Monthly Archives: February 2012

Multi-Million Dollar Foreclosures

Below are eight multi-million dollar foreclosed homes that are back on the market throughout the United States.

Laguna Beach, CA

Asking price: $18 million

Located in “the Gold Coast of Orange County,” this impressive home with views of Catalina Island and the Pacific Ocean fell into foreclosure in 2010, the same year it was built. At one time, it was in escrow for $28 million. Now, the home is available through a private investment group for $18 million. It has never been occupied.

The house has an oversized master suite and 3 additional bedrooms, 6 1/2 bathrooms and a garage that can accommodate 20 cars. The kitchen is outfitted with high-end stainless steel appliances, granite counter tops and a butler’s pantry. There’s also a screening room and an atrium foyer. Elsewhere on the 11-acre property, are an infinity edge pool, spa, gardens and a fire pit.

“A home of this size on a parcel of land over 11 acres in this area is unheard of,” noted the listing broker Richard Leavitt. “It could never be built again.”

 

Newport, RI

Asking price: $7.9 million

This sprawling estate is a throwback to the Gilded Age — just with all new appliances. Originally built in 1891, the estate was foreclosed on last year and then renovated by one of its lien holders. It was listed last summer for $7.9 million and remains on the market.

There are 7 bedrooms, 7 1/2 bathrooms, a ballroom, music room and a library. Located at the highest point in Newport, there are impressive views of the ocean and — on a clear day — Martha’s Vineyard, from the rooftop deck. The property also includes 7 acres of manicured lawn and an extra lot with an additional lot available.

 

Atlanta, GA

Asking price: $3.7 million

Because of its sheer size (22,000 square feet) and Mediterranean-style architecture, this estate is unlike any other home in the area, said listing broker Suzanne Close.

It initially hit the market nearly three years ago for $5.9 million. After the bank took possession of the property in 2011, it was re-listed for $3.7 million.

Built in 2006 on 3 1/2 acres, this home was made for people who love to cook — or, have someone cook for them. There are four kitchens inside (two on the main level, one in the guest suite and an additional one in the basement), as well as an outdoor kitchen near the pool area with gas and charcoal grills and a pizza oven.

Other pricey details include hand wrought iron work, travertine floors and limestone around the pool deck.

 

Orono, Minn.

Asking price: $6.25 million

This shingle-style mansion with 350 feet of frontage on Lake Minnetonka was originally listed in 2009 for $11.5 million, but the price was reduced to $9.9 million and then again to $8.9 million. Now the home is owned by the bank and listed for $6.25 million.

Designed by an architect from Sag Harbor in 1999, the house is very much in keeping with the high-end homes in the Hamptons, said the listing broker Ellen DeHaven. “It looks like a home you could airlift onto Long Island, but [Lake Minnetonka is] our version of the waterfront.”

The home includes 4 bedrooms, 6 bathrooms, a game room and a carriage house. Despite being bank-owned for 6 months, it has been exceptionally well maintained, DeHaven noted, with a refurbished roof and refinished floors.

 

La Jolla, CA

Asking price: $5.9 million

After languishing on the market for several years at an asking price of more than $7 million, this prime beach property fell into foreclosure last year. Now it’s listed by the bank for $5.9 million.

Listing broker David Finburgh admits that the place is just in “fair condition,” but there’s plenty of great potential for this 11,000-square-foot home with amazing views. One highlight: the 3,700-square-foot master suite, with his and her bathrooms. There are also 4 other bedrooms and optional additional bedrooms. Outside, there is a pool and spa.

The home, which was built in 1991, sits on 3/4 of an acre on top of one of the highest points in La Jolla, a neighborhood where foreclosures like this are a rarity, assured Finburgh.

 

Palm Desert, CA

Asking price: $3.5 million

The last time this home in the gated Bighorn Golf Club community sold in 2007, it went for $6 million, according to Signe Beck, of Luxury Homes by Keller Williams. But after being foreclosed on in March 2010, its price has come down significantly. It’s been on and off the market over the past two years and was recently re-listed last month for $3.5 million.

The Palm Springs home boasts 5 bedroom suites, including a master suite with its own fireplace, his and her bathrooms and French doors that open onto the pool. The chef’s kitchen has a pair of Viking refrigerators and a view of the putting green and the waterfall out back.

 

Monterey, CA

Asking price: $3.99 million

Located in Monterra Ranch, an exclusive gated community with a private golf course and club, this home was foreclosed on in 2009, then listed for sale by Monterey County Bank for $4.65 million. The bank later slashed the listing price to $3.99 million. Over the past few months, several lower offers have been declined, said listing agent Joy Jacobs.

The Mediterranean-style home has 4 bedrooms, 6 bathrooms, a gourmet chef’s kitchen, game room, wine cellar and library with high-end details like limestone floors and vaulted ceilings.

 

Cherry Hills Village, CO

Asking price: $4.6 million

Originally listed in 2008 for $8.9 million, the price on this home was dropped to $6.9 million in 2010, then to $5.9 million a year later. The house was finally offered through a public trustee sale and bought by the original lender in September of last year. The bank is currently listing the home for $4.6 million.

Built in 2007, this 11,135 square-foot stone home sits on 2 acres and has 5 bedrooms and 9 baths. There’s a large chef’s kitchen with a wood burning fireplace plus an artist’s studio.

But perhaps the biggest selling points are the impressive views of the mountains and the town. “You look at Pikes Peak out the front door and Longs Peak out the back door, and there are 125 miles between the two of them, it’s dramatic,” said listing broker Tim Colleran.

 

Source: By Jessica Dickler @CNNMoney

Million-Dollar Foreclosures Rise As Rich Walk Away

Five years after the housing bubble burst, America’s wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country — and many of them are doing so voluntarily.

Over 36,000 homes valued at $1 million or more were foreclosed on — or at least served with a notice of default — in 2011, according to data compiled by RealtyTrac, which tracks foreclosures. While that’s less than 2% of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years.

“These properties are accounting for a bigger piece of the foreclosure pie,” said Daren Blomquist, vice president of RealtyTrac.

Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures — or homes valued at more than $2 million — jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.

Until recently, many homeowners at the high end of the housing market were able to postpone the foreclosure process, Blomquist explained. With other assets and alternatives, “they had more financial means to hold out against default.”

In addition, lenders are typically more amenable to working with homeowners that have other resources, said Ron Shuffield, president of Esslinger-Wooten-Maxwell, a real-estate firm in Miami where homes priced over $1 million represented 9% of all foreclosures last year.

But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a “strategic default.” Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.

“In the lower-priced houses you’ll see more people defaulting because they can’t afford the payments and it’s a choice between feeding their family and paying the mortgage on a home that’s under water,” said Stuart Vener, a national real estate and mortgage expert with the Florida-based Wilshire Holding Group.

“In million-dollar homes, you’re looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?” he said. In many cases, it often makes more financial sense to walk away.

See inside 8 multi-million dollar foreclosures

Lost home to foreclosure but ready to buy again? Prepare to wait in lender ‘penalty box’

Next to filing for bankruptcy protection, nothing wrecks your chances of qualifying for a home loan like a foreclosure.

And if you got out from under an oppressive mortgage  through a short sale — when the bank agrees to accept less than what the homeowner owes — lenders can look upon you just as unfavorably.

It’s a reality that the former  owners of the more than 4 million homes lost to foreclosure in the six  years since the housing bubble burst will have to confront if they want  to own again. But the passage of time makes all the difference.

That’s because mortgage-lending guidelines that most banks  follow prohibit them from making loans to people with foreclosure or a  short sale in their credit history, often for years. Never mind the hit  that one’s credit score takes.

Still, some of the  homeowners who were foreclosed upon when the market first started to  skid are now looking to buy and getting loans.

“They’re probably going to pay a little higher interest rate, but with  rates so low, a higher interest rate of 4 percent is not a big deal,”  said Rosa Herwick, a broker and owner of Century 21 JR Realty in  Henderson, Nev.

So how likely are banks to approve  your mortgage application if you have a real estate-related blemish on  your record? And can you do anything to spring yourself from the  mortgage penalty box?

It depends on several factors, but largely on whether you had a foreclosure or a short sale.


FORECLOSURE

Generally, borrowers who have a foreclosure in their  credit history can expect to wait between two to seven years before a  lender will even accept their loan application.

The waiting periods stem from guidelines most banks must follow in order to be able to sell their home loans. That’s because potential purchasers,  such as Fannie Mae and Freddie Mac, each have a different set of  guidelines for the loans they will buy and criteria for whom they deem a qualified borrower.

The fact is, a person’s credit score, employment history and other factors that make up one’s  creditworthiness will take a back seat to these resale guidelines.

If a buyer with a past foreclosure is seeking a  government-backed mortgage, the waiting period can vary before they can  qualify.

Take the Federal Housing Administration,  which insures roughly 30 percent of new loans. Under its guidelines,  former homeowners must wait three years from the date of their  foreclosure before they can qualify for backing by the agency.

Compare the U.S. Department of Agriculture’s housing program which requires three years, while the time penalty for a VA loan is two years. Fannie Mae and Freddie Mac, which own or guarantee about half of all mortgages, require the longest stretch: seven years after a  foreclosure.

In some cases, the waiting periods for a foreclosure can be reduced.

Fannie Mae, for example, allows a three-year waiting  period in the event the foreclosure was due to an extenuating  circumstance. The company defines this as an event that was beyond the  homeowners’ control and resulted in a sudden reduction in income or  catastrophic increase in financial obligations. Think job layoff,  medical bills or divorce.

FHA may grant an  exception to its waiting period in the event a wage-earner becomes  seriously ill or dies. A divorce may qualify for an exception, but only  in certain cases.

SHORT SALES

The roadblocks for having a short sale in your credit history can be less severe, and in some cases, waived altogether.

FHA requires borrowers who weren’t paying their mortgage  when they sold their house to wait three years before they can qualify  for a home loan. That time penalty may be waived in certain cases,  including long-term job loss.

There is no FHA time penalty for homeowners who made their house payments in the 12 months before their  short sale.

The size of a down payment can also shorten the waiting period.

A down payment of 20 percent or more will cut Fannie Mae’s time penalty on a borrower with a short sale down to two years from  seven. Buyers who put down 10 percent can qualify after four years.

CREDIT SCORE

It’s no longer just a waiting game for homeowners caught  up in the earliest stages of the foreclosure crisis in 2007 and 2008.

There’s still the impact a foreclosure or short sale has  on one’s credit score — still very much a factor in qualifying for a  loan.

Like most credit blemishes, foreclosures and short sales will remain in your credit history for seven years.

As a general rule, the higher your FICO score, the more it will drop as a result of a bad debt, said Barry Paperno, consumer  affairs manager for MyFICO.com, the consumer website for FICO.

FICO credit scores range from 300 to 850. In simulations, a  foreclosure sent a FICO score of about 720 down to as low as 570 and  took about seven years to recover fully, assuming everything else being  equal.

Still, there are steps one can take to burnish one’s tarnished credit rating.

  • While in the foreclosure penalty box, make sure to pay all your bills on time.
  • Get more credit. This may sound counterintuitive after a foreclosure, but beefing up your track record of good credit accounts  can help boost one’s credit score. A car loan or a credit card will do.  But if you get a credit card, pay it off every month.
  • Be patient. A foreclosure’s drag on your credit score will decline over time.
  • Dispute any mistakes on your credit report, which can lower your score.
  • Don’t close your oldest credit accounts. Your score gets a boost from older credit lines.
  • Scale back your lifestyle and pocket the savings toward a future down payment.

 

Source: Associated Press

Lenders Embrace More Short Sales

Lenders are allowing more short sales by financially strapped homeowners and a few people are even getting cash to complete the sale.

Short sales have been increasing for months, but the financial incentives – which Realtors say are random and infrequent – are a newer wrinkle.

Examples:

• JPMorgan Chase went national with short-sale incentive offers last year, paying up to $35,000 in some cases.

• Bank of America is testing incentives from $5,000 to $25,000 in Florida to see if they should be expanded to more states. The Florida program began last fall, spokesman Richard Simon says.

• Wells Fargo’s incentive offers range from less than $3,000 to $20,000, spokesman James Hines says.

Short sales, even with incentive payments to borrowers, can save lenders money compared with the expenses involved in completing foreclosures. In states such as Florida where foreclosures go through the courts, 50 percent of loans in foreclosure are more than two years past due, says a January report by mortgage tracker LPS Applied Analytics.

“It’s a lot cheaper to shell out $10,000 or $20,000 to someone than it is to go through a long foreclosure,” says Jim Gillespie, chief executive of Coldwell Banker.

Banks are more willing to do short sales now than in the past, Gillespie says. Cash incentives appear to be “limited but increasing” in number, he adds.

“When a loan modification isn’t possible, a short sale may be a better and faster solution” than foreclosure, says JPMorgan Chase spokesman Thomas Kelly.

The lenders won’t say how often they extend such incentives.

“If you have two similar sellers, one might get it and another may not,” says Colleen Badagliacco of Altera Real Estate in San Jose. “It’s very random.”

Typically, short sale incentives are more common for loans in states where foreclosures take more time, Hines says.

In November, short sales accounted for more than 9 percent of single family home sales and were up 32 percent from the year before, according to CoreLogic.

Market researcher Dataquick also shows short sales increasing from January 2011 through last month throughout California and in Phoenix, Miami and Seattle.

The federal government-run foreclosure prevention program also offers short sale incentives, at least $3,000 for sellers, but far more short sales are being done outside the government program.

“The trend is up,” says Moody’s Investors Service analyst William Fricke.

© Copyright 2012 USA TODAY, a division of Gannett Co. Inc.

Mortgage deal means more foreclosures

Even as the $26 billion mortgage settlement helps hundreds of thousands of troubled homeowners, it will bring a wave of new foreclosures.

Many lenders held off on reposessing homes during the complex negotiations between 49 state attorneys general, and federal officials.

That’s left a backlog of troubled loans, many of which won’t be helped by measures in the deal that will let homeowners refinance or reduce the amount of their mortgage.

“The bottom line is that 2012 will see a lot of foreclosures that should have taken place in 2011 and didn’t,” said Rick Sharga, executive vice president for Carrington Holdings, a real estate finance firm.

Daren Blomquist, vice president of RealtyTrac, online marketer of foreclosed properties, agrees that much of last year’s 34% drop in foreclosure filings was likely due to the uncertainty involved in the negotiations. He estimates that new filings will climb from 1.9 million in 2011 to between 2.2 million and 2.5 million this year.

“We think what we saw in 2011 was artificially low foreclosure numbers,” he said. He added that banks took longer to file foreclosure notices last year, and longer to finish the foreclosure process.

Source: CNN Money

Banks See The Value of Short Sales

A lender takes market value and writes off the mortgage balance.

Short sale is a term you’ll hear a lot more in coming months as homeowners and banks try to bail out underwater mortgages.

The term is often associated with falling stock markets, where short selling drives down stock prices.

But there is a different meaning when “short sale” is applied to real estate. It’s a meaning that more buyers and sellers need to understand at a time when 10 to 15 percent of metro area home sales qualify as short sales.

The real estate definition of short sale involves selling a home that’s underwater, which means the mortgage is larger than the market value of the property.

If the difference is too big, it can prevent the owner from selling the house, because a sale will not bring in enough cash to pay off the mortgage and provide a clean title for the new owner.

Increasingly in recent years, when underwater homes can’t be sold, they go into foreclosure, which leads to banks taking title and then doing nothing for several months or even years as the property deteriorates. By the time banks get around to selling foreclosed properties, they are typically worth only a fraction of their original value.

A short sale allows the bank and homeowners to avoid sliding into that downward spiral.

In a short sale, the lender agrees to accept market value for a house and write off the unpaid portion of the mortgage. That allows the original homeowner to walk away without continuing to owe the lender the unpaid balance of the mortgage.

To successfully complete a short sale, homeowners must pass a series of tests designed by banks to prevent abuses, said Shane Torres, a ReMax agent who handled 35 short sales last year and has another 35 or so pending now.

Banks finally realize what they need to do

Until recently most lenders did not have procedures in place to handle short sales, said Mike Knapp, chief executive of Iowa Realty, the state’s largest real estate agency.

The recent increase in short sales is the result of banks finally recognizing the problem and deciding its time to “clear out some of the inventory” of underwater mortgages, said Arthur Cox, who teaches real estate courses at the University of Northern Iowa.

For most banks, the last thing they want to do is take a loss on a loan. They put it off as long as possible, hoping market conditions will improve or that the financial condition of the borrower will improve.

But after four years, the big national banks that made unrealistic loans to unqualified borrowers are finally realizing that things will not get better on their own.

Until now, the big banks have largely resisted pleas from borrowers, government officials and social activists that the banks write off a portion of underwater home loans as a way to keep people in their homes.

Instead, the banks lowered interest rates and extended payment periods, actions that lowered monthly payments while increasing the total that borrowers must ultimately pay.

The result nationwide has been that tens, maybe hundreds, of thousands of people have walked away from their homes and turned them over to banks that were not prepared to handle the flood of loan defaults and foreclosures.

The big banks are now learning that it costs much more in the long run when homeowners walk away and leave properties vacant than it does if they write off a portion of the loans and keep people in their homes.

Banks “have always been able to do short sales,” said UNI’s Cox. “They’ve just been reluctant to.”

Short sales require  a lot of paperwork

ReMax agent Torres has handled short sales resulting in mortgage write-offs of as little as $10,000 and as much as $500,000. He said there are currently about 230 short sales in process in the metro area, where about 1,500 homes are in pre-foreclosure, meaning the owners have missed at least one payment.

Knapp estimates that 10 to 15 percent of the home sales that Iowa Realty handles are short sales.

It’s not easy for a homeowner to do a short sale, Torres said. But it is less of a headache now than it was a couple of years ago.

Some banks — Torres cites Bank of America as an example — are easier to deal with on a short sale today than they were a few years ago, because the banks are now more familiar with the procedure.

Others banks — Wells Fargo and Chase are two examples, Torres cited — are still slow to process short-sale paperwork, but even they are more open to the idea than they were in the past.

The key to persuading lenders to do a short sale is convincing them that the borrower is insolvent, Torres said.

Homeowners who do short sales “have to be in a hardship. It can’t just be someone who says: ‘I don’t want to pay my mortgage anymore,’ ” he said.

“In most cases, it’s because of a job loss, medical situation or divorce,” Torres said.

“There is a ridiculous amount of paperwork that has to be submitted to the bank,” he said. “There’s financial statements. There’s tax returns. There has to be a hardship letter, numerous affidavits and disclosures.”

After financial hardship has been proved, he said, “the bank sends out an appraiser to determine the fair market value, and that is what is used to accept the short sale offer, or to counter with an amount they will accept.”

Short sales alone will not solve the current housing dilemma, said UNI’s Cox, “but they are a piece of the puzzle.”

Source: The Des Moines Register, David Elbert