TEAM EMPOWERMENT MORTGAGE CHATTER: Sept 14; Houses Underwater: The Tide Is About To Rise; Western States Post Big Jump In Foreclosure Starts; Responsible Home Owners To Get Aid In Expanded Program; Stay Profitable With A Budget & Goals

“The best thing workers can bring to their jobs is a lifelong thirst for learning.” – Jack Welch





Two separate housing reports came out in the last week which discussed different challenges facing the current real estate market. The first was CoreLogic’s Negative Equity Report and the second was JP Morgan Chase’s Home Price Monitor. Each report delivered some difficult news. However, if you piece both reports together, we can see future challenges are in store for home values.


Negative Equity

When a home’s current value is less than the existing mortgage on that home, the house is said to be in a “negative equity” situation (other terms used to describe this situation are “underwater” and “upside down”.


The CoreLogic report stated:


“…that 10.9 million, or 22.5 percent, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2011… An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the second quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide.”

This is important because studies show that people in a negative equity situation are more likely to default on their mortgage payments than people who have equity in their homes.


Home Prices

Many experts believe that housing prices will soften through this winter. According to an article in HousingWire, analysts from JP Morgan Chase announced in their recent Home Price Monitor:


“Home prices could dip another 6% to 7%, before hitting rock bottom in early 2012.”

Let’s Combine the Information

The CoreLogic report said there are an additional 2.4 million households with less than 5% equity. The JP Morgan Chase report said that prices will drop another 6 to 7% in the next six months. That leaves an additional 2 million+ homes in the near future that will be faced with the decision to pay (or not pay) the mortgage payment on a house no longer worth the amount of that mortgage.


Bottom Line

History has shown that a percentage of those 2 million+ homes will enter the distressed property category as some families decide it no longer makes sense to pay their mortgage. Any increase in short sales or foreclosures will impact prices in an area.







Foreclosure filings and sales jumped significantly throughout areas in the West, reversing what had been a declining trend the past several months, ForeclosureRadar reports. The surge was driven by a drastic increase in filings by Bank of America, the company reports.


Bank of America and related entities posted a 116 percent increase from July to August in foreclosure starts, ForeclosureRadar reports in its August 2011 report. Foreclosure starts represent the first notice filed, either a notice of default or notice of trustee sale, depending on the state.


“Bank of America appears to be primarily responsible for the surge in foreclosure starts this month,” says Sean O’Toole, CEO of “Since their average time to foreclose has recently increased to more than a year, it is unclear that these foreclosure starts will lead to an increase in foreclosure sales anytime soon.”


The following is data comparing July to August 2011 foreclosure filings for the western states ForeclosureRadar analyzed in its latest report.




Notice of default: n/a


Notice of trustee sale filings: +15%


Properties sold back to bank (REO): -8.1%




Notice of default: +69.5% (its highest level in a year)


Notice of sale: +6.1%


Sold back to bank: +12.3%




Notice of default: +44.2%


Notice of sale: -9.9%


Sold back to bank: +1.2%




Notice of default: +35.6%


Notice of sale: n/a


Sold back to bank: +243.3%




Notice of default: n/a


Notice of sale: +3.9%


Back to bank: -29.4%








The Obama administration is expected to allow more home owners to take advantage of current low interest rates by expanding its two-year old refinancing program, the Home Affordable Refinance Program.

To a joint session of Congress on Thursday, President Obama vowed to help “responsible home owners” refinance their mortgage so that they could reduce their monthly mortgage payments. It’s “a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices,” Obama told Congress last week.


The Home Affordable Refinance Program was originally designed to help home owners who could not qualify for loans from private companies. Fannie Mae and Freddie Mac would then offer loans at lower rates to borrowers with mortgage debts up to 125 percent of the value of their homes.


Through the end of June, the companies had refinanced only 838,000 mortgages through the program with critics mostly blaming the low number on falling home values and strict income requirements that reduced the number of eligible borrowers.


The Obama administration announced late last week that they plan to issue new guidelines for the program in the coming weeks, The New York Times reported.








The economic crisis and the housing downturn have put a damper on realty firms’ profitability, and many are having trouble shifting to new business models.


Experts say the housing boom enabled agents and brokers to operate inefficiently, but falling home prices have since put downward pressure on commission income and forced them to pay closer attention to their operations.


In order to remain profitable, experts say firms need to create a budget and impose reasonable goals for themselves and their agents. They should make generating profits a primary goal, which can be accomplished by developing separate budgets for the company and its agents and budgeting to turn a profit. By giving agents goals, they will be motivated to succeed and to communicate regularly with the brokerage. A SWOT (Strengths, Weaknesses, Opportunity, Threats) analysis is important to ensure that goals are being met, flagging big outstanding expenses and other potential problem areas and reviewing the budget every quarter.


Among other things, brokerages need to track the coming and going of funds by monitoring deals; track the success of each agent to ensure they are profitable, which will boost the company’s profitability in turn; and consider partnering with a firm like Lone Wolf, which offers brokerWOLF and WOLFconnect to boost office efficiency by managing accounting and back office functions.


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