Falling foreclosures

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Foreclosure rates are dipping. Here’s how owners, sellers and buyers can benefit

By Erik J. Martin
CTW Features

If you’re a homeowner, home seller or even a homebuyer, housing market headlines continue to indicate favorable conditions. But one recent news item in particular should make you sit up and take notice: foreclosure rates are dropping, and many stand to gain from this trend.

According to a recent report from ATTOM Data Solutions (parent company to RealtyTrac), foreclosure filings have decreased 20 percent in the first six months of 2016 versus six months earlier and have fallen 11 percent compared to the first half of 2015.

“Overall foreclosure activity is back below pre-recession levels in 15 states, and foreclosure starts nationwide are at the lowest level ever recorded in a six-month period in the RealtyTrac report. Together, these two metrics strongly indicate that homeowners now falling into foreclosure are the exceptions to the rule and as such have a fighting chance to avoid foreclosure,” says Daren Blomquist, senior vice president of ATTOM Data Solutions, Irvine, California. “It shows that foreclosure activity is returning to what it should be in a healthy housing market: a rare, but necessary evil.”

Blomquist says that’s good for owners because it means a disproportionately high level of foreclosures are not dragging down their home value.

“Homeowners will likely have enough home equity built up to give them a lifeline out of foreclosure, whether through refinancing or by selling the property and at least walking away with cash to show for it,” he says. “It’s also good for home sellers because it means they are less likely to be competing with lower-priced distressed properties for sale in the neighborhood.”

The aforementioned news is even favorable for buyers in that it indicates a more stable, healthy market for them to be making an investment in, although the caveat is that it shifts the supply-demand balances in favor of sellers, Blomquist says.

Wendell de Guzman, CEO of PCI LLC, an Oak Brook, Illinois-based real estate investment firm, says the report’s findings are especially advantageous to homeowners because their properties should continue to appreciate next year, “and less foreclosure activity will also lead to higher sales prices, which also leads to even lesser foreclosure activity. The result of this virtuous cycle is that property values will likely go up in the next three to five years and foreclosure filings will continue to decrease over the next one to two years, I believe.”

  1. Keith Baker, mortgage banking professor with North Lake College in Irving, Texas, says this latest news also raises hopes for underwater borrowers who owe more than their homes are worth.

“Those who were trapped into houses that they couldn’t sell may now be able to move to another location or trade up or down,” says Baker, who recommends asking your lender about pursuing one or more of the following limited-time options if you are underwater and/or facing foreclosure (restrictions apply for each):

  • Home Affordable Refinance Program (HARP, due to expire on Dec. 31, 2016), a federal government mortgage refinance program designed to help underwater owners refinance to a lower interest rate
  • Home Affordable Modification Program (HAMP, also expiring on Dec. 31), a federal government program created to assist owners in avoiding foreclosure
  • Home Affordable Unemployment Program (UP, expiring Dec. 30), intended to provide temporary forbearance for unemployed homeowners
  • Second Lien Modification Program (2MP, expiring Dec. 30), which offers a mechanism for servicers to modify second liens when a homeowner receives a first lien modification through HAMP
  • Home Affordable Foreclosure Alternatives Program (HAFA, expiring Dec. 30), which grants the opportunity to be relieved of your remaining mortgage debt through a short sale or a deed-in-lieu of foreclosure and provides $10,000 in relocation assistance
  • Principal Reduction Alternative (PRA, expiring Dec. 31), which assists owners having a loan-to-value ratio exceeding 115 percent

“The biggest mistake homeowners who are forced into foreclosure make is waiting too long to take action. There are government programs that can help them,” says Buddy Schilling, president of Austin, Texas-headquartered JBGoodwin REALTORS. “But you can’t wait until the last minute to seek help, and you shouldn’t try to get a lot of equity out of your home if you need to sell it before foreclosure.”

Instead, Shilling suggests, consider lowering the price as low as you can to get the home sold before you are foreclosed on.

© CTW Features