“If people don’t have a paycheck they can’t support a mortgage,” Jay Brinkmann, the MBA’s chief economist, said in an interview. “The longer the recession lasts the more people run through their savings reserves, leading to higher delinquencies and higher foreclosures.” …
One in every eight Americans is now late on a payment or already in foreclosure as mounting job losses cause more homeowners to fall behind on loans, the MBA said.

The recession is taking its toll on housing, and the longer we are in a recession, the further housing prices are going to fall.

Measuring both old and new defaults, 11 percent of all mortgages in Florida were in foreclosure at the end of the first quarter, the highest in the U.S. In Nevada, it was 7.8 percent, in Arizona, it was 5.6 percent, and in California, it was 5.2 percent.

The question is how many of the 5.6% are going back to the banks? More foreclosures will lead to lower housing prices. The historical house price average is around 3.1 times the average annual household income. Look for a bottoming when this happens. Tucson family income for 2008 was roughly $44,000, household income was roughly $36,000. The Tucson Association of Realtors reported in April the median average home sold for $164,000 still above the historical average when using either the family or household income. I look for prices to continue to drop this coming year. The month of May will probably show an increase in sales and home price but I would look for the summer to continue to decline.

Phoenix is seeing a surge of investors buying foreclosures. Some are even trying to keep the people foreclosed upon in the house as renters at a reduced rate, but a recent study stated less than one quarter of the foreclosed upon people stayed living in the homes.

Having talked to a few REO agents, foreclosures and “decent” deals are flying off the MLS quickly. They mention how all of a sudden the investors are purchasing multiple homes, and good deals are receiving multiple offers.

Along those lines the Fannie/Freddie foreclosure moratorium has just been lifted and could increase the buying opportunities over the summer, when the houses start to hit the market. I haven’t seen a large increase in the notice of defaults, but the banks might of just postponed all the sale dates.

KB Home has torn down its three model homes at its abandoned Saguaro Springs project in Marana. Liability concerns led to the demolition last week, a company spokesman said. Back in 2005, plans for Saguaro Springs called for 2,400 homes near Rattlesnake Pass just west of the Tucson Mountains.

But although roads were paved and some infrastructure was put in, the project never got off the ground and the model homes sat vacant and gutted for years. KB Home had partnered with California-based Empire Land LLC until Empire filed for bankruptcy last year. The site is now up for auction.

There are multiple videos on youtube.com highlighting multiple model homes being torn down. This is the first I have seen from Tucson or Phoenix of homes being demolished. If there are others please comment on it.

As noted by Calculated Risk lower rents will bring lower home prices as the house price to rent ratio will near the more historic level of 1.0-1.1.  So while home prices are falling and nearing a more even 1.o mortgage payment to rent payment, falling rents could cause home prices to drop even more.  If this happens look for even more foreclosures as landlords can’t afford the mortgage payments.

New York Reporter in Foreclosure.

Registration is free, so be sure to read the whole article.

Arizona republic reports

Foreclosure-rescue scams have shot up 30 percent in Arizona during the past few months.

Arizona Attorney General Terry Goddard delivered that startling statistic last week at the Arizona Foreclosure Prevention Task Force meeting. It was the right crowd to engage about the growing problem.

“Firms are contacting homeowners on the verge of foreclosure, offering help and instead taking the money the homeowner has,” Goddard said. “We have a real obligation to find these people and prosecute them.”

The latest foreclosure-rescue scam involves loan modifications, the program that’s the backbone of the federal housing plan announced in February. In a loan modification, a lender and homeowner work out a deal to cut interest rates and even principal on mortgages of homes in danger of foreclosure.

Free counselors, certified by the U.S. Department of Housing and Urban Development, are available to help homeowners work with lenders. Arizona homeowners can call the state’s foreclosure hotline at 877-448-1211 to find a counselor. There also are reputable private firms, run by attorneys, mortgage brokers and real-estate agents, offering loan-modification help.

But a growing number of scam artists that have joined the scene, promising help, taking hefty upfront fees and then leaving homeowners on their own.

Data released last week shows mortgage companies have made more than 55,000 offers to modify loans since the program was launched in March. There are 14 companies, which service about 75 percent of all U.S. mortgages, signed up to do loan modifications.

The federal program was expanded to help people who can’t afford their mortgages and don’t qualify for a loan modification. They may be able to still avoid foreclosure by using new streamlined processes for short sales or deeds in lieu. Like with modifications, lenders and borrowers can get $1,000 or more to work out deals to avoid foreclosure.

The different federal housing programs continue to confuse many homeowners and servicers at lenders agreeing to participate, slowing the process.

“What is needed is a coordination of policies between all lenders on both the modification and refinancing programs,” said Jay Luber, Galaxy Lending president.

Federal officials on Monday reversed an earlier decision to allow first-time home buyers to use an $8,000 tax credit to borrow the down payment on a home.

A week earlier, U.S. Department of Housing and Urban Development Secretary Shaun Donovan had told the National Association of Home Builders that HUD would let banks and local governments offer short-term “bridge loans” to cover the down payment for first-time buyers eligible for the tax credit. The loans would have been available to applicants for federally insured mortgages such as Federal Housing Administration loans.

Lenders, home builders and real- estate agents had reacted favorably to the bridge-loan proposal, saying it would open up the housing market to more first-time buyers.

However, not everyone was in favor of using the tax credit as collateral on a down-payment loan.

“That tax credit should be savings, not debt,” said Patricia Garcia-Duarte, executive director of Neighborhood Housing Services in Phoenix.

Garcia-Duarte said the proposal too closely resembled a now-illegal practice known as seller-funded down-payment assistance, which allowed a home’s seller to “gift” the down payment to a specific buyer through a non-profit organization.

Phoenix loan originator Dean Wegner was among the housing-industry professionals who had expressed enthusiasm about the bridge-loan plan.

Wegner said the program would have boosted local home sales, but he added that the bridge loans likely would have come with a high interest rate.

The loans also could have created income-tax issues, according to the IRS officials who shot down HUD’s plan.

Still, Wegner remains optimistic that the government will seek other means to circumvent the FHA’s required 3.5 percent down payment.

“They will probably come out with a zero-down FHA loan starting January 1, once the $8,000 goes away,” he said.

The government should not allow this tax credit to be monetized in the form of a loan. From above - “the credit was to be monetized via a short term loan from the local banks and governments;” offering short term loans with the promise of repayment coming from next years tax return sounds like many of the “Pay Day Loan” centers business plans.  Banks are already struggling with loans that homeowners and consumers can not repay, allowing this credit to be monetized would only allow new homeowners to struggle with more debt with exhorbinant interest rates.  One can only imagine the surprise when expecting large tax returns(read vacations) for the next few years only to have it swiped away by the bank or local government as repayment for a loan.

Edit: The AZ republic has posted a note stating the credit can still be applied directly toward home purchase costs when using an FHA-insured mortgage. However the person will still have to come up with a 3.5% down payment.

Here is the chart.

The 190 filings this week total 1st lien position was ~$38.3 million and Zillow Estimates of the homes were $39.86.  Again usually these homes include a second or even a 3rd mortgage so we add an additional 15% to get a total encumbrance of $44.04 million.  This is substantially higher than the Zillow Estimates and means each home is underwater by 10%.

A surprise in the filings was the zipcode 85706 with 28 filings, outpacing the closest competitor zipcode 85713 with 13 filings.  The subdivisions with the most filings: Continental Reserve, Tres Pueblos, and Terra Del Sol.

I suspect the higher number of defaults came from the previous weeks low filing number.  For the week of Dec 8-13 2008, 216 N.O.D were filed in Pima County.  The total sum of first mortgage liens came in around 39.3 million while the Zillow Estimates came in around 42.5 million.  If you add most of the mortgages contained 2nd or 3rd mortgages at 15% of the first the total liens came in around $45.2 million dollars.  This means most houses are ~13% underwater and have very little chance of selling on the market.

Continuing a trend 85746 and 85706 both lead the way with 22 filings for the week which is up from the previous weeks.  85710 followed with 12 notices for the week.  Here is the graphical break down, and the subdivision with the most filings was: Gladden Farms.

Pima County NOD filings