by Paige Panzarello | Jun 9, 2021 | blog, investing, real estate
Research shows that so-called “zombie foreclosures” are emerging in much bigger numbers again as distressed homeowners abandon their properties in the belief that somebody soon will repossess them.
Remember Jingle Mail? When someone who has a mortgage decides they can’t or won’t pay it and are willing to give up their home, they mail the keys to the lender as many did during the 2008 housing crisis to popularize the term. The more industry-correct name for this is voluntary foreclosure. The borrower no longer sees a way to catch up on their mortgage, or they calculate that to do so would put them in an otherwise untenable financial position, so they move out. Thus Zombie Foreclosures.
Around 1.4 million residential homes in the U.S. stood vacant in the second quarter, amounting to 1.4% of all homes, ATTOM Data Solutions said in a new report last week. That’s up almost 28% from the first quarter and suggests that more distressed and vacant homes might end up on the market soon.
Zombie Foreclosures
Zombie Foreclosures refer to homes left vacant by homeowners who have fallen behind on their payments and misbelieve that they have to move out immediately when they receive a foreclosure notice. They don’t realize that they still own the home until the foreclosure process is completed, which can take some time.
For many reasons, a lot of lenders don’t get around to completing foreclosures. As a result, those abandoned homes might sit vacant for a long time and fall into disrepair. That’s a problem because it not only has safety implications but can also lower the value of other homes in the community.
Rick Sharga, executive vice president at RealtyTrac, an ATTOM Data Solution company, blamed the rising zombie foreclosures on government officials. He said they were trying to prevent unnecessary defaults by delaying foreclosure proceedings. But, unfortunately, the delays often last so long that the borrowers abandon the home before the lenders complete the foreclosure.
the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years potentially, Paige dedicates herself and her business to helping people improve their lives in every way. For more information got to www.CashflowChick.com
by Paige Panzarello | May 26, 2021 | blog, investing, real estate
So far, we are experiencing an uneven economic recovery with a hidden impact of lost jobs and lower-income for some homeowners. There is a complicated web of rules and regulations to help renters and homeowners stay in their homes.
The programs set up to prevent people from losing their homes won’t end any time soon. Homeowners with federally backed loans should be protected from foreclosure through the end of June. The federal eviction moratorium is set to expire at the end of this month. When the deadlines do hit, housing counselors still don’t know what to expect.
Regulations to Help Renters and Homeowners
“We just don’t know what the financial conditions of homeowners are at this point,” Ms. Loftus said. “It’s not just the mortgage that they may be dealing with. They may have delinquent utilities, insurance, car repairs. … A lot of that comes into play that makes it doubly hard to deal with their mortgage.”
Missed Mortgage Payments
For homeowners, missed mortgage payments could lead to foreclosure, the process in which the mortgage lender moves to take ownership or sell the home to recover the lost money. For renters, missed rent checks could lead to eviction when a landlord removes them from the property.
In the state of Pennsylvania, more than 9,800 homeowners said it was very likely they would have to leave their homes due to foreclosure in the next two months, according to the survey data. Another 47,700 reported they could lose the roof over their head to eviction.
The first ban on foreclosures and evictions went into effect last March and came with legislation to provide rental and mortgage assistance for tenants, landlords, and homeowners.
The federal government COVID 19 relief program has another round of economic relief, which includes $25 billion for rental assistance.
A False Sense of Safety
When the foreclosures and evictions ban lifts, the impact will hit homeowners differently, depending on their economic situation, their loan, and their lender.
“For some, it will be immediate, said Jeffrey Fondelier, vice president of operations with Blueprints. For others, we’ll be able to intervene effectively and buy time,” he said
Buying time could include applying for other funding sources or modifying parts of the loan, but it’s hard to predict how mortgage lenders will react once the moratorium lifts, he said.
Forbearance and Repayment
Some people have been making partial payments toward their overall bill, but all homeowners will be on the hook to make up the missed checks once the period of forbearance ends.
“When forbearance ends, for some people when they see the amount they owe, we may see some homeowners panicking,” said John Arentzen, a housing counselor with Advantage Credit Counseling Service.
“It’s likely homeowners won’t have to pay all the missed months back at once — something that would be overwhelming, Mr. Arentzen said — but the specifics of what happens once the forbearance period ends depends on the type of loan and the lender.”
A Shot of Novocain to the Housing Market
Michael Suley, a former real estate broker, thinks of the moratoriums on foreclosures and evictions as a shot of Novocain. It dulls the pain at the moment but won’t help homeowners, tenants, and landlords once the ban lifts and payments are still due.
the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years potentially, Paige dedicates herself and her business to helping people improve their lives in every way. For more information got to www.CashflowChick.com
by Paige Panzarello | May 12, 2021 | blog, investing, real estate
According to Realtor Magazine, “The Federal Reserve voted to keep its benchmark interest rate near zero and historic lows as the economy continues to recover from the COVID-19 pandemic.” The Fed vows to keep the benchmark rate low and further indicates that they won’t likely raise interest rates until 2023—at the earliest.
But that doesn’t necessarily translate into good news for mortgage rates—which have begun rising over recent weeks. The Fed’s benchmark rate does not directly influence mortgage rates. The Fed’s federal funds rate is not what consumers pay. It is what banks charge one another for short-term lending. However, the Fed’s action can indirectly impact what consumers end up paying on mortgage rates.
Fed Vows to Keep Benchmark Rate Low
Bloomberg reports, “In its quarterly review of monetary policy that covers 90% of the world economy, no major western central bank looks to hike interest rates this year.”
Mortgage Rates Loosely Follow the U.S. Treasury 10-Year Bond
Mortgage rates reached an all-time low in January (the 30-year fixed-rate mortgage averaged 2.65%), according to Freddie Mac. But over recent weeks, they’ve been rising, increasing more than 30 basis points since the start of the year. Last week, the 30-year fixed-rate mortgage averaged 3.05%. Investors are growing concerned about inflation.
Still, economists are quick to note mortgage rates are still hovering near all-time lows. “People have been spoiled by getting sub-3% loans,” Robert Frick, corporate economist at Navy Federal Credit Union, told CNBC.
One move that could help push mortgage rates lower: The Federal Reserve has been increasing its purchases of mortgage-backed securities to add liquidity into the market since the pandemic. “Reaffirming its commitment to ongoing asset purchases while acknowledging that a tapering is on the horizon at some point—likely pretty far off—should help slow the rise of mortgage rates,” Danielle Hale, chief economist of realtor.com®, told MarketWatch.
The Mortgage Bankers Association predicts mortgage applications to stay high even as rates tick above the 3% mark. “While mortgage rates are likely to move somewhat higher, the purchase market remains on track for a record year,” Mike Fratantoni, MBA’s chief economist, told MarketWatch.
A Worry
There is a caveat in this bullish outlook. On Wednesday, the Federal Reserve sharply ramped up its expectations for economic growth. Still, it indicated no interest rate hikes are likely through 2023 despite an improving outlook and a turn this year to higher inflation.
Higher inflation is a significant worry. The Fed is in a box. Ifbillion inflation starts to roar and comes in above 3%, the traditional medicine is to raise interest rates to cool things down. With debt now over $28 trillion and heading for $35 trillion, rising interest rates would end the stock market boom and bankrupt many businesses.
Here is CNN on April 16: “The stock market is soaring, and bond yields have pulled back after a big spike earlier this year. But make no mistake: Investors still have plenty to fret about when it comes to the threat of inflation.
The US economy is rebounding thanks to stimulus and Covid-19 vaccines. Retail sales went through the roof in March; the housing market roared back to life, and the number of people filing for unemployment claims plunged last week. And all of that follows the blockbuster March jobs report.
This growth will likely lead to inflation — and higher interest rates. The only question is when.”
Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years, Paige potentially dedicates herself and her business to helping people improve their lives in every way.
by Paige Panzarello | Apr 15, 2021 | blog, investing, real estate
According to Wolf Richter for WOLF STREET, “Everything is on ice. But when forbearance ends, forced sellers or lenders will put millions of these homes on the market.
Since last spring, a historic delinquency problem has been fermenting largely on ice and on hold by forbearance programs. “The Federal Housing Administration (FHA), which insures nearly 8 million high-risk mortgages, reported that the delinquency rate of its mortgages rose to 17.5% in February, up from 17.0% in January, matching the all-time records of September and November last year,” according to the AEI’s Housing Center.
“Low down payments, low closing costs, and easy credit qualifying,” the FHA promises. So FHA mortgages always have high delinquency rates, even during the good times, when they were already rising. But during the Pandemic, delinquencies ballooned, and they’re not improving in any way despite the improving economy.
FOMO
Despite the increasing delinquency rate, there is another phenomenon taking place that is worrying. The prices of houses are increasing rapidly. There is something called FOMO, fear of missing out. FOMO: defined as a fear of regret, which may lead to concerns that one might miss an opportunity for a profitable investment. There are many stories of buyers making offers on many houses and getting outbid. It is not uncommon to give in and buy more than you can reasonably afford.
Paying top dollar to commit yourself to a house that is not the one you want to live in to access a cheap mortgage is probably not a good idea.”
FOMO has led to many areas of the country over-leveraged, meaning debt is unsustainable. Over-leverage often leads to a downward financial spiral. Resulting in the household having to borrow more to stay solvent, and the problem gets worse. This spiral usually ends in default and foreclosure. Bankruptcy protection is often the result.”
Not the Best of Times
We may look back on these times as not the best of times. The national debt is $28 trillion, soon to be $35 trillion. I remember Sen. Everett Dirksen, long ago, saying, “A billion here and a billion there. Soon you are talking real money.” A bill passed in Congress totaled $1.9 trillion, and a $3 trillion bill is on deck. Every time we print more money for the debt and new programs, we cheapen the dollar. That is inflationary. It seems like prices are going up, but the dollar buys less and less.
If you are out on the end of the branch where even birdies won’t go, you are overleveraged. The slightest change in employment or cost of food and essentials can ruin the budget you used to buy the house leading to buyer’s remorse.
It is hard to wait for better times, but I suspect many homeowners of recently purchased houses will wish they had not been in such a hurry.
Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years, Paige potentially dedicates herself and her business to helping people improve their lives in every way.
by Paige Panzarello | Mar 10, 2021 | blog, investing, real estate
We are kicking the can down the road–again. Millions of homeowners with federally guaranteed mortgages have the option to extend their forbearance an additional six months, and the new federal foreclosure moratorium deadline has been pushed back to June 30, 2021.
According to a statement released by the White House, there are now 70% of existing single-family mortgages, including the 2.7 million homeowners currently in forbearance.
The New Federal Foreclosure Moratorium Deadline
The new forbearance and foreclosure moratorium deadline applies only to loans backed by a federal agency, Fannie Mae, or Freddie Mac. If you have a private mortgage, then these moratoriums won’t apply to you. But many private lenders are offering forbearance, so call your loan servicer and ask even if you don’t have a government-backed loan
Forbearance gives homeowners who are struggling financially the option to pause their monthly mortgage payments without hurting their credit score or paying penalties. If you’re eligible for forbearance, your options vary slightly depending on what type of loan you have. “The dates [for forbearance] vary based on who owns your loan, and based on when you got your original forbearance,” says Urban Institute senior research associate Karan Kaul.
An Opportunity
Lenders have to reserve for loan losses on delinquent loans,. Loan loss reserves are accounting entries banks make to cover estimated losses on loans due to defaults and nonpayment.
Paul Tracy explains how this works at Investing Answers. “Let’s assume Bank XYZ has made $10,000,000 of loans to various companies and individuals. Though Bank XYZ works very hard to ensure that it lends only to people who can repay their loans (and repay them on time), inevitably, some will fall behind, some will be renegotiated, and even some will default, sold off as non-performing loans.”
“Bank XYZ knows this and estimates that 1% of its loans, or $100,000, will probably never come back to it. This $100,000 estimate is Bank XYZ’s loan loss reserve, and it records this reserve as a negative number on the asset portion of its balance sheet.”
Looking forward, an estimated 2 million mortgage loans could become seriously delinquent in 2021. For some borrowers, the reason they are delinquent is job loss.
States are beginning to loosen COVID rules, allowing Americans to take their kids back to school, allowing businesses to reopen and people to go back to work. Many of the hardships that caused such financial difficulties as forbearance and threat of evictions will moderate. For some it may be too late. We have an opportunity to help the consumers stay in their homes. We can buy the non-performing loans at a deep discount from lenders, restructure the loans on better terms, and keep the borrowers in their homes. It is very satisfying work.
Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years, Paige potentially dedicates herself and her business to helping people improve their lives in every way.
by Paige Panzarello | Mar 1, 2021 | blog, investing, real estate
The most recent mortgage delinquency information came in November 2020. Delinquencies fell to their lowest level since the start of the coronavirus pandemic, back in March 2020, though the number is still far higher than the rate a year earlier.
According to the latest reading by CoreLogic, just under 6% of all U.S. mortgages — 2.7 million homes — were in some stage of delinquency at the end of November.
The Most Recent Mortgage Delinquency Information
Dr. Frank Nothaft, Chief Economist at CoreLogic, said, “This was the highest rate in more than 21 years and double the December 2009 Great Recession peak.” The largest share of troubled mortgages are seriously delinquent or more than 90 days past due. And if trends continue, an estimated 2 million mortgage loans could become seriously delinquent in 2021
“The consistent decline in serious delinquency since August is a sign of growing financial stability for families,” said Frank Martell, president, and CEO of CoreLogic. While the decline is certainly positive, the pandemic-driven distress in the mortgage market is far from over. The share of loans in government or private-sector mortgage bailout programs now appears to be stuck in place.
“It’s Just So Much More Expensive to Serve a Delinquent Loan Than a Performing Loan.”
That quote is from the lending side. On delinquent loans, lenders have to reserve for loan losses. Loan loss reserves are accounting entries banks make to cover estimated losses on loans due to defaults and nonpayment.
Paul Tracy explains how this works at Investing Answers. “Let’s assume Bank XYZ has made $10,000,000 of loans to various companies and individuals. Though Bank XYZ works very hard to ensure that it lends only to people who can repay their loans (and repay them on time), inevitably, some will fall behind, some will be renegotiated, and even some will default, sold off as non-performing loans.”
“Bank XYZ knows this and estimates that 1% of its loans, or $100,000, will probably never come back to it. This $100,000 estimate is Bank XYZ’s loan loss reserve, and it records this reserve as a negative number on the asset portion of its balance sheet.”
Looking forward, an estimated 2 million mortgage loans could become seriously delinquent in 2021. For some borrowers, the reason they are delinquent is job loss. We pray every day that the economy picks up and people go back to work. For many, that will never happen. Those jobs are lost forever.
We have an opportunity to help the consumers stay in their homes. We can buy the non-performing loans at a deep discount from lenders, restructure the loans on better terms, and keep the borrowers in their homes. It is very satisfying work.
Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years, Paige potentially dedicates herself and her business to helping people improve their lives in every way. For more information got to www.CashflowChick.com
