At Team Reba we have several brokers who are part of the Certified Distressed Property Expert (CDPE) organization which provides high level training on the short sale process. As part of the ongoing education that is provided, we get monthly and quarterly reports on what is going on in the mortgage markets with respect to mortgage defaults and foreclosure rates. Right now we have seen that mortgage defaults are rising nationally with over 7 Million homes in default or foreclosure as of 3rd Quarter 2010 – this is out of a total of 44 Million mortgages outstanding.
National number for all loans: 4.39% in foreclosure, 9.39% in default = 13.78% total
When the different loan types are compared we get the following breakdown….
Prime loans: 3.46% in foreclosure, 6.48% in default = 9.94% total
Sub-prime loans: 13.73% in foreclosure, 26.56% in default = 40.29% total (many of these are adjustable rate loans where interest rates are resetting to payment levels that owners cannot afford and with values down the owner cannot refinance.
FHA loans: 3.22% in foreclosure, 13.22% in default = 16.44% total
VA loans: 2.14% in foreclosure, 7.82% in default = 9.96% total
Clearly, there is still a lot of pain going on for those that got subprime loans back when loans were easy to get. The number of foreclosures is following a seasonal trend of the past 3 years where banks and loan servicers are attempting to not take in more bank owned assets (aka REO) because it negatively affects their bottom line and they get bad press for holding foreclosure auctions during the holidays. The downward trend doesn’t mean that fewer people are being foreclosed on – it just means the situation is delayed till the seasonal uptick in real estate happens in the Spring.
For you “traditional” sellers who are out there, this is a call to action really. If you want to stay ahead of an influx of bank owned property that will come on market in the Spring, which will likely depress prices even further, then getting on market now is a good idea. Bear in mind also that Rob McKenna (Attorney General for Washington State) is taking legal action against some of the trustee organizations which also will delay some foreclosures, but not stop them altogether. They’ll just be delayed as the local banks have already done their review of files and found they are in compliance with foreclosure rules.
If you’re a homeowner who is in default and you’d like to start looking into what your options are – then please feel free to reach out to our team and we’ll be happy to sit down and discuss it with you. There are few easy answers, but there is a lot of good information we can dispense which will help you sort out what’s the best option based on your circumstances. Another great tool is to go onto the Washington State Bar Association website to access their Home Foreclosure Legal Aid Project information. You can also call them at 1-877-894-HOME (4663).
For the people who are on the sidelines of real estate – owners who aren’t planning on moving anytime soon – just know that values are going to continue declining for most likely a few more years. Employment numbers in the USA will have a big impact on whether or not the real estate market and values improve.
