn means more jobs. Which, in turn, means more people with money to buy their own homes and have discretionary income of their own.

Sitting in the middle of your pricey living room with no budget to go out to the movies, no cable TV service, no furniture and no new television doesn't require ANY new jobs. The money from that pricey mortgage just goes into the pocket of a corporation so they can give their CEO a $50 million bonus.

Anonymous said...

"No worries current homeowners....no need to foreclose/short sale. Ask bank for a loan modification on your current mortgage."

heh... I've seen your post, or the exact same one, on a number of "bubble" blogs lately. Sadly, happy talk isn't going to save this market. Good luck though!

Anonymous said...

Every situation is different, but I merely wanted to give some hope to homeowners out there that feel they have no other option, but to do a short sale, or foreclose. Thats what I was told to do on my house in Santa Monica. Walk away.

But then I realized there are a lot of people out there who stood to make a lot of money off of me selling or refinancing. I did my own investigation of the options available to strapped homeowners. I came up with the loan modification option and I approached my bank to reduce my payments based on the present value of the house, my current income and my monthly expenditures. You DO NOT have to pay a company to do this, it is easily handled by the homeowner and bank.

I am not some punk, just a homeowner trying to keep her house in Santa Monica and sharing my research/experience with other people.

Don't we all deserve some positive inspiration on these blogs?

latesummer2009 said...

I Like to encourage all opinions on this blog as long as people are civil with one another.

Everyones situation is different, and you have to make your own decisions. Unfortunately the financial industry is largely responsible for today's real estate mess, and you must do your own homework.

Anonymous said...

Here's my observation and 2-cents to Anon 2:10 pm's comment: If every distressed homeowner walked away from their home, the real estate market will further decline, prices will continue to go through a downward spiral. Only problem is banks will really tighten credit and interest rates will most likely go up because too many people are simply walking away from their homes. So who will get the benefit of buying these deals? Cash buyers and people who will be putting a big huge chunk of cash down (investors and people with money).

Not only will the person who walks away from his/her home's credit be shot to hell - they will have a hell of a time trying to find a decent rental. Most landlords do require credit checks. As a landlord myself, I would question renting to an applicant with shitty credit. In addition, you really think the bank will lend to the homeowner who just walked away from their property a few years ago at a decent rate when the market readjusts? Let's see...if John Doe walks away from his home in 2008, his credit will be shot for about 7 years - this means that he probably will have shitty credit until at least 2015. Humpf...maybe by then the market will be once again at its peak (or at least getting there).

So my question to Anon 2:10 pm is this...your suggestion seems to present a hidden motive benefitting you. I mean I get that there are a lot of buyers out there just sittin on the sidelines waiting for prices to hit rock bottom. I agree that we haven't hit that point yet...but we will eventually (at least another year or so).

Simply walking away from your home is easier said than done. You present your solution of walking away as if it is that simple. There are no easy answers or solutions (especially given the current economic climate). In the end, people will ultimately do what they have to do. Just sayin'...

Latesummer2009 said...

Unfortunately, many who will walk away are people who were actually renting without having to put any money down. Without "skin" in the game, it will merely become a business decision. Especially, more affluent people who may have another primary residence. Almost 1/4 of U.S. mortgages are now underwater, prices are declining, lending is getting tighter and unemployment is rising, walking away becomes the choice of many. With a large pool of "new" renters soon to be in this category, potential job loss will be the number 1 concern.

IMHO, we need to flush out these bad loans ASAP, take the pain, and establish new loan guidelines. This should get us back to normal, after Bubble Market housing prices get cut in HALF.

kangs said...

anon Oct 22 2106 (whom I assume is the same as anon Oct 22 0841), sorry I didn't check in sooner to see your 'response', but I had a suspicion that your response (if there was one) would be as vague as your original post.

Again, speifics please... original price, new value, old & new payments? A change in time to maturity? We're looking for specifics here. All we know is that your home is in Santa Monica.

Everyone's circumstances are different, so with your specifics perhaps others can figure out if they are in a similar situation. Otherwise, you are still a punk claiming you got your payments halved by talking with the bank (what position did the person hold in this bank that approved the modification? How many people did you have to talk to?).

Yeah, yeah, you're so cool... if it's true... which I doubt. I'm not trying to be negative for the sake of being negative, but you're not really helping anyone.

Just saying that "it can be done" is like saying, "it might rain tomorrow." Might be true but the statement has no intrinsic value. It's like saying, "there are still people who are rich" as a 'positive' message... sure, but that little truism doesn't help out anyone else to improve their situation.

If anon Oct 22 2106 is, in fact, different from anon Oct 22 0841, my sincerest apologies, but then my annoyance is directed at both of yous :-)

Anonymous said...

Kangs...I got one 3 words for you....CALL YOUR BANK. They will run the numbers for you to see if a loan modification could work for you. You are wasting time trying to get one scenario out of one homeowner, when there is 100 variables out there (ask Latesummer, a former RE agent and broker).

I gave you a lot of info,here it is again....'I came up with the loan modification option and I approached my bank to reduce my payments based on the present value of the house, my current income and my monthly expenditures, You DO NOT have to pay a company to do this, it is easily handled by the homeowner and bank.' my income is less now than when I got my loan,the payments are more than 34% of my gross income, and my house is in SM.....The banks hardly asked for more than that!!! Get off your keyboard and get your phone and call the mortgage holder....geez.

kangs said...

Anon Oct 25 1732, you presume very poorly. I don't have a mortgage; I still rent. I've been shopping for a home, but mostly just trying to educate myself while I save up money. So of these 100 variables you mentioned, you've shared very few... and I would argue very useless pieces of info at that.

1) Your income is less than when you took out the loan. Not as important as you'd think. While this differentiates you from the case where the market price of your house has dropped WAY below the principal left on your mortgage, it's still not particularly useful without knowing the original LTV ratio and the new ratio... and the differential in the terms of the new loan.

2) It's in Santa Monica. Uummm... which part? Are we talking multiple millions north of Wilshire? Or a condo on Main St just adjacent to Venice? This is important since banks currently have very different attitudes towards single family homes & condominiums.

3) Your mortgage payment is more than 34% of your gross. Wow... I can Google search for the Freddie Mac & Fannie Mae's (and FHA) loan standards too, y'know. But then we're missing a key piece: Are you within the old comforming or new jumbo conforming limits?

And, again, what's the terms of your new mortgage?

Listen, I'm not asking for the address to your house, but if you're really trying to help others here, just telling us "TO CALL YOUR BANK" really doesn't add much to the discussion. It adds as much as Anon Oct 22 2222 ill-conceived advice to just walk away.

You still haven't given us any specifics to make us believe that you're nothing more than a real-estate agent-type troll trying to reassure people that real estate is a great "investment" (ie all the pithy nothings they used to spout for the past 3 years).

I would maybe have believed you if you had said, for example: I started with a 15 year jumbo loan 'cuz I had a mid-six figure income back then. 3 years in and new job pays half that. My bank (who didn't sell the note) agreed to recast the mortgage as a 40 year fixed jumbo. LTV didn't get adjusted, just the length of the term. Had to talk to the regional manager & submit proof of new income, but it worked out after a month of constant phone calls & mountains of documents.

Something like that would be more believable and helpful than your call to the phone banks. Why? Because we all know banks are not our friends. They're only going to make a deal if it makes profit for them. It's the way it should be.

So in my hypothetical story: they reduced your payments, but extended how much interest they can extra from you over 40 years. So that's a win for them, but it's also a win for you because it had the immediate effect of lowering your payments. Everyone wins... in my hypothetical & over-simplified story.

Your story just says, "call your bank, they're your friends and will help you just out of the kindness of their hearts." I don't think that really jives with most people's perception of reality.

While your story might be true, you're not really convincing anyone except maybe yourself. It also doesn't help that I saw your original post on other more active blogs: straight cut & paste too. I'm quite surprised you even responded this weekend. Sorry, I assumed you were just a drive-by spammer/troll. Altho it would really help your cause if you stopped posting anonymously.

Anonymous said...

Hey Late, what do you think of Mccains idea to buy up mortgages so home prices don't fall, but continue to rise ? Is he saying this to get elected, or is he serious? Really, why should they stop falling if prices in our areas are still beyond WTF. Let alone go up, does he not understand what a real estate bubble is?

Anonymous said...

I live in the fairfax area. And while rents are lower than mortgages rents are still insanely expensive for those who have lost jobs or are paying for one's education or has a family member with an illness or medical condition. So basically everyone. Ironically on our block there are five for rent signs that have been up for a long long time yet the owners are still expecting 3000 a month. I know landlords must be feeling squeezed but so is everyone. Isn't that what deflation is all about?

Anonymous said...

Kangs,

You are really wasting my time...you are a *!&%#@! renter, trying to get me to give you all my mortgage/income particulars? Really?

That is ballsy.

Buy a house you can afford and you'll be fine.

My last free advice to you.

kangs said...

Anon Oct 29 1504 - HAHAHAHA.... I didn't think it would be so easy to get you to show your true colors. You are a punk after all.

I ALREADY knew you shouldn't buy more house than you can afford. Duh? That's why I'm still renting, punk.

Your last outburst pretty much confirms that you are a lying punk with nothing worthwhile to share with the community at large. I'm just glad I could call you out so easily.

And if you want to start throwing epithets around... reach down a sack up & stop posting anonymously. That way it will make it easier for the rest of us to just ignore you.

Anonymous said...

Take your worthless argument off this website, your doing yourselves no good.

Anonymous said...

You can view price trends in a grander scale (nation wide cities) at the following website:

http://www.homepricetrend.com

This trend is not changing anytime soon!

Anonymous said...

'lying punk'...what are you? A Chicago cop from 1934? You sound like a real 'punk', Kangs.