Monthly Archives: October 2014

Seattle-area home prices up again

After retreating a bit in August, Seattle-area home prices rose again last month, according to a new report.

The median price of a King County house that sold in September was $460,000, up 5.3 percent from August and 9.5 percent from a year ago, the Northwest Multiple Listing Service reported Monday. Seattle’s median price was $517,000, up 3.4 percent from August 12.15 percent from a year ago.

“It’s looking pretty frothy out there,” said Stephen O’Connor, director of the Runstad Center for Real Estate Research at the University of Washington. “Double-digit increases, it’s not the norm.”

Prices had fallen a bit in the city and county from July to August, although they still rose from August 2013. O’Connor noted that August tends to be a slow month in Seattle.

One reason for the rising prices is that inventory (how long it would take all the homes on the market to sell at the current rate of sales) remains well below that four to six months considered the balance area between supply and demand.

Last month, King County had 2.35 months worth of inventory, up from 2.08 months of inventory in August and 2.26 months in September 2013. Seattle’s inventory was 1.62 months, up from 1.36 months in August but down from 1.83 months a year ago.

“At the risk of sounding incredibly obvious, it is supply and demand,” O’Connor said.

The number of homes on the market actually fell last month from a year earlier, by 11.4 percent in Seattle and 0.14 percent countywide. Sales ticked up by 0.2 percent in the city and 4 percent countywide. Pending sales — which don’t all close, but can be the best indicator of recent activity — fell by 2.9 percent in Seattle but rose 4.35 percent countywide.

Improving economic numbers nationwide may spur the Federal Reserve to raise interest rates, and that could push potential buyers off the fence, O’Connor said. “Certainly, there’s going to be plenty of people who go, ‘Yeah, I’d better jump in now.”

Prices should impact sales over the coming year, Gary O’Leyar, designated broker/owner of Prudential Signature Properties in Seattle, said in a listing service news release. “I foresee a general leveling off in overall market activity as prices approach the affordability ceiling for many buyers.”

George Moorhead, designated broker and owner of Bentley Properties/America’s Home Caretakers in Bothell, predicted prices would rise slowly, while sales would dip.

“What we are seeing is market correction and a balance of pricing, inventory levels and overall market health,” he said.

In the news release, local real estate professionals noted several trends.

There’s stiff competition for homes over $2 million, Windermere Real Estate President OB Jacobi said. “I attribute this to Seattle’s economic boom, which is attracting an increasing number of high-paying, executive level professionals and international interest.”

Declines in bank-owned homes on the market and investors buying lower-end prices are pushing up median prices, according to Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma. This is “helping sellers as well as appraisers justify values,” he said.

Chinese buyers are making “very significant purchases of prime properties,” particularly east of Seattle, according to O’Leyar. Beeson agreed, saying high prices in Vancouver and San Francisco are pushing these buyers here.

John Deely, principal managing broker at Coldwell Banker Bain in Seattle, said high rents are spurring parents to buy places for children attending local universities.

Americans face post-foreclosure hell as wages garnished, assets seized.

Many thousands of Americans who lost their homes in the housing bust, but have since begun to rebuild their finances, are suddenly facing a new foreclosure nightmare: debt collectors are chasing them down for the money they still owe by freezing their bank accounts, garnishing their wages and seizing their assets.

By now, banks have usually sold the houses. But the proceeds of those sales were often not enough to cover the amount of the loan, plus penalties, legal bills and fees. The two big government-controlled housing finance companies, Fannie Mae and Freddie Mac, as well as other mortgage players, are increasingly pressing borrowers to pay whatever they still owe on mortgages they defaulted on years ago.

Using a legal tool known as a “deficiency judgment,” lenders can ensure that borrowers are haunted by these zombie-like debts for years, and sometimes decades, to come. Before the housing bubble, banks often refrained from seeking deficiency judgments, which were seen as costly and an invitation for bad publicity. Some of the biggest banks still feel that way.

But the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses. Now, at least some large lenders want their money back, and they figure it’s the perfect time to pursue borrowers: many of those who went through foreclosure have gotten new jobs, paid off old debts and even, in some cases, bought new homes.

“Just because they don’t have the money to pay the entire mortgage, doesn’t mean they don’t have enough for a deficiency judgment,” said Florida foreclosure defense attorney Michael Wayslik.

Advocates for the banks say that the former homeowners ought to pay what they owe. Consumer advocates counter that deficiency judgments blast those who have just recovered from financial collapse back into debt — and that the banks bear culpability because they made the unsustainable loans in the first place.

‘Slapped to the floor’

Borrowers are usually astonished to find out they still owe thousands of dollars on homes they haven’t thought about for years.

In 2008, bank teller Danell Huthsing broke up with her boyfriend and moved out of the concrete bungalow they shared in Jacksonville, Florida. Her name was on the mortgage even after she moved out, and when her boyfriend defaulted on the loan, her name was on the foreclosure papers, too.

She moved to St. Louis, Missouri, where she managed to amass $20,000 of savings and restore her previously stellar credit score in her job as a service worker at an Amtrak station.

But on July 5, a process server showed up on her doorstep with a lawsuit demanding $91,000 for the portion of her mortgage that was still unpaid after the home was foreclosed and sold. If she loses, the debt collector that filed the suit can freeze her bank account, garnish up to 25 percent of her wages, and seize her paid-off 2005 Honda Accord.

“For seven years you think you’re good to go, that you’ve put this behind you,” said Huthsing, who cleared her savings out of the bank and stowed the money in a safe to protect it from getting seized. “Then wham, you get slapped to the floor again.”

Bankruptcy is one way out for consumers in this rub. But it has serious drawbacks: it can trash a consumer’s credit report for up to ten years, making it difficult to get credit cards, car loans or home financing. Oftentimes, borrowers will instead go on a repayment plan or simply settle the suits—without questioning the filings or hiring a lawyer—in exchange for paying a lower amount.

Though court officials and attorneys in foreclosure-ravaged regions like Florida, Ohio and Illinois all say the cases are surging, no one keeps official tabs on the number nationally. “Statistically, this is a real difficult task to get a handle on,” said Geoff Walsh, an attorney with the National Consumer Law Center.

Officials in individual counties say that the cases, while virtually zero a year or two ago, now number in the hundreds in each county. Thirty-eight states, along with the District of Columbia, allow financial institutions recourse to claw back these funds.

“I’ve definitely noticed a huge uptick,” said Cook County, Illinois homeowner attorney Sandra Emerson. “They didn’t include language in court motions to pursue these. Now, they do.”

‘A curse’

Three of the biggest mortgage lenders, Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, all say that they typically don’t pursue deficiency judgments, though they reserve the right to do so. “We may pursue them on a case-by-case basis looking at a variety of factors, including investor and mortgage insurer requirements, the financial status of the borrower and the type of hardship,” said Wells Fargo spokesman Tom Goyda. The banks would not comment on why they avoid deficiency judgments.

Perhaps the most aggressive among the debt pursuers is Fannie Mae. Of the 595,128 foreclosures Fannie Mae was involved in—either through owning or guaranteeing the loans—from January 2010 through June 2012, it referred 293,134 to debt collectors for possible pursuit of deficiency judgments, according to a 2013 report by the Inspector General for the agency’s regulator, the Federal Housing Finance Agency.

It is unclear how many of the loans that get sent to debt collectors actually get deficiency judgments, but the IG urged the FHFA to direct Fannie Mae, along with Freddie Mac, to pursue more of them from the people who could repay them.

It appears as if Fannie Mae is doing just that. In Florida alone in the past year, for example, at least 10,000 lawsuits have been filed—representing hundreds of millions of dollars of payments, according to Jacksonville, Florida-based attorney Chip Parker.

Parker is about to file a class action lawsuit against the Dallas-based debt collection company, Dyck O’Neal, which is working to recoup the money on behalf of Fannie Mae. The class action will allege that Dyck O’Neal violated fair debt collection practices by suing people in the state of Florida who actually lived out of state. Dyck O’Neal declined to comment.

In Lee County, Florida, for example, Dyck O’Neal only filed four foreclosure-related deficiency judgment cases last year. So far this year, it has filed 360 in the county, which has more than 650,000 residents and includes Ft. Myers. The insurer the Mortgage Guaranty Insurance Company has also filed about 1,000 cases this past year in Florida alone.

Andrew Wilson, a spokesman for Fannie Mae, said the finance giant is focusing on “strategic defaulters:” those who could have paid their mortgages but did not. Fannie Mae analyzes borrowers’ ability to repay based on their open credit lines, assets, income, expenses, credit history, mortgages and properties, according to the 2013 IG report. “Fannie Mae and the taxpayers suffered a loss. We’re focusing on people who had the ability to make a payment but decided not to do so,” said Wilson.

Freddie Mac spokesman Brad German said the decision to pursue deficiency judgments for any particular loan is made on a “case-by-case basis.”

The FHFA declined to comment.

But homeowner-defense lawyers point out that separating strategic defaulters from those who were in real distress can be tricky. If a distressed borrower suddenly manages to improve their financial position – by, for example, getting a better-paying job – they can be classified as a strategic defaulter.

Dyck O’Neal works with most national lenders and servicing companies to collect on charged-off residential real estate. It purchases foreclosure debts outright, often for pennies on the dollar, and also performs collections on a contingency basis on behalf of entities like Fannie Mae. “The debt collectors tend to be much more aggressive than the lenders had been,” the National Consumer Law Center’s Walsh said.

A big reason for the new surge in deficiency claims, attorneys say, is that states like Florida have recently enacted laws limiting the time financial institutions have to sue for the debt after a foreclosure. In Florida, for example, financial institutions now only have a year after a foreclosure sale to sue — down from five.

Once financial institutions secure a judgment, they can sometimes have years to collect on the claim. In Maryland, for example, they have as long as 36 years to chase people down for the debt. Financial institutions can charge post-judgment interest of an estimated 4.75 percent a year on the remaining balance until the statute of limitation runs out, which can drive people deeper into debt.

“This is monumentally unfair and damaging to the economy,” said Ira Rheingold, the executive director of the National Association of Consumer Advocates. “It prevents people from moving forward with their lives.”

Software developer Doug Weinberg was just getting back on his feet when he got served in July with a $61,000 deficiency judgment on his old condo in Miami’s Biscayne Bay. Weinberg thought the ordeal was over after Bank of America, which rejected Weinberg’s short sale offers, foreclosed in 2009.

“It’s a curse,” said Weinberg. “It’s still haunting me. It just doesn’t go away.”



Washington Mutual executives being sued

Six years after one of biggest bankruptcy filings in U.S. history, the case of Washington Mutual Inc. plods on.

On Tuesday, WMI Liquidating Trust filed a lawsuit against 16 former officers and directors of WaMu in King County Superior Court. WMI Liquidating Trust was formed in 2012 after a lengthy bankruptcy proceeding.

The suit alleges the 16 defendants “breached their fiduciary duties to Washington Mutual Inc. and committed corporate waste by squandering the company’s financial resources.”

The 16 executives named in the suit include Thomas W. Casey, former CEO Kerry Killinger, Stephen J. Rotella, Robert J. Williams, Jr., Alan H. Fishman, Stephen E. Frank, Charles M. Lillis, James H. Stever, Margaret Osmer McQuade, Michael K. Murphy, Orin C. Smith, Phillip D. Matthews, Regina T. Montoya, Stephen I. Chazen, Thomas C. Leppert, and William G. Reed, Jr.

“WMI Liquidating Trust is seeking damages, costs and reasonable attorneys’ fees, and other relief as the court deems just and proper, including prejudgment interest at the legal rate,” the company said in a statement.

Washington Mutual’s decline was chronicled in a series of articles in the Puget Sound Business Journal that became a finalist for a Pulitzer Prize.

Average rent is now $1,338 in King County.

Seattle’s hot job scene continues to push up apartment rents, although a building boom may soften the market next year, according to two new reports.
Average rent is now $1,338 in King County, up 5.4 percent both from six months ago and 9 percent from a year earlier, Dupre + Scott Apartment Advisors reported Monday.
Tom Cain, of Apartment Insights, reported that rents in King and Snohomish counties rose 2.5 percent in the third quarter and 8.1 percent over the past year.
The rent increases includes many new apartments, which tend to rent for more, Dupre + Scott principal Patty Dupre noted in the report. Take out new apartments, and the region-wide rent increase falls from 4.7 percent to 3.9 percent since March, and from 8.2 percent to 6.3 percent over the past year.
Because of up and down cycles, rents have gone up by an average of just 3.4% a year since 1997, Dupre said. “The increases we’ve seen lately aren’t unusual when the economy is strong. But they happen less often than investors think, and they barely make up for the downturns.”
Nearly three-quarters of landlords Dupre + Scott surveyed said they planned to raise rents another 4 percent by next March.
The King County vacancy rate is 3.4 percent, which is unchanged from March but down from 3.8 percent last September, according to Dupre + Scott. Cain reported vacancy at 4.3 percent in King and Snohomish counties, up from 4.17 last quarter but down from 4.4 percent a year ago.
Across the region, the “gross” vacancy rate, which includes new buildings in lease-up, is 4.7 percent, down from 5 percent in March, according to Dupre + Scott. Similarly, Cain reported a gross vacancy rate of 5.86 percent, down from 6.35 percent.
“The drop in the gross vacancy rate means that demand is still outpacing supply which is helping new units lease up,” Dupre said in her report. “There are 8,900 units in lease-up today and they are already 74 percent occupied.”
Seattle’s economy takes the credit, or blame, for this, depending on your perspective. The Dupre + Scott report noted that Conway Pedersen Economics reported the region added 48,200 jobs since the third quarter of last year. So far this year, the number of people in the region exchanging out-of-state driver’s licenses for Washington licenses is up 17 percent from the same period last year.
While lots of people are moving to Seattle, developers also are building lots of apartments. Dupre + Scott report that 8,700 apartments are hitting the market this year and they expect another 12,000 next year.
Cain expects 8,106 apartments to hit the two-county area this year, up from 5,233 in 2013, with another 11,231 coming next year.
This will soften the market and increase use of rental concessions, such as free months of rent, the experts said.
“The potential cloud on the horizon has been and continues to be the amount of new construction,” Cain wrote, adding: “These numbers suggest that the market will weaken slightly through 2015.  Yet, if the current level of economic growth continues, the market will still be healthy next year.”
Right now, just 14 percent of apartment buildings in the region are offering concessions, and those concessions average $600, Dupre + Scott reported. Cain reported that 17.5 percent of buildings in King and Snohomish counties are offering concessions, down from 20.9 percent last quarter, and those incentives averaged $8 per month down $1.
Concessions are already rising in areas with lots of new construction, such as central Seattle, where they average $1,215, according to Dupre + Scott.

Published 6:21 pm, Monday, September 22, 2014

Special Fannie Mae loan program comes to a close

The country’s biggest provider of mortgage money has eliminated its popular financing plan for foreclosed properties, another sign the housing market has returned to healthy and hearty. The Fannie Mae HomePath program terminates October 6. Not only did it provide attractive financing for owner-occupants, but it also included a financing option for second homebuyers and investors.  The HomePath financing program offered 3 percent down-payment options for owner-residents, 10 percent down payments for second homebuyers and 15 percent down-payment plans for investors on Fannie Mae REO properties.  Participating borrowers usually need a 660 credit score and they are required to borrow at least $50,000. Down payment (at least 3 percent) can be funded by savings, employer, gift, grant, or a loan from a nonprofit organization, state or local government.  Other components that made this program attractive are no appraisal and no Private Mortgage Insurance (PMI). All of this afforded a very quick closing time, typically about two weeks.  Eliminating those two components was huge. Accurate and timely appraisals have been a hotly contested topic in the housing industry over the past few years as many neighborhoods have dipped (sometimes yo-yoed) in value. Mortgage insurance, typically required on loans with less than a 20 percent down payment, can be costly. Not having to pay mortgage insurance would equal an approximate .75 savings on an interest rate (4.5 percent instead of 5.25 percent).

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