Tuesday, June 28, 2011

Will your Bank pay you to do a short sale?

Two of the nation’s largest lenders are quietly offering some delinquent homeowners a deal.
JPMorgan Chase & Co. and Wells Fargo & Co. say they give select borrowers behind on their mortgage payments $10,000 to $20,000 for agreeing to short sales, which means the homes are sold for less than what’s owed on the mortgages.

Most banks figure they’re doing homeowners a favor simply by signing off on short sales and forgiving the amount owed. But in some cases, Chase and Wells Fargo borrowers receive that and cash at the closing.
Lenders routinely hand homeowners a few thousand dollars if they leave the properties in good shape after foreclosure. That’s known as “cash for keys.” Also, homeowners are entitled to $3,000 of government money if they complete short sales through the Home Affordable Foreclosure Alternative program.
But real estate agents and other industry observers say they aren’t aware of other major lenders offering such sizable incentives for successful short sales.

“It looked, to me, like it was a come-on,” said Allison Adler, an agent for the Keyes Co. in Weston.
But Adler checked and discovered it was legitimate. Her client, Sara Horowitz, received $10,000 last week from Chase when she completed a short sale of her Davie townhouse.

“I have to say, this extra bonus from Chase was a lifesaver for me,” Horowitz, 39, said Monday. “I used it to help me get into a rental unit. It was perfect.”

Wells Fargo and Chase don’t specifically address why they offer the money for short sales. Rather, they explain they’re cutting their losses in choosing to forgo the potentially lengthy process of foreclosure.
“Our goal is to help as many people avoid foreclosure as possible,” Chase spokeswoman Nancy Norris said, pointing out that the bank has completed more than 110,000 short sales nationwide since early 2009.
Wells Fargo offers the cash to homeowners in Florida and other states “where the foreclosure process is lengthening,” spokesman Tom Goyda said.

The average foreclosure in Florida took 619 days for cases completed in the first three months of 2011, according to RealtyTrac Inc., a foreclosure listing firm. That's more than 30 percent longer than cases completed a year ago.

The lenders decide whether to make payments after considering individual circumstances, and they don’t disclose what those are. The banks won’t say how many people have been offered the cash.
Wells Fargo and Chase are the nation’s second- and third-largest lenders, respectively, behind Bank of America. A spokeswoman for Bank of America said she couldn’t provide any information on incentives for short sales.

Chase and Wells Fargo don’t say how many home loans they own in Florida.
Wells Fargo has 700 offices and $66.1 billion in deposits statewide, according to Federal Deposit Insurance Corp. data as of June 2010, the most recent period for which statistics are available. Chase has 247 offices and $10.4 billion in deposits in Florida.

In 2008, Chase acquired Washington Mutual, and Wells Fargo took over Wachovia Corp.
The money for short sales is an effort by the lenders to be viewed as good corporate citizens as they expand aggressively in Florida after the banking takeovers, Miami-based banking analyst Ken Thomas said.
Ward Kellogg, chairman of Paradise Bank in Boca Raton, said his community bank occasionally has offered money to homeowners who cooperate in short sales. He figures Chase and Wells Fargo are agreeing to the incentives so that they can write off the bad loans as soon as possible.

“Without cooperation, it’s going to take a year and half,” Kellogg said. “With cooperation, it could be 30 to 60 days.”

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South Florida homeowners seeing big increases in renewal notices for property insurance

When Paul Hobson received his State Farm Florida renewal this month, he was shocked to find the annual premium to insure his 2,200-square-foot house had increased to $2,715 from $1,092.
“That’s a 152 percent increase. I called to make sure the figure was right,” Hobson said. “Did the end of the world happen or something?”
The State Farm office he called in Jupiter assured him the amount for his St. Lucie West home was correct and due in August.
In April, regulators granted State Farm an average 18.8 percent rate increase, but as Hobson discovered, those averages mean little because there is no cap. Some homeowners are being hit with huge increases.
"This is only the beginning. The rates are being approved quicker and easier on behalf of the insurance industry. It’s quite sad," said state Sen. Mike Fasano (R-New Port Richey), who has been an advocate for consumers on insurance. "We have a governor now who is sympathetic to the insurance industry."
Last year, state insurance regulators approved about $718 million in rate increases affecting 4 million Floridians, The Associated Press reported. No totals are available for increases approved in 2011, but they are all starting to kick in this summer.
The state-run Citizens Property Insurance Corp., Florida’s largest insurer, has 1.35 million policyholders and more than 100,000 in Palm Beach County. It is allowed to increase its rates by an average of 10 percent this year.
In addition, 19 companies have pending rate increases for this year, including some that also were given the OK last year to charge higher rates, according to the Florida Office of Insurance Regulation.
“Working families and retirees are stressed enough trying to make ends meet,” said state Rep. Joseph Abruzzo (D-Wellington). “They do not need to be hit with a two-by-four. That is what the rate increases do.”
Abruzzo and Fasano both find Senate Bill 408, which Gov. Rick Scott signed into law last month, especially onerous. The law allows expedited filing for reinsurance costs of up to 15 percent, also known as "insurance for insurers" costs. Among its many other provisions is one that requires homeowners to pay upfront for repairs caused by damage and be reimbursed later.
The bill’s proponents said the changes were needed to curb sinkhole claims, which have quadrupled in the last five years; reduce fraud; and increase competition to create a sound insurance industry. For example, the law requires insurers to have at least a $15 million surplus to pay claims.
The rate increases thus far have nothing to do with the new law. They will show up over the next year as renewal dates come up.
But with no major hurricanes in the last six years, and Florida’s high unemployment and foreclosure rates, Hobson and other homeowners are wondering why insurance increases were granted.
“If I were unemployed and could not afford it in the first place, how am I supposed to find another $1,700?” said Hobson, a financial analyst.
He doesn’t understand how such increases are allowed to happen in a regulated environment.
“Why do we need an Office of Insurance Regulation? Why do they exist? What are we paying them for?” Hobson said.
State Farm spokesman Michael Grimes said policy­holders may be seeing increases because of a reduction in wind mitigation discounts that took effect March 15.
State Farm policyholders whose renewal date is July 15 or later also will see the rate increases.
“Individual policyholders will see a varying degree of change,” Grimes said.
Factors that determine the amount of a rate increase include the property’s location, previous claims, coverage selected, deductible and discounts, Grimes said.
“This will help State Farm Florida’s efforts to remain viable in the marketplace,” Grimes said.
Lantana resident Steve Wainscott, an electrical supply salesman, has felt the new law’s impact. His insurer, Argus Fire & Casualty Insurance Co., gave him 45 days’ notice that it was leaving the state. Before the new law, the company would have had to provide 100 days’ notice.
Wainscott said: “This is an outrage.”
On May 31, the Office of Insurance Regulation granted Argus’ request to cease operation as an insurance provider in Florida. A consent order states the company lacked adequate reinsurance coverage for hurricane risk.
Meanwhile, Wainscott’s insurance agent is scrambling to find coverage, which will cost at least $600 to $700 more than the $1,400 a year Wainscott has been paying on his 1,000-square-foot house west of I-95.
“Since the three sister hurricanes [Frances and Jeanne in 2004 and Wilma in 2005], it’s been a nightmare trying to keep this thing insured,” he said.
Fasano predicts the higher rates will cause more of those who do not have mortgages to “go bare” and have no insurance coverage.
“Then when a storm hits, there will be an even bigger negative economic impact. You will have homes that will never get repairs,” Fasano said.
As for Hobson, he said a quote he obtained from Citizens is less than what State Farm wants him to pay.
“I’ve told State Farm I will be taking my vehicles elsewhere,” Hobson said.

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Home prices rise, snapping 8-month drop streak

The downward cycle in home prices broke in April after eight consecutive months of decline, according to a survey released Tuesday.
According to the S&P/Case Shiller 20-city index, prices rose 0.7% compared with March, although they fell 0.1% when adjusted for the strong spring selling season. Prices were down 4% year-over-year.
"In a welcome shift from recent months, this month is better than last -- April's numbers beat March," said David Blitzer, S&P's spokesman, in a statement. "However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season."
"It is much too early to tell if this is a turning point or simply due to some warmer weather," Blitzer added.
Any hint of good news in the troubled housing market will likely bring cheer to the industry, and there are some signs that market conditions are not quite as dire as some of the statistics may indicate.

Foreclosures for sale: Big supply, low prices

Much of the price drop over the past year can be blamed on severe price slashing for homes in foreclosure, as Federal Reserve chairman Ben Bernanke pointed out in a press conference last Wednesday. Prices for homes sold by regular sellers have held up much better.
Metropolitan Washington continued to be the strongest of the 20 cities covered by the report. Prices rose 3% in April there and have been on the plus side year-over-year, up 4%.
The worst performing market for the month was Detroit, where prices fell 2.9%. The biggest year-over-year drop was recorded by Minneapolis, where prices have plunged 11.1% since last April.

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Monday, June 27, 2011

Commercial real estate prices dip

NEW YORK – June 27, 2011 – Moody’s Investors Service is reporting that U.S. commercial real estate prices declined by 3.7 percent during the month of April, as distressed prices masked the price recovery seen in larger, higher-quality assets.

The commercial property sector continues to struggle with slumping demand, and April marks the fifth straight decline in the Moodys/Real Estate Analytics LLC commercial property price index. On the bright side, the price recovery that began a year ago among “trophy properties” in the biggest U.S. markets continued unabated.

Tad Philipp, Moody’s director of CRE research, states, “In April, we continued to see a case of where the strong are getting stronger and the weak are getting weaker. Major asset/major market prices have recovered more than half of their post-peak losses, while prices for distressed transactions have continued to bounce around the bottom.” Distressed property sales have now made up at least one-fifth of the repeat-sales transaction volume for 17 consecutive months.

Source: “Moody’s: U.S. Commercial Real Estate Prices Fall 3.7 Percent in April,” The Wall Street Journal, Melodie Warner (June 23, 2011)

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