House Prices continue to UnTriple

[Crewleader]

Posted for Scott Ellis of Brevard County, FL, graphs by Roger Shealy

A few people have wondered why many homes seem to be entering foreclosure when they know the owners still have jobs. Are these people planning on moving away?

No, they are wising up just like people did in Boston in 1988.

Why keep up payments on a $230,000 debt when I can now buy the same house for $80,000, or rent it for $800 a month? People were walking up there and they’ll be walking down here, even if they have jobs, as they realize they are so far underwater they’ll never break the surface again. They also now have the option of discontinuing payment and living rent free for one to two years.

With many people reason will never trump hope. They will hold on to their ‘property’ until they have exhausted all sources of cash, and then end up foreclosed anyway.

Prices were straight up, then straight down, they’ll go even lower than when you started as you overshoot down, then a slight bounce to equilibrium.

House prices tripled from 1999-2005, now they’re un-tripling.

Scott

http://patrick.net/forum/?p=28236

[Warpy]

1. Oh, if it were only that easy

Banks have the right to hound you for the difference between what you borrowed and what they eventually sell the property for and they can do it for 20 years. Of course, they have to find you. Moving frequently makes you more trouble than you're worth, just don't try to buy anything else and put down roots.

Face it, if you got conned into buying at the top of the market in one of the boom areas, you're pretty much stuck unless you declare bankruptcy.

[fasttense]

5. Most home loans are non recourse loans and the bank can NOT

Come after you for the difference. They are non-judical forclosure states

These are all the mortgage walkaway trustee sale states, meaning they are non-judicial foreclosure states.

In those states, generally, when they foreclose on you, they cannot pursue you for their financial losses.

Many, such as California, do in theory allow a lender to choose judicial foreclosure but in those cases the lenders only do so if a borrower has significant other assets. This is the "one action" rule that lets the lender either pursue non-judicial foreclosure, at lower cost and less time, or judicial foreclosure that costs more money and takes more time but lets them go after you for their financial losses.

Alaska
Arizona
Arkansas
California
Colorado
District of Columbia (Washington DC)
Georgia
Hawaii
Idaho
Mississippi
Missouri
Montana (as long as non-judicial foreclosure is used)
Nevada - note that the lender CAN get a deficiency judgment (See below)
New Hampshire
Oregon
Tennessee
Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
Virginia
Washington
West Virginia

These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:
Michigan
Minnesota
North Carolina
Rhode Island
South Dakota
Utah
Wyoming

http://www.mortgagereliefformula.com/recourse/

[FBaggins]

7. That's incorrect.

It's a mistake to say that "Most home loans are non recourse loans"

In fact, exactly the opposite is true... and even in non-recourse states, large amounts of housing debt are on home-equity products that also do not have the same options. Lots of people in those suposedly "non-recourse" states on your list have refinanced their purchase-money mortgage and also no longer have a non-recourse loan.

In reality very few mortgages are non-recourse... I couldn't guess whether it was 15% or 20% or even 30%... but it's nothing close to "most".

This also ignores the impact of the hit on your credit and the potential tax implications.

[amandabeech]

8. Why would refinancing a purchase money loan remove the non-recourse feature?

Please include cites.

[FBaggins]

9. Because (with a couple exception IIRC) the legal protection is for purchase money.

There is some debate on whether a refi that only pays off the original mortgage becomes a recourse loan. Last I heard, there was no case law on the subject. I've even heard a theory that in California it might be a recourse loan only on amounts over the original mortgage balance.

First link I found.

http://www.avvo.com/legal-guides/ugc/california-residential-foreclosures--how-to-determine-whether-your-loan-is-non-recourse-or-you-will


Learned something new on that site. Even in non-recourse states, federal loans may be recourse. That includes the most common Fannie-backed loans IF Fannie it doing the foreclosure.

[amandabeech]

10. I can understand if folks are taking money out.

However, when the refi is to take advantage of a lower interest rate or to convert to a 15 year from a 30, I see no conflict with the basic principle that shifts risk to the bank if the value of the home drops precipitously in order to protect the mortgagee.

The idea is to induce Americans to buy homes. If a refi to a lower interest rate were not possible without taking on substantial additional risk, it might adversely affect the goal of home ownership, especially during periods of high interest rates.

[gorfle]

2. How?

They also now have the option of discontinuing payment and living rent free for one to two years.

How do you do this?

[4_TN_TITANS]

4. The time between stopped payments and the time it

takes to finalize a foreclosure and kick you out.

[bhikkhu]

6. Its different from state to state

The best thing would be to contact an attorney in your state willing to give you the run-down on how to best lengthen the process.

[happyslug]

11. And often County to County, can be 90 days to 120 days in PA for example

For example in Pennsylvania the Bank has to send an "Act 91" notice first, wait 30 days to see if the Home Owner contacts the State's Homeowners Emergency Mortgage Assistance Program (HEMAP) then file a Complaint in Common Pleas Court for the County the property is located in. Now if the homeowner does apply for HEMAP assistance within the 30 period, the bank has to wait for HEMAP to make a decision. This can take anywhere from 30 days upward. If you dislike the decision, the Homeowner has the right to an Administrative hearing. The bank still can NOT proceed until the Administrative hearing is held and a decision is given (If HEMAP assistance is approved, the bank gets paid by HEMAP for arrears, for more look up information on PA HEMAP program). If HEMAP assistance is disapproved, or the Homeowner NEVER ask for such assistance, then the bank has the right to file a Complaint in Foreclosure.

Once a Complaint in Foreclosure has been filed, the bank has to wait 20 days and then send out a "10 day letter" (Yes, Pa has a two step process to make up the 30 day period after the Bank has filed a Complaint in Common Pleas Court). At the end of the ten days, a Judgment is entered and at that point the Bank takes it and about S1500 to the Sheriff for Execution Sale.

If the Homeowner does NOTHING (i.e. does NOT apply for HEMAP NOR file a response to the Complaint in Foreclosure) The total time before the property is given to the Sheriff is no less then 60 days (30 days for the Act 91 Notice, 30 days for the Actual Foreclosure action).

Now, Real Property Execution sales are held at different times depending on what county you live in. Allegheny County (County Seal Pittsburgh PA) holds Real property Execution sales every month. My home County of Cambria County (Main City, Johnstown PA) holds its Real Property Execution sales every three months. Now Under State Law any property to be sold at such real property execution sale MUST be filed with the Sheriff on or before the previous Execution Sale i.e. in Allegheny county at least 30 days before it is to be sold, in Cambria County at least 90 days before it is sold. If you add these time to the time above, it takes at least 90 days to sell a piece of property in Allegheny County, but 150 days in Cambria county (And that if no one fights, you can delay the sale even more by filing for HEMAP even if NOT eligible, filing objections to the Complaint, filing an Answer and forcing the bank to go for a Summary Judgment Motion or even a court hearing, all of which delay any execution sale).

Some other variation in Execution Sale in Pennsylvania, but County:

Montour County, one of the Smaller Counties in the State does its Execution Sales on a "As needed" basis. See http://www.montourco.org/montour/cwp/view.asp?a=766&Q=418484&montourNav=| For Details

Centre County seems to Follow the Allegheny County Practice of Monthly Real Property Execution sales:
http://www.co.centre.pa.us/sheriffsale/default.asp

Greene County holds sales as needed, which can be weekly:
http://www.co.greene.pa.us/secured/gc2/depts/lo/sheriff/sheriff.htm
http://www.co.greene.pa.us/salelisting/

Westmoreland County hold such sales once every two months (A 60 day delay):
http://www.co.westmoreland.pa.us/sheriff/lib/sheriff/forms/Packet_2008.pdf

Allegheny County every month rule:
http://www.alleghenycourts.us/pdf/civil/local_rules/Enforcement%20of%20Judgments%20for%20the%20Payment%20of%20Money.pdf

Philadelphia also does it Monthly:
http://www.phillysheriff.com/homeadvertisedate.html

Beaver County Does is Monthly:
http://pasheriffsales.com/calendar.cfm?month=1&county=13&year=2010

Carbon County does it Monthly:
http://pasheriffsales.com/calendar.cfm?county=12

Columbia County does it Monthly:
http://www.sheriffofcolumbiacounty.com/sheriffsales.html

Luzerne County does it bi-monthly:
http://www.luzernesheriff.com/assets/pdfs/Sheriff_Dates_2009.pdf

Northtumberland does it Monthly (but requires a two month waiting period):
http://www.northumberlandsheriff.com/pages/sales.html

[barb162]

3. It's a highly unusual situation where house prices tripled in 6 years.

That was one superheated market.