As more and more Michigan mortgage holders suffer through increased on interest rates and are forced to foreclose on their homes, others are swooping in to buy at low, low prices. But be warned:
Buying foreclosed property is not for novices.
A new mortgage broker is about to enter the Ann Arbor housing market, despite the slowdown in residential housing construction and sales.
Few possessions are more valuable than the roof your head. Yet a growing number of people are facing foreclosure on their homes because they cannot keep up with the monthly home loan payments.
The national meltdown of the subprime loan market is causing its share of Michigan mortgage casualities, as major lenders have closed and smaller ones are struggling with a lower volume of loans.
Eric Whitcomb stares at the Hillsdale house he lost to foreclosure and wonders: What could he have done differently?
“The big thing would be not to [mortgage refinance],” said Whitcomb. The 31—year—old now lives in a mobile home park where his monthly lot rent is almost as high as his first house payment.
“I was doing OK with the original loan with Southern Michigan Bank & Trust,” he said. “After I refinanced with an out—of—town lender, things got worse. My payment went from $300 a month to about $475.”
A job layoff figured into the scenario, as did confusion over the computer - based unemployment reporting system. Confusion reigned to some extent, said Whitcomb, as he scrambled to borrow from Peter to pay Paul. There were so many things happening, so much paperwork.
“I took out a personal loan to try to bring the house payments up, and then I couldn’t pay that,” Whitcomb said, shaking his head. “Then, I lost the house and the car. It just all happened so fast.”
Whitcomb’s story sounds all too familiar to a growing number of Hillsdale County residents. At last count, at least six homes a week go to the sheriff’s sale at the courthouse at 10 a.m. each Friday morning.
The Michigan housing market is being hit hard overall, but the foreclosure rate is rising fastest in five other states: California, Texas, Colorado, Florida and Nevada.
Reasons cited for the increased foreclosure rates are many and diverse.
- Poor economy in Michigan.
- Bust in the national housing speculation boom.
- Increased number of bad credit home loans to higher risk borrowers — known as the “sub prime market.”
- Predatory lending. Contracts carry high prepayment penalties, high fees and/or escalating payments if payments are missed.
- Loan competition leading to loans at more than 100 percent value.
- Adjustable rate mortgages (ARMs ) catch homeowners off-guard when their mortgage payments suddenly rise.
In general, lending professionals see the greater number of mortgage defaults in the third to fifth year and more can be expected, according to Doug Duncan, chief economist at the Mortgage Bankers Association.
“(And ) if there’s a weakening in employment (locally ), it will lead you to weakening house prices,” Duncan recently told a group of real estate writers meeting in Charlotte, N.C.. “That’s the market ‘normalizing’, but it’s not a price bubble, it’s an employment problem.”
For an individual homeowner, it’s a lot simpler than all that “economic analysis.” They are losing their house, usually after dealing with other hard-hitting personal issues, such as job loss, divorce or family illness.
Few Michigan mortgage holders realize they have rights in the system, which is designed to help them through difficult times but comes across more often as alien, unfamiliar and threatening. For suggestions on dealing with a foreclosure or cleaning up credit in the aftermath, see accompanying information box.
Click here to read the rest of this article.
How slow is the Michigan housing market?
Rather than selling their Mason, Mich., home the old-fashioned way, Mike and Anne Dunivon are throwing a Hail Mary pass of sorts, called the “Own This Home In Mason Essay Contest.”
According to the Lansing State Journal, they’re inviting 1,000 people to explain, in 250 words or less, why they want the house. The essays, each accompanied by a $200 entry fee, will then be judged by a board appointed by the Mason Area Historical Society.
That’s 1,000 entry fees, at $200 a pop, adding up to $200,000.
The house was on the market for $150,000. The appraised value five years ago was just $135,000, but one home improvement loan and many updates later, the asking price has risen considerably.
Also, the difference between the actual fair market value of the house and the $200,000 the couple hopes to collect will cover the advertising and legal costs associated with the contest.
The prize is a 960-square-foot single-family home with a heated in-ground pool, fireplace, remodeled kitchen and a finished basement. The Dunivons aren’t the first people to turn slow-moving real estate into a contest prize. But if you think it’s an alternative to open houses and low-ball offers, think again.
After sitting down with their lawyer to make sure all the Ts were crossed and the laws of the land obeyed, the Dunivons ended up with three pages of rules and regulations, which you can read here.
And of course, there is no guarantee the Dunivons will get the 1,000 entry fees they say they need to hit their asking price and make the enterprise financially viable. The rules address that contingency.
If they don’t get 1,000 takers by June 1, the Dunivons have the right to extend it by up to 90 days. If that still doesn’t do the trick, they’ll refund each entry fee (minus a $30 fee) - and return to Square One.
But for the moment, the Dunivons have pushed that prospect from their minds.
“Somebody is going to get a house for $200,” Anne said.
And 999 will be able to say they tried. Hey, that sure beats qualifying for a six-figure Michigan mortgage. Who would blame them for taking a shot?
SOURCE: Lansing State Journal
The State of Michigan’s above-average reliance on risky bad credit home loan products is inflaming the state’s real estate downturn and pushing Michigan near the top of the list of states suffering mortgage delinquencies, the Battle Creek Enquirer reports today.
Wayne County saw the fourth-highest mortgage foreclosure rate in the nation in February, RealtyTrac reports. A recent Consumer Federation of America study showed that Battle Creek ranked in the top 10 metro areas in the United States for subprime mortgage refinancing of homes in 2005.
More than half of the mortgage refinance activity came in the form of subprime home loans, the study revealed.
The problems weigh heavily on the Michigan housing market - specifically moderate-income homeowners who have subprime mortgages, given to people with shaky credit histories.
Subprime loans allow such buyers to own a home, but only at mortgage rates that can run several percentage points higher than a standard (prime) rate. Michigan’s bad economy makes matters worse for residents.
Angela Gavelis inherited her grandmother’s house in southwest Detroit and in 2005 took out a $60,000 subprime mortgage at 8.5 percent to fix it up. But she wasn’t able to find a job, fell behind in her payments, and her mortgage lender foreclosed last year.
She filed for bankruptcy and is fighting the foreclosure.
“It needed a whole lot of work, a new boiler and everything, but they would not work with me when the payments started falling behind,” she said Friday. “I just didn’t count on the no-job situation.”
In the past few years, subprime lending has soared as a percentage of all U.S. mortgages as lenders — eager for income from mortgage-writing fees — began to loosen credit standards.
On the upside, this enabled many buyers to own a home for the first time. But in recent weeks, the rising volume of bad loans in the subprime market has shaken national credit markets and led to the failure of several lending organizations.
About 44,000 of the subprime Michigan mortgage loans — or 21 percent of the total of 210,000 — were delinquent at the end of last year. That was almost three times the state’s overall mortgage delinquency rate, which itself ranked among the highest in the nation.
It also was well above the national delinquency rate for subprime loans of 13.3 percent, according to a survey released this month by the Mortgage Bankers Association, a national trade group.
“There’s no question that Michigan is among the worst performing areas in the country, and it’s not a surprise,” Bob Walters, chief economist for Rock Financial, one of Michigan’s biggest mortgage lenders, said. “It’s completely related to our economic picture.”
The human cost can be considerable.
“Unfortunately, the people that get taken advantage of by the subprime lenders are the most vulnerable. That’s what’s sad,” said bankruptcy attorney Walter Metzen.
“Most of the clients who have those subprime home loans, they don’t know what their home loan rate is. They just don’t understand it.”
Follow the link to continue reading in the Battle Creek Enquirer …
There are problems in the most populated Michigan housing market.
Detroit, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years.
Home prices have gained less than 2 percent per year in the five years since 2001, when the auto industry entered a renewed slump.
Real estate auction examples
Steve Izairi, 32, who conducted a mortgage refinance on his own house in suburban Dearborn and sold his restaurant to begin buying rental properties in Detroit two years, was concerned that houses he thought were bargains at $70,000 two years ago were now selling for just $35,000.
At least 16 Detroit houses up for sale on Sunday at an auction sold for $30,000 or less.
A boarded-up bungalow on the city’s west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000.
“You can’t buy a used car for that,” said Izairi. “It’s a gamble, and you have to wonder how low it’s going to get.”
Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings, according to tracking service RealtyTrac.
With large swaths of the city now abandoned, banks are reclaiming and reselling Detroit homes from buyers who can no longer afford payments at seven times the national rate.
Michigan was the only state to see home prices fall in 2006. The national average price rose almost 6 percent but prices slipped 0.4 percent here, according to a federal study. The state’s jobless rate of 7.1 percent in January was also the second highest in the nation, behind only Mississippi.
How much can you buy for $1 million?
Mayor Kwame Kilpatrick was greeted with applause when he announced last week that two condominiums in the city’s revitalizing downtown sold for over $1 million each.
But investors, including some from out of state, proved far more cautious at Sunday’s auction.
Dave Webb, principal at Hudson & Marshall, said Michigan had become a “heavy volume” market for his auction firm in recent years, although bigger-money deals were waiting in the California housing market, a region he said was ready for the first such auctions of repossessed property in years.
“These people that are buying have got to look at holding on for five to seven years,” he said. “The key is holding power.”
Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince.
“I’m not sure it’s congratulations,” said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. “My wife is going to kill me.”
Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction. The Michigan mortgage borrowers simply were not active.
“Once we’ve seen the last person leave Michigan, then I think we’ll be able to say we’ve seen the bottom,” he said
The American dream of owning a home is becoming a nightmare for some Michigan mortgage holders and families.
After investing their life savings in a home, many families facing layoffs or pay cuts are finding it impossible to pay their mortgages. What’s worse, the value of their homes - often their key investment - is deteriorating.
Michigan was the only state in the nation to see its home prices decline in value in 2006, according to a recent study by the U.S. Department of Housing and Urban Development. The national average was a 5.87 percent increase, compared with Michigan’s decline of -0.44 percent.
In the Grand Haven-Holland statistical area, housing prices were flat in 2006 while they fell one-third of a percent in the Muskegon-Norton Shores area. Over the past five years, housing prices have gone up 15.95 percent in the Grand Haven housing market; while in Muskegon they’ve gone up 14.35 percent.
“You have this incredible overlay of worry in Michigan as people respond to declining jobs and declining incomes,” said Dana Johnson, a Detroit-based senior economist for Comerica. “For many families, their house is their largest asset. To see it eroded in value after having seen only modest increases in the last year or two causes real concern.”
Michigan was second in the nation in the rate of new foreclosure filings in January 2007 (Nevada was first), according to RealtyTrac, a national real estate and foreclosure tracking site. Michigan saw 11,554 new filings, up 147 percent from a year ago. Nationally foreclosures totaled 130,511 or one for every 866 U.S. households; Michigan had one for every 355 households.
It’s not news that Michigan finds itself in a one-state recession, or that the state’s economic fortunes have turned sour as a result of the ailing automobile industry and the flight of companies such as Pfizer Inc. and Comerica.
But what is shocking for many families is that the place they call home could become a stone around their financial necks as they try to stay afloat during rough economic times and rising home mortgage payments.
“Typically people worked one job to reach a certain income level and now they have to take three jobs to survive,” said Karry Reith, manager of the Oakland County Community and Home Improvement program, which provides housing counseling. “It’s very difficult times for a lot of people. Their only option may be to leave their house and turn it over to a mortgage company with the hope they can become a homeowner again in the future, when things are better.”
Many experts say it’s hard to know when things will get better. The Michigan housing market had ticked along at a steady if not spectacular pace in the last five years while the rest of the nation was experiencing a real estate boom. Today the future is uncertain, and a number of economists don’t think the area has hit bottom yet.
The Michigan Association of Realtors reports that the average selling price of a home in December 2006 was $149,753, compared to $153,297 in 2005. The number of residential sales in Michigan dropped from 137,069 in 2005 to 118,407 in 2006.
It’s been more than 22 years since Michigan saw a three-month period with a decline in home prices, according to the U.S. Department of Housing and Urban Development. The last time was the third quarter of 1984 — the tail end of the 1980s recession — when home prices declined by -0.28 percent. In 2006, it happened in both the third (-0.51) and the fourth (-0.44) quarters. Many economists expect it to continue in 2007.
“We’ve had bad patches here before in this state,” said Lee Schwartz, executive vice president for government affairs for the Michigan Association of Home Builders, which represents the state’s builders. “But I don’t think we’ve had anything like this for a while.”
Click here to read the rest of this Muskegon Chronicle article.
The Michigan housing market has seen better days.
As a result, some state lawmakers want to give would-be home buyers a new incentive. House democrats unveiled their plan to put a temporary stop to what is known as the pop-up real estate tax.
You see them all across mid-Michigan: for sale signs.
In some cases, they’ve decorated the same lawn for years. The prices will not draw offers as Michigan mortgage costs remain too steep for potential buyers. Democrats have an offer they say will help remove some of those signs and jump start Michigan’s economy.
Rep. Mark Meadows, (D-East Lansing), says that under a new plan, “If you purchase a house, you’ll get the taxable value that the seller has at the time of the purchase of the house.”
Every time a home changes hands, the buyer pays a higher property tax rate. It’s called the pop-up tax, because it jumps on every sale.
“We think it will spur home sales that will help spur the economy, puts money into people’s pockets so that consumers can spend that money in our local businesses,” Meadows added.
Right now there are thousands of for sale signs on lawns in mid-Michigan, and real estate agent associations say they’re not sure how many of them will come down if the pop up tax is eliminated.
Jeff Thornton of Briarwood Realty is optimistic.
“It’s going to have an impact,” he said, although “It’s going to vary from community to community.”
Agents say communities that already have low taxes and low prices may not see a jump in home loan activity, while other more expensive homes with traditionally higher taxes may move quicker.
“It’s a step in the right direction,” Thornton said.
A step democrats hope will recharge the sagging housing market.
Lawmakers are holding hearings on the bill this week. If it’s passed, it will be retroactive to March 1, and hopefully, give Michigan home sellers some long-awaited good news. Here’s hoping.
SOURCE: WLNS News