Real estate roundup: Californians in foreclosure limbo

A rising number of Californians are finding themselves in financial limbo, having defaulted on their mortgages but still living in their homes, a new report has found.

The report by Foreclosureradar.com (registration required) found that while the number of properties scheduled for foreclosure sale increased last month, lenders continue to postpone the sales rather than foreclose.

After three months of declines, the number of houses taken back by banks in October rose by 22.2% from September and 20.95% from October 2008. Despite that jump, the number of foreclosures remains 42.6% below a peak reached in July 2008, from which time the inventory of scheduled foreclosures has grown 131.36%, according to the report.

“While we continue to see a steady stream of properties entering foreclosure, relatively few are completing the process and being sold at auction,” Sean O’Toole, chief executive of ForeclosureRadar.com, said in a statement. “The bigger picture is that more and more homeowners are finding themselves upside down in foreclosure limbo, some hoping for a loan modification or short sale, while others are just waiting for a knock on the door.”

Of all postponements, 87% of them were made at the request or with the agreement of lenders, compared with 10% postponed due to bankruptcy. The majority of loans foreclosed upon in October 2009 were originally made between January 2005 and December 2007, according to the report.

In other news, the death of prominent attorney and developer Doug Ring may have resulted from an overdose of pills. Ring was found dead Thursday in his Brentwood home. Read more about it in our sister blog,  L.A. Now.

-- Alejandro Lazo

Real estate roundup: U.S. foreclosures slow, California new home sales dip

The number of foreclosures dropped in October for the third consecutive month, a sign that efforts by banks to take back troubled properties may be easing, according to a report out this morning by RealtyTrac.

The number of foreclosures -- default notices, scheduled foreclosure auctions and bank repossessions -- was down 3% in October from September, though that number is still 19% higher than in October 2008.

One out of every 385 housing units in the U.S. received a foreclosure filing in October, according to the report. The dip in the number of filings was a positive sign. But James J. Saccacio, chief executive officer of Irvine-based RealtyTrac, said in a statement that the moribund economy and the potential pitfalls facing the housing market could imperil any housing rebound.

“Three consecutive monthly declines is unprecedented for our report, and on first blush an indication that the foreclosure tide may be turning,” he said. “However, the fundamental forces driving foreclosure activity in this housing downturn — high-risk mortgages, negative equity, and unemployment — continue to loom over any nascent recovery.”

Nevada, California and Florida posted the highest foreclosure rates out of all the states. California had the second-highest rate, after Nevada, with one in every 156 housing units receiving a foreclosure filing in October.

A total of 85,420 California properties received a foreclosure filing during the month, a decrease of 1% from the previous month but still nearly 50% above the total reported in October 2008, according to the report.

California's default notices and scheduled foreclosure auctions were up 120% and 73% respectively from October 2008, when California foreclosure activity was in the midst of a three-month lull after a state law required lenders to give troubled homeowners extra notification before beginning foreclosure.

With financing still tight and so many cheap foreclosure properties on the market, it is no wonder that few people are buying new homes these days. A report by the California Building Industry Assn. confirmed that new-home sales continued to drop in September.

The report shows that sales in new-home communities of 10 units or more were 11% below September 2008, with only 2,310 new homes and condominiums sold, compared to 2,580 in September 2008.

In the Los Angeles-Long Beach-Glendale region 300 new homes were sold in September, a 9% increase from the 273 sold in the same month one year prior.

-- Alejandro Lazo

Fannie Mae to allow troubled homeowners to rent back homes

Mortgage titan Fannie Mae said it will begin allowing homeowners facing foreclosure to rent back their homes for up to one year in a move aimed at keeping a stack of foreclosures on its books from hitting the market, which is just beginning to show signs of recovery.

The new program is meant for troubled borrowers who don't qualify for or haven't been able to get a loan work-out, such as a modification, according to Fannie's news release.

Under the Deed for Lease program, the borrower would transfer title to the property to the lender by completing a deed in lieu of foreclosure and then rent back the house at market rates -- which in many markets have fallen over the last year and probably would be cheaper than a mortgage payment on a loan made during the boom years.

-- Alejandro Lazo

Photo: Rows of homes in Las Vegas. Credit: Bloomberg

Beware when signing up for online realty services [Updated]

The Times David Lazarus' column, "Real estate company's pitch leads to unexpected bill," may strike a chord with some readers. Here's an excerpt:

Maria Casanova, an assistant professor of economics at UCLA, toyed with the idea earlier this year of buying a foreclosed property near the Westwood campus. She signed up for a prominent listing service called RealtyTrac.

Casanova, 31, canceled her subscription not long after. Yet a few days ago she discovered that some other real estate company she'd never heard of has been billing her almost $45 a month for the last eight months.

Consumer advocates say it's an all-too-common problem: People signing up for one thing online and inadvertently signing up for something else that comes with recurring monthly charges.

It's worth a read in its entirety as a cautionary tale. (And Casanova is chagrined for not having noticed the charges sooner, in case you are wondering.) Has this happened to you? Personally I'm too paranoid to sign up for any paid services online, though I will do a little shopping.

-- Lauren Beale

Thoughts? Comments?

[Update: Here's a video of David Lazarus on the subject.]

Signs of life in Southern California's housing market

Southern California’s housing market took another small step toward recovery in September as the median sale price for homes in some areas rose above last year’s levels – the first such increase since the market crashed.

The median price paid for all homes in six Southern California counties in September -- $275,000 -- was unchanged from August and 11% below the same month last year, according to San Diego-based MDA DataQuick.

But in Orange County, the median home sale price last month of $429,000 rose modestly from $425,000 the same month a year earlier -- the first year-over-year gain since 2007, DataQuick said. If condominium sales are excluded, last month’s median home sale price in San Diego and Ventura counties also beat their September 2008 levels.

Christopher Thornberg, a Los Angeles economist who was an early predictor of the housing bubble, said several factors converged last month to give home sales a boost. "Tax breaks, low interest rates and pent-up demand added up to create a surge in sales that’s surely gone some way in stabilizing prices,” he said.

But Thornberg cautioned that prices could fall again.

“The question continues to be, how is this going to stand up when the next wave of foreclosures hits the market?” he said.

Even if the housing market takes another hit in the coming months, Thornberg said, the bulk of the market correction is past.

“If prices do fall again, it’ll be another 10% to 15% max,” he said.

The Southern California median price remains at 2002 levels, even without considering inflation, and is 46% below its peak level of $505,000 set in several months of 2007.

Those relatively low prices pushed the number of homes sold in September up 5% over the same month last year, and 0.2% above August. Home sales in the past year picked up first in the lowest-priced inland areas, where massive foreclosures pulled prices down.

Last month’s sales, with a rising median price over last year in some areas, show the mix of homes sold is normalizing. Sales of homes priced at or above $500,000 were 21% of the total, up from 13% in January, DataQuick said.

-- Peter Y. Hong

California Assn. of Realtors' 2010 housing market forecast

Home prices in California will increase slightly next year as buyers snap up foreclosures and other properties at the market’s low end, the California Assn. of Realtors said today.

At the same time, the number of purchases will decline slightly because there will be fewer of these foreclosures available.

In its annual forecast, the association predicted that the median home price in California would rise 3.3% to $280,000 next year. Sales of houses and condominiums, it said, would decrease 2.3% to about 527,500.

"We forecast that sales would be off a little bit next year because we're scheduled to lose first-time home buyers' tax credit at the end of November," said Leslie Appleton-Young, the group's chief economist.

She is calling for an extension of the federal tax credit, which benefited more than 1 million home buyers this year.

"Expanding credit through at least part of 2010 would help an economy that's still trying to get back on its feet," Appleton-Young said.

There are two markets, she said. In the moderate to low-end market, home prices have dropped 50% or more in some places, enabling people to buy homes that they otherwise would not have been able to afford. In the high-end market, however, prices haven't softened, but potential buyers have less money.

The forecast says sales will be driven by distressed properties in the low end of the market, causing a shortage in the number of homes for sale at that level and a moderate home-price appreciation. It will continue to be hard to sell higher-priced houses because values have dropped and financing is hard to get.

-- Melissa Rohlin

District attorney warns of loan modification scams

Los Angeles County Dist. Atty. Steve Cooley warned homeowners today to be careful to avoid foreclosure rescue scams.

Some companies offering to negotiate home loan modifications are instead opportunists who “promise quick results for a fee but actually provide nothing,” Cooley said in a news release.

Read more at California Consumer.

-- Stuart Pfeifer

Knock knock. Who's there? Freddie....

It's not quite "Hi, I'm from the government and I'm here to help." 

But it's along those lines. 

Freddie Mac, the government-controlled mortgage giant, plans to send people out to knock on the doors of borrowers who might qualify for a loan modification under President Obama's Making Home Affordable program but haven't completed the paperwork. 

The plan, which you can read about here, is to work one-on-one with people who didn't respond to letters or phone calls from their mortgage servicers, or who need to provide more information to launch their three-month trial periods under the federal loan-mod scheme. 

The door-knockers will be supplied by Titanium Solutions Inc., a specialist in contacting and working with troubled borrowers. They will try to contact people whose mortgages are owned by Freddie Mac, the second-largest buyer of home loans. The borrowers must be at least 31 days late in paying their loans, and they can't be in bankruptcy. 

Titanium "can help them overcome the roadblocks keeping them from starting their Home Affordable Modification trial periods," Ingrid Beckles, Freddie Mac's senior vice president of default asset management, said in a statement. The idea, she said, is to "give borrowers ... the same type of personalized guidance they may have had when they were buying their home or applying for their mortgage." 

To minimize potential fraud by impostors, Titanium representatives will not accept mortgage payments or any other money from borrowers, Freddie Mac said. 

The announcement left unanswered certain questions about the program, such as exactly how many borrowers are likely to be contacted and how much it will cost. Freddie Mac spokesman Brad German said he didn't have those details, and Titanium officials couldn't be reached for comment. 

At last report, Freddie Mac had 340,000 seriously delinquent single family mortgages -- loans in foreclosure or behind in payments by at least 90 days, German said. That worked out to 3.14% of its mortgages, up from 1.11% a year earlier. 

Fannie Mae, the largest buyer of U.S. mortgages, said in a news release today that its serious delinquency rate hit 4.17% at the end of July, a record and up from 1.45% percent a year earlier. Like Freddie Mac, Fannie Mae was taken over by the government when defaults threatened its solvency. 

It would be interesting to know how many Freddie Mac borrowers will welcome the help, and how many have just given up on reworking their loans because they are so far under water. No word on whether Freddie Mac will report along those lines, but don't hold your breath. 

In any case, plenty of people will be watching this and similar efforts. 

"It is my understanding that a number of loan servicers/loan modification specialists have started going door-to-door trying to get home owners to engage in the loan modification process," banking consultant Bert Ely said in an e-mail to The Times. 

"However," Ely added, "many people do not want to play, usually for financial reasons. Consequently, Freddie's outreach is hardly unique. How successful it will be, though, is questionable." 

-- E. Scott Reckard

Los Angeles mortgage modification event begins Thursday

More than 50,000 homeowners are expected to begin streaming through the Los Angeles Convention Center on Thursday, hoping for a hand in restructuring their mortgages or avoiding foreclosure.

The free five-day event, running through Monday, is organized by Boston-based Neighborhood Assistance Corp. of America. NACA hosted similar meetings nationwide this summer that attracted more than 180,000 participants.

Counselors at 360 computer stations will scan homeowners’ mortgage documents and send electronic files to nearly 2,000 on-site servicers and lenders, including representatives from Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp., who will negotiate more affordable loans.

“People usually call up the servicers and get the runaround,” NACA Chief Executive Bruce Marks said. “But here, there’s nothing to lose and everything to gain.”

The event will cost about $1 million, funded by federal grants. Boston-based nonprofit National Consumer Law Center released a study today of 25 foreclosure mediation programs from 14 states, including California, and concluded that most were inefficient.

The law center said that procedural barriers often kept homeowners from participating in those programs, and that mortgage servicers were rarely required to provide documentation or more affordable alternatives.

Rafael Mayo, 41, said NACA helped save his home from foreclosure by pushing both his 5% and 11% interest-only mortgages down to two 2% fixed-rate loans, saving him $850 a month.

“We were one foot inside the safety line, one foot outside,” he said.

The Save the Dream tour launched in Cleveland with 35,000 participants before moving to Chicago and St. Louis. Other stops will include Phoenix, Las Vegas and San Francisco.

Participants can register for appointments at www.naca.com or toll-free at (888) 499-6222.

-- Tiffany Hsu

Housing market may be stabilizing, Lennar chief says

Though home builder Lennar Corp. had a rough third quarter, its executives seem to be seeing the light at the end of the tunnel for the company and for the housing market.

Chief Executive Stuart Miller launched his review today of the company’s third-quarter performance with several minutes about the general economy.

“We’re gaining confidence that we’re getting much closer to the end of this housing-led downturn,” he said. “A combination of low prices, lower interest rates and government incentives have worked to pique the interest of primary buyers and dispel the taboo about home purchases that has deterred so many from the market.”

Lennar divisions have seen an increase in traffic and general consumer confidence as the sales and pricing plunge has slowed or stabilized, Miller said.

But, he said, the future is still murky: Ongoing foreclosures continue adding to inventory, mortgage rates are fluctuating and tax credit programs are potentially nearing their end. Upswings in unemployment and gas prices continue to pose a downside risk.

“By no means would I suggest that housing is out of the woods and recovered,” he said. “To the contrary, many important headwinds remain.”

But the market, he said, “feels materially better than the absolute hopelessness that had existed for so long.”

Home buyers are gradually taking advantage of prices made affordable by the recession, Miller said. If the economy stays relatively stable, executives predict, the company will be profitable by next year.