Patrick Carmichael's Real Estate Blog

Foreclosure filings and foreclosure sales increased in August throughout the majority of areas covered by ForeclosureRadar.

Foreclosure starts – the first notice filed, either a Notice of Default or Notice of Trustee Sale depending on the state – rose in every state, and appears to have been primarily driven by Bank of America and related entities, where foreclosure starts rose 116 percent from July to August, according to the report. Wells Fargo and US Bank also saw increases in foreclosure start filings, while filings by JP Morgan Chase and Citibank were essentially flat.

Notice of Default filings increased 69.5 percent in California, to the highest level in a year. Notice of Trustee Sale filings were up more moderately, rising 6 percent month-over-month, but down 23.6 percent year-over-year. Cancellations were nearly flat, up just 1.9 percent from July.

Activity on the courthouse steps increased in August, with Properties Sold Back to Bank (REO) increasing 12.3 percent from the prior month. Properties Sold to Third Parties rose 9.9 percent month-over-month and 10.8 percent year-over-year. Time to Foreclose increased to 333 days in August, 49 days longer than a year ago.

Last week, Gov. Brown signed AB 771, a bill that prevents home buyers in a common interest development (CID), such as a condominium or townhome, from being charged excess document fees.

Homeowner associations (HOAs) are required to provide specific documents to prospective purchasers of homes in a CID — a form of real estate ownership in which each homeowner has an exclusive interest in a unit and a shared interest in the common area property.  In addition to the standard residential property disclosures, purchasers of a unit within a CID must receive basic information about the structure, operation and management of the HOA that operates the CID.

Current law requires that this information come from the HOA and prohibits it from charging fees in excess of what is “reasonable,” not to exceed the actual cost of processing and producing these documents.  HOAs generally have provided the documents for approximately $75 to $250. Increasingly, HOAs have been delegating document preparations to third party vendors or contractors who, under a 2007 court decision, are exempt from this fee limitation. This delegation of responsibility by HOAs sometimes resulted in home purchasers being forced to pay additional fees, as much as $1,000, for other documents which were “bundled” with the required documents.

Assembly Bill 771 (Betsy Butler, D-Torrance) addresses this situation by specifying that only fees for the required documents may be charged when such documents are provided, effectively prohibiting any “bundling” of fees for other documents with these fees. The bill also creates a new form detailing which documents are required, and requires the provider to disclose the fees that will be charged for the documents before they are provided. The seller of a CID must complete this form and transmit it to the prospective purchaser along with the required documents.  This will eliminate any uncertainty for the prospective purchaser as to exactly which documents are being provided and the precise fees being charged for those documents.

California pending home sales dipped in July, as did the share of sales of distressed properties, C.A.R. reported Monday.

Pending home sales in California fell 1.7 percent in July, according to C.A.R.’s Pending Home Sales Index (PHSI)*.  The index was 117.0 in July, down from June’s index of 119.0, based on contracts signed in July.  The index was up 4.9 percent from July 2010.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

The total share of all distressed property types sold statewide fell to 44.5 percent in July, down from June’s 46.9 percent.  The share of distressed sales also was down from a year prior, when distressed sales totaled 47.7 percent of all home sales.

Of the distressed properties sold statewide, 17.5 percent were short sales, a decline from last month’s share of 19.3 percent and last July’s share of 20.9 percent.

At 26.7 percent, the share of REO (real estate-owned) sales was down from June’s 27.3 percent figure, but was up slightly from the 26.3 percent reported in July 2010.

Non-distressed sales made up the remaining share of home sales in July at 55.5 percent, up from 53.1 percent in June and 52.3 percent in July 2010.

In the second quarter of 2011, fixed-rate loans accounted for approximately 95 percent of refinance loans, according to the Freddie Mac Quarterly Product Transition Report.
An increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter. Of borrowers who paid off a 30-year fixed-rate loan, 37 percent chose a 15- or 20-year loan, the highest such share since the third quarter of 2003.

Fifty-five percent of borrowers who had a hybrid ARM chose a fixed-rate loan during the second quarter, while the remaining 45 percent chose to refinance into the same type of product. The share refinancing from hybrid ARM to hybrid ARM was the highest since the second quarter of 2004.

Standard & Poor’s downgraded the U.S. debt rating Friday, leaving many wondering how it would impact mortgages backed by the government, including Fannie Mae and Freddie Mac.

While some have reported the downgrade is likely to lead to an increase in interest rates, the downgrade actually had the opposite effect.  The 10-year Treasury, which most mortgage rates are tied to, is seeing its rate decline due to global economic environment.

According to Greg McBride, an analyst at Bankrate, mortgage rates are likely to remain low as long as the U.S. is battling a sluggish economy, but the nation could see a slight uptick in rates if Treasury yields edge higher.  Furthermore, McBride said it’s unlikely mortgage rates will be an impediment for well-qualified borrowers, because the “weak economy will keep a lid on mortgage rates.”