This housing market has been running on distress for the past year, as investors rush to buy foreclosed properties in order to take advantage of today’s hot rental market. Sales of millions of foreclosed homes pushed home sales higher, off the bottom in fact. Now that supply of distressed properties is drying up, and pulling overall home sales down with it. Sales of existing homes dropped unexpectedly in June, down 5.4 percent from the previous month, according to a new report from the National Association of Realtors.Home sales were particularly hard hit out West, where there is the largest concentration of delinquent mortgages and foreclosed properties. Overall sales out West were down 3.6 percent in June from a year ago according to the Realtors, but in the $0-100,000 price range, they were down nearly 36 percent.“More than 50 percent of all existing home sales have been to "investors" and "first timers" — thin and volatile cohorts relative to repeat buyers — looking for low-end properties to rehab and occupy or rehab and rent/flip respectively. These two cohorts have carried the market for three years,” California-based mortgage analyst Mark Hanson noted.The distressed share of home sales fell to 25 percent, while it had been running at a third for much of the past year. The first-time home buyer share also fell to 32 percent, down from 34 percent the previous month and from a normal range of 40-45 percent. First-timers are having particular trouble obtaining home loans.So why is the supply of foreclosures so low when there are so many hungry investors waiting to pounce? There should be plenty to go around, given that the total U.S. delinquency rate is at 7.2 percent, representing 5.57 million loans either delinquent or in the foreclosure process, according to Lender Processing Service’s June Mortgage Monitor.The answer is the process.This from Fannie Mae’s most recent quarterly report: “Our foreclosure rates remain high: however, foreclosure levels were lower than they would have been during the first quarter of 2012 due to delays in the processing of foreclosures caused by continuing foreclosure process issues encountered by our servicers and changing legislative, regulatory and judicial requirements.”New laws in Nevada, criminalizing faulty foreclosure processing ground that state’s foreclosure machinery to a near halt. Foreclosure filing there down 61 percent annually in the first half of this year according to RealtyTrac. California just passed a new law requiring mortgage servicers to prove they have the right to foreclose by showing title of the loan. That is sure to create huge delays, as many of these distressed loans were sliced and diced and sold off in strips to investors during the housing boom. NAR chief economist Lawrence Yun also noted that many foreclosure transactions are either getting delayed or not clearing at all due to title issues, a new phenomenon.“This is due to increasing legal risk,” said Yun, noting a 10-15 percent fallout rate, up from a negligible rate just months ago.In addition, major bank servicers are now complying with a $25 billion mortgage servicing settlement with the U.S. Department of Justice and state attorneys general. Part of that is offering principal reduction modifications to delinquent borrowers. Bank of America [BAC Loading... () 
] alone put 200,000 delinquent loans on hold while it sends out letters offering to slash loan balances.A lack of supply, even of distressed homes, should help settle this housing market, but the trouble is that regular buyers, move-up buyers, are, in large part, unable to participate in this recovery. Negative equity (including second liens) and near negative equity (less than 5 percent equity) is trapping an estimated 30 million potential repeat buyers in their homes, according to Hanson.— By CNBC's Diana Olick— CNBC Producer Stephanie Dhue contributed to this report.Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick
Foreclosure starts” were down 2.6 percent in April from the previous month, according to a new report from Lender Processing Services. As lenders continue to try to modify delinquent mortgages or offer foreclosure alternatives, like short sales or deeds-in-lieu of foreclosure, the number of loans entering the foreclosure process are falling. So-called “foreclosure starts” were down 2.6 percent in April from the previous month, according to a new report from Lender Processing Services. But it’s not all good news. FHA loans, those insured by the federal government, saw a huge spike in foreclosure starts, up 73 percent during the month, according to the LPS report. Loans originated in 2008 and 2009 are primarily to blame, although all FHA vintages did see some, albeit far smaller, increases. “In 2008, when the loan origination market virtually dried up, the FHA stepped in to fill the void,” explained Herb Blecher, senior vice president for LPS Applied Analytics. “FHA originations tripled that year, and increased to five times historical averages in 2009. High volumes like that, even with low default rates, can produce larger numbers of foreclosure starts.” Still the numbers mean a big hit to the FHA, which is already operating at well below its congressionally mandated two percent capital reserve ratio. “The 2008 vintage alone represents some $14 billion of unpaid balances in foreclosure, and the overall FHA foreclosure inventory continues to rise,” adds Blecher. FHA took on a huge volume of loans in 2008 and 2009, “with relatively little oversight of underwriting and lending practices,” according to Guy Cecala of Inside Mortgage Finance. That has since changed of course, and FHA is aggressively going after lenders for certain claims and is pursuing large settlements. In the recent mortgage servicing settlement with the nation’s top five lenders, FHA got over $1 billion from the big banks. “There is no question that claims—or losses—on FHA’s 2008 and 2009 business will be high,” says Cecala. “But if FHA is successful in getting large banks and FHA lenders to effectively cover those losses via large cash settlements, then the damage may be contained.” Questions? Comments? document.write("
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Close to twelve million borrowers are now in a negative equity position on their homes because so many other borrowers were unable to afford their mortgages. The logical assumption would then be that as foreclosures ease, organic home prices will rebound. But what if the current, unique state of the housing market turns that assumption on its head? 
One in every 624 U.S. households received a foreclosure filing in January, up 3 percent from the previous month, according to a new report from RealtyTrac. Foreclosure activity froze in many states in 2011, due to processing delays after fraud, or so-called "Robo-signing," were uncovered in the fall of 2010. The thaw is now on."We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation's largest lenders," said RealtyTrac's CEO Brandon Moore in a written release. "Foreclosure activity increased on a year-over-year basis for the first time in more than 12 months in Florida, Illinois, Indiana and Pennsylvania, following a pattern we saw in late 2011 in states such as California, Arizona and Massachusetts."While states that do not require a judge to preside over foreclosure proceedings, like California, saw a jump in filings toward the end of last year, judicial states have all but stalled. That will now change, thanks to the $26 billion dollar government-lender/servicer settlement. There will still be some delays on individual state levels, but the wheels are turning again, and that means more bank repossessions and more foreclosed properties heading to the re-sale market.Bank repossessions, the final stage of the foreclosure process, increased at least 30 percent year-over-year in several states, including Massachusetts, which saw a 75 percent spike. Bank-owned or REO (real estate owned) activity hit a 16-month high in Illinois and a 15-month high in Indiana. Default notices, the first stage of foreclosure, were flat nationally in January, but spiked in judicial states, like Connecticut and Pennsylvania (up 112 percent) and even in non-judicial states like Maryland (up 100 percent).Nevada still posted the highest foreclosure rate, with one in every 198 households receiving a filing, despite an 8 percent drop in foreclosure activity. Nevada is a non-judicial foreclosure state, so the foreclosure backlog has been clearing for the last several months.The situation is the same in California, where foreclosure activity dropped to a 50-month low, but the state still posted the second highest foreclosure rate in the nation. More than 51,000 borrowers received a foreclosure filing in January. California cities still account for nine of the top ten metro foreclosure rates, according to RealtyTrac.As optimism seems to abound for the spring, at least among the nation's home builders whose sentiment index jumped to the highest level in four years this month, foreclosures still stand in the way of a robust recovery.Distressed property sales lower the value of homes around them, and that pushes more borrowers into a negative equity position, owing more on their mortgages than their homes are currently valued. Until banks work through the enormous backlog of foreclosures, which number in the millions, home prices will not hit a firm bottom, especially in the most troubled local real estate markets.Questions? Comments? document.write("
Oakland, California-based Waypoint Real Estate Group, a major acquirer of so-called “REO to Rental” (Real Estate Owned) just announced a partnership with a private equity firm, Menlo Park, California-based GI Partners, to buy foreclosed properties.GI Partners has approximately $6 billion of capital under management, 
The Obama administration, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, CNBC has learned.The Obama administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials.There currently are about a quarter of a million foreclosed properties on the books of Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), and millions more are coming. The foreclosure processing delays of last year created a mammoth backlog of properties yet to be processed, which are just now being re-started. One of the initiatives of this program is for the federal government to be in the position to mitigate and manage any new wave of foreclosures, sources say. Late-stage delinquencies still in the pipeline number close to two million, according to a new report from 
Justin Sullivan | Getty ImagesIs there a double dip in foreclosures on the horizon?Just as we saw a double dip in home prices, we may be seeing another surge in foreclosures. And just as the home price scenario was caused by artificial government stimulus, in the form of the home buyer tax credit juicing home sales only briefly, the foreclosure scenario was caused by real negligence, in the form of the "robo-signing" paperwork scandal. Banks and servicers stopped foreclosures entirely for a time after the malpractice was discovered, and courts delayed the process, picking through papers as foreclosures were resubmitted; that is now turning around. The system is ramping up again, and foreclosure starts are up dramatically, more than 10 percent in June from the previous month, according to Lender Processing Services (LPS). The good news of the past few months has been that while the end game is quickening, as stalled foreclosures are making their way through the system at a faster pace, new delinquencies were decreasing, leading us all to believe that the crisis is abating. Well think again. New delinquencies rose 2.4 percent in June, which isn't a lot, but it is still the wrong direction. This as the pipeline is still so clogged that foreclosure timelines continue to rise. The average loan in foreclosure in June was delinquent a record 587 days, and more than 40 percent of 90+-day delinquencies have not made a payment in more than a year. For loans in foreclosure, 35 percent have been delinquent for more than two years, according to LPS. Today's ![[cnbc explains]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_t4R-_100AGheV29Roq7A2cQ5yIQ2zapDHjTCEG4mD_BoZ2HKdiDiA9BrS4sN4lZ3vTnAQHV72gixk_Il9DVwgt6O7nrC2-bdpM-E6w7GbtT9uIOdKv2p41=s0-d){kind=small}
on anything but a crippled foot. Questions? Comments? document.write("
The comprehensive six-CD audio course is packed with educational information and resources that ensures first-time and experienced real estate flippers alike pocket as much cash as possible investing in foreclosures. It is adapted from the real world successes of Foreclosure.com Founder, President and CEO, Brad Geisen. Before turning 24 years old, Brad was already a self-made millionaire because of smart foreclosure investing. And more than 20 years later he hasn't slowed down one bit! In fact, "Get Rich Buying Real Estate Foreclosures" features a bonus DVD that follows Brad throughout various investment property inspections. He tells you firsthand all the things you should and shouldn't do when rehabbing homes.
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