Ready for a new servicer on your loan?

Bank of America may have just unloaded two million loans (totaling $306 billion) to other lenders, but it’s already looking to sell rights on at least $100 billion more MSRs. Last week, BofA started with selling $306 billion in mortgages to Nationstar Mortgage Holdings and Walter Investment Management. The move is not unusual – lenders have been known to do it as costs rise and servicers go bankrupt. Additionally, Basell III capital rules will soon take effect, forcing banks to “hold more capital for mortgages serviced or to put less premium on the value of MSRs.” Servicing companies are exempt from this rule, so they are eager to buy.

Ally Financial and JP Morgan are looking to do the same soon.

Foreclosure inventory will remain low in 2013

Foreclosure Inventory via Wall Street Journal

With gains in housing prices the past year also comes an increase in home equity – very good news for current homeowners. But while those shopping for good deals (especially first-time home buyers and move-up buyers) are getting incredibly low interest rates, foreclosures and other REO inventory is shrinking drastically.

According to CoreLogic, foreclosure inventory is down 20% in November from a year ago. REOs fell from 19.6% to 11.5% between January and November 2012. This drop is due to a lower number of delinquencies and a more laborious foreclosure process that resulted from the original housing crisis issues.

Along with fewer foreclosures and REOs comes major competition to purchase deals by investors, first-time homebuyers, and the move-up buyers, hence the rise in prices. Economists are predicting that 2013 will see further declines in both REO and foreclosure inventory, but won’t be as steep a decline as we saw in 2012.

New HARP program expands benefits to more struggling homeowners

You may now be able to borrow a little more than your home is worth under some new changes to the Home Affordable Refinance Program (HARP). Under the current program (which expires at the end of 2013), Freddie Mac and Fannie Mae borrowers could get help with refinancing if the value of their home had declined and they owed more than the home was worth. Now, banks are more comfortable raising the loan-to-value caps to include more struggling homeowners. HARP 3.0 will cover borrowers not under Freddie Mac and Fannie Mae, and loans over $417,000 can now qualify.

It’s unclear when the new HARP program will take effect, but for now homeowners under those lenders still have options for refinancing.

Foreclosures account for less than half of shadow inventory

From October 2011 to October 2012, the national shadow inventory decreased to 2.3 million units – that’s down 12.3%. Current inventory is looking like a seven month supply and in terms of dollars we are looking at $376 billion. Seriously delinquent properties represent 1.04 million of those units, while 903,000 are in foreclosure, and 354,000 are REOs according to CoreLogic. That means that over half of the shadow inventory are delinquent, but not yet in foreclosure.

By the end of October 2012, California ranked second in serious delinquencies and saw a 9.7% decline. At the same time in the state, home sales have jumped 15% and prices 19% year over year.

Short Sale process is better, faster, easier

The short sale process, while still difficult, is becoming a little less frustrating, according to a Lender Satisfaction Survey conducted by the California Association of Realtors(C.A.R.). The trade organization reported 64 percent of California Realtors expressed difficulty in closing short sales, an improvement from 77 percent in August 2011 and 70 percent in 2010.

However, the more significant improvement was the drop in Realtors who described the short sale process as “extremely difficult.” More than half (56 percent) of the Realtors surveyed in 2011 said the process was “extremely difficult” compared to about a third (34 percent) in 2012.

Both qualifying and completing the process has improved. Some short sales do not even need any financial verification to close. It is a stated short sale – just like a stated loan was.

My only assumption is that the banks have realized that if a foreclosure is inevitable then the cost of a short sale is less and has a reduced impact on the overall market.

Foreclosures Down 31% from Year Ago

CoreLogic indicated that completed foreclosures continued to reduce in September, falling 31 percent from a year ago. The analytics company reported the number of homes lost to foreclosure in September dropped to 57,000 nationwide. The decline is a steep drop from 83,000 in September 2011, and a decrease from the upwardly revised 59,000 in August.

In addition to the monthly and yearly declines, Mark Fleming, chief economist for CoreLogic, said completed foreclosures are also down 50 percent since the peak month in September 2010 and are 22 percent less than the beginning of the year.

Before the housing crises, completed foreclosures were much lower than the sinking figures reported recently. Between 2000 and 2006, completed foreclosures averaged 21,000 per month.

A look at the Northeast Los Angeles real estate market

Communities included: Echo Park, Silver Lake, Atwater, Highland Park, Glassell Park, Eagle Rock, Mt. Washington, Montecito Heights. Single Family: September/October

• Properties sold: 91 / 100
• Average days on market: 54 / 62
• Median price: $498,745 / $492,222
• Average cost per square foot: $360 / $337

Residential Income (2-4 units)

• Properties sold: 18 / 24
• Median price: $495,000 / $578,517

Condo:

• Properties sold: 17 / 15
• Median Price: $300,000 / $291,286

(Source: The MLS)

Also see our last market review for July/August 2012.