This chart shows the amount of new bank owned properties that have come on the market in each county in the month of March. As you can see even though Nassau had an increase in new inventory last month, the trend has been downward in all three counties.

Major banks may be forced to let severely delinquent homeowners sell their houses for less than the loan amounts owed as part of a broad settlement of federal and state investigations into botched foreclosure paperwork, according to government officials involved in the negotiations.

The requirement to allow so-called short sales would be in addition to forcing mortgage servicers to reduce the amount some homeowners owe on their loans, said two officials, who spoke on the condition of anonymity because negotiations are ongoing.

The goal of short sales would be twofold: provide a quicker and more economical way for banks to dispose of distressed real estate and to help stabilize the real estate market by clearing out a backlog of defaulted mortgages that are poised for foreclosure.

They would be used in situations in which borrowers were so underwater that the more costly and time-consuming process of foreclosure would seem to be the only option.

“Short sales just command a better premium than foreclosures,” said Glenn Kelman, chief executive for online brokerage Redfin. “It’s like day-old bagels. They never sell for the same price. If they sit there for a while, nobody wants them because houses just break down when they are left alone.”

Foreclosures continue to drive down housing values, with prices in 20 major U.S. cities down an average of 3.1% in January compared with the same month a year ago, according to new data from a Standard & Poor’s/Case-Shiller index. Prices in Los Angeles were down 1.8%.

The latest proposal is among those to be discussed when executives from the top five mortgage servicers meet Wednesday in Washington with state and federal officials working on a settlement that could range from $5 billion to $25 billion.

Those servicers are Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.

It will be the first face-to-face meeting since attorneys general from all 50 states, along with federal officials from the Justice Department and other agencies, presented the banks with 27 pages of demands calling for sweeping changes to mortgage servicing, including how homeowners are treated when they try to modify their loans.

The banks have given officials a counterproposal on some of the mortgage servicing requirements that includes a single point of contact for distressed homeowners, timelines for considering modifications, an online system for checking the status of applications and a third-party review of rejections, one of the officials said.

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Short sales would help accelerate the turnover of homes from borrowers who are months behind on their mortgage payments, Kelman said.

Some sellers are not eager to complete a short sale because it would force them out of their home. And lenders can withhold approval of a short sale if they don’t like the price.

Banks often resist such sales because they are difficult to execute, particularly when multiple creditors and other parties are involved. In addition, short sales lock in losses for the lender that might be reduced if the sale is delayed until the market improves.

Requiring banks to allow short sales could fuel further opposition from some Republican attorneys general and members of Congress who already have criticized the broad scope of the proposed settlement.

Some House Republicans have derided possible payments of $20,000 to encourage distressed homeowners — dubbed by some as “cash for keys” — as a bailout for irresponsible behavior.

Seven Republican attorneys general recently wrote to Iowa Atty. Gen. Tom Miller, a Democrat who is leading the negotiations for the states, saying the proposals go beyond resolving damages from foreclosure paperwork problems. Those problems include robo-signing, the practice of bank employees’ signing sworn documents without reading or understanding them.

“I think it’s morphed into something that’s bigger and different than what we talked about in the beginning,” said Oklahoma Atty. Gen. E. Scott Pruitt, a Republican who organized the signing of one of the letters.

Pruitt said he might not join the settlement if it is too broad. And with 24 Republican attorneys general nationwide, opposition could limit the size of a settlement and how many people it covers.

Miller has been in contact with some of the attorneys general who have raised concerns, said spokesman Geoff Greenwood.

“We’ll do the best we can to reach a comprehensive agreement that is in everyone’s best interest,” Greenwood said. “At the end of the day, an attorney general must decide for himself or herself whether to sign on to this, assuming we get a settlement.”

In Southern California, short sales made up an estimated 19.8% of the market for previously owned homes last month. That was up from an estimated 18.4% in February 2010 and 12% in February 2009, according to DataQuick Information Services of San Diego.

Combined with foreclosures, these so-called distressed sales made up more than half of homes sold in the Southland last month.

Though struggling homeowners escape weighty mortgage debts quickly under a short sale, they don’t get away unscathed.

Their credit scores are damaged enough to limit their borrowing capability for years, though the damage is perhaps less severe than in foreclosure. Money for down payments and renovations would be lost, and there may be tax consequences.

The California Assn. of Realtors has been pushing for short sales to be made simpler. Earlier this month, in an open letter in the Los Angeles Times and six other California newspapers, the group called on banks to approve more short sales and for regulators to streamline the process.

The real estate agents argued that short sales are better for consumers and banks.

jim.puzzanghera@latimes.com

alejandro.lazo@latimes.com

Times staff writer E. Scott Reckard contributed to this report.

Copyright © 2011, Los Angeles Times

Any time I see a decline in short sales inventory it is something to celebrate. Unfortunately all three counties have a higher inventory of short sales then the county had at the same time last year with Suffolk county have the largest increase.

Lis Pendens filings are down in both Nassau and Suffolk Counties.

Lis Pendens filings have been decreasing since the 4th quarter of ‘08 and both counties are at a 2 year low (Not taking into account the Paterson Foreclosure moratorium in the 4th quarter of ‘08) . This is the first place that we would see the signs of the market improving. Unfortunately we are still not out of rough water yet, until the economy and home prices stabilize we will continue to see are large amount of Lis Pendens filings each quarter. But all in all this is very good news.

This data seems to be all over the place no real trends exposing there self here. 

With all the turmoil in the world economy interest rates are being pushed down to 1 year lows! It won’t last so find that house and lock in. These rates over time will save you thousands more then the $8,000 Homebuyer Credit.

Below is an excerpt for a post I did awhile ago called “What Cause’s Real Estate to Appreciate” Click on the title to see full post.

Interest Rates:
A one percent change in the mortgage financing rate can change the value of real estate by as much as 10%

A $300,000 mortgage financed at 5% for 30 years costs 1610.46 (Principle and interest)

So a monthly mortgage payment of 1610.46 at 6% for 30 years gives you a mortgage of $268,611.22 or 10% less.

Mass layoff at LI home lender amid federal probe

December 1, 2009 by ELLEN YAN / ellen.yan@newsday.com

Melville-based Lend America closed its loan-making operation Tuesday and laid off most of its 600 workers, a day after federal officials revoked its license to make loans insured by the Federal Housing Administration.

FHA-backed loans made up at least 90 percent of the company’s business. After the subprime loan collapse two years ago, the FHA became the primary insurer for nonprime mortgages; if an FHA-backed loan defaults, the government takes the hit.

The top generator of FHA loans in the metro region, Lend America was about to ramp up business, taking loans from brokers and also pooling FHA loans from lenders to sell to investors – with a goal of selling $500 million in mortgages each month by the middle of next year.

But late Monday, federal authorities pulled its license in the wake of a 155-page civil complaint, filed in October, accusing the lender of shoddy underwriting and lying about borrowers’ credentials to get FHA backing. Weeks ago, federal prosecutors sought but lost a temporary injunction to stop the firm from making more FHA loans.

The FHA on Monday fined the company $512,500, and federal officials said a criminal investigation and arrests have not been ruled out. A senior official for the regional office of the Department of Housing and Urban Development said investigators are looking deeper into alleged scams at Lend America, including a suspected mortgage fraud ring that led to charges from the U.S. attorney’s office in Manhattan and 12 arrests in October. Among those arrested were a Lend America loan officer and contract employee.

With the firm’s license gone, executive vice president Michael Ashley met with senior management Monday night to discuss options, said John Lovallo, a spokesman for the firm. He said Lend America executives declined to comment. “At this point, there’s a skeleton crew,” Lovallo said. “They are working to try to find qualified lenders for applications in the pipeline.”

Tuesday, Lend America had taken down all of its Web pages except for the home page, which had a link giving borrowers instructions on how to transfer applications to other lenders.

Last year, Lend America closed 6,986 loans, or $1.36 billion in loans, Lovallo said, and for this year it projected 12,500 loans closed, for about $2.5 billion. The company serviced about $1.8 billion in loans, he said, and it is not clear whether it will continue to provide that service.

Ashley, a former car racer, had pleaded guilty in 1993 to three counts of conspiracy to commit wire fraud in connection with numerous cases of mortgage fraud while employed by Liberty Mortgage Banking Ltd., which was later convicted of wire fraud. Over the years the FHA had penalized Lend America for various violations.

Source: Newsday

By Dina ElBoghdady
Washington Post Staff Writer
Wednesday, December 2, 2009

The Federal Housing Administration is proposing to increase the up-front cash paid by borrowers as part of an effort to shore up the agency’s finances, which have been staggered by rising defaults in its flagship mortgage insurance program, according to FHA officials.

The changes also include raising minimum credit scores for borrowers who receive FHA-backed mortgages and limiting the amount of money sellers can kick in, including paying closing costs or giving free upgrades.

These measures are designed to increase the amount borrowers invest in the homes they buy, thereby making it less attractive for them to default on loans and walk away from properties, as many people have done during the current housing crisis.

Housing and Urban Development Secretary Shaun Donovan is scheduled to announce the agency’s policy changes when he testifies Wednesday before the House Financial Services Committee.

The FHA has played a critical role in propping up the housing market by insuring lenders against default after the mortgage market unraveled. Currently, the agency backs about 30 percent of all loans for home purchases and 20 percent of refinancings. In the past, the FHA has resisted raising down payments or insurance premiums for fear of shutting out qualified borrowers and stunting the housing market’s slow but steady recovery.

But Donovan plans to tell the House committee that the exploding volume of loans the FHA is now handling requires stricter risk controls than the previous administration had in place, according to a copy of his prepared testimony. A recent audit shows that the FHA’s financial cushion already has eroded below the level required by law.

“We’ve learned from recent history that the market is fragile, and we have to plan for the unexpected,” Donovan’s prepared statement says. “That uncertainty is complicated by an organization we inherited that, to be honest, was simply not properly managing or monitoring its risk.”

By requiring that borrowers bring more cash to the table, the agency is seeking to ensure they have “more skin in the game and a stronger equity position in their loans,” Donovan says. But he does not specify the size of the proposed increase. FHA officials said they have yet to determine how much cash will be required.

“There are several ways to accomplish this, and so we are currently analyzing various options to determine which is the most effective and consistent with our mission,” Donovan says.

Up-front cash can include down payments as well as other payments. For now, FHA borrowers can put down as little as 3.5 percent, a level that many FHA critics say is too low. One lawmaker has introduced legislation that would boost the minimum down payment to 5 percent.

As for seller concessions, the agency now allows sellers to kick in 6 percent of the home’s value. Donovan said he wants the maximum permissible level to be lowered to 3 percent, in line with industry norms.

Agency staff are reviewing whether to increase the monthly insurance premiums charged to borrowers, officials said. These payments come on top of insurance paid up front.

The current up-front premium is set at 1.75 percent of the value of the loan. FHA may decide that an increase in that premium is needed also, officials said.

To protect itself against the riskiest borrowers, the agency has decided “for the time being” to raise its minimum credit score requirements for new borrowers. Again, FHA staff are still analyzing what the new threshold should be, Donovan’s prepared testimony says.

The minimum credit score requirement is now so low — 500 out of a possible 850 — that it’s basically irrelevant. Many lenders that make FHA-insured loans impose much tougher restrictions. The concern is that if FHA does not toughen up, abusive lenders will get away with financing risky, poor credit borrowers already rejected by more reputable lenders.

Most of the new initiatives do not require congressional approval. Many have previously been suggested by critics and even supporters of the agency.

These measures are meant to build on other actions the FHA has taken to curb its risk and beef up its eroding cash reserves.

An audit released last month found that the agency’s cash reserves have shrunk to a level far below what is required by law, and the agency could need taxpayer funding if worst-case scenarios play out.

The audit, designed to measure the agency’s financial health, examined the excess cash the agency must set aside to deal with unexpected losses and found that those reserves were at about $3.6 billion as of Sept. 30, a drop from the $12.9 billion available a year earlier. The current total represents 0.53 percent of all outstanding single-family-home loans insured by the FHA, well below the 2 percent threshold set by law. This is the first time reserves have fallen under that level since 1994.

To stop the financial erosion, the FHA has focused in part on weeding out abusive lenders. This year, the agency has suspended business with seven lenders, including the now-defunct Taylor, Bean and Whitaker. It has withdrawn FHA-approval for 270 others, including Lend America. On its Web site Tuesday, Lend America said it has ceased its loan origination and operations, effective immediately.

The FHA is currently working on a new rule that would require banks it does business with to have up to $2.5 million in capital that they can use to repay the agency for losses if they were involved in fraud. Now, they are required to hold only $250,000.

On Wednesday, Donovan will ask Congress to grant the agency more authority to close down abusive lenders.

Source: Washington Post

Seeing the short sale inventory declining is a very good sign; however, what confuses me is the report of increased mortgage delinquencies and Lis Pendens filings. If delinquencies are increasing it would only make sense that short sales would be increasing.