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Has bottom arrived in Manteca?

There’s a good chance we’re already there for resale market

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POSTED September 11, 2009 2:52 a.m.
Two years ago this month there was a record 625 resale homes available in Manteca, Ripon, and Escalon. Of those, more than 250 were foreclosures including almost 180 in Manteca.

The demand was so soft that the 625 homes represented a supply of 21.7 months assuming every home available would be purchased based on sales activity at the time.

Today there are 144 resale homes listed in the three South County cities. Of those, 54 are foreclosures and 33 are in Manteca. The 144 homes represent a 1.8-month supply based on the current market absorption rate.

Meanwhile, pending prices have started an ever so slowly creep upwards week-after-week. Perhaps even more significant is the fact the median price on closed escrows – which is now at $178,000 – has been wavering slightly between $177,900 and $179,500 all summer long.

Could this be the bottom for the Manteca housing market where it isn’t completely flat but rolls up and down ever so slightly as you move forward?

Much ado has been made about the “next wave” of foreclosures and whether banks are deliberately holding them back trying to manipulate prices.

If that were true, why are banks so eager to cater to cash buyers on foreclosures who often offer $10,000 or more less than FHA buyers whose loans may need a 30 to 60 day escrow? Banks need to dump poisonous assets as quickly as possible. Cash is just part of the game. They need to clear liabilities off their books and minimize their losses.

If cash was all that matters as in getting the most money for the foreclosed property then it would make sense for them to wait 45 days or so and get significantly more money wouldn’t it?

So why the logjam on getting foreclosed properties on the market?

A government report released Wednesday on the 47 banks participating in the Home Affordable Modification Program is partly to blame - if you want to call it that.

Trial loan offers have been extended to 571,000 borrowers which represents 19 percent of those eligible. Of those, 360,165 have been started as of Aug. 31.
To qualify those buyers that meet eligibility requirements must be 60 days or more behind in their payments. The federal program that awards banks for making the loans and borrowers for keeping current after a set amount of years is in addition to other efforts for qualified mortgage holders who are on edge due to unforeseen circumstances – such as medical bills and such or perhaps carrying for an additional person that requires proof – or are teetering due to a loan rate adjustment.

Two families involved in the latter in Manteca-Ripon who have trial loans in place can tell you the process took close to three months. As for those behind, there’s only Manteca example I’m aware of that had gotten 60 days behind but was still making payments. It took them close to five months.

While you don’t expect banks to make such decisions overnight as they need to do their due diligence and verify everything, part of the delay has to do with banks finally doing what they historically did which is being overcautious.

Various bank spokesmen will tell you there is no grand conspiracy here although there is truth that some mortgage servicing firms – not banks – pile up tons of fees when property goes into foreclosure. Those fees, by the way, are paid by the very banks that are left holding the bag.

Avoiding foreclosures when they can makes sense financially for banks. It is not in their best inertest, though, to extend new life to a borrower that is only going to go into default again. That is what happened to many initial loan modifications made over a year ago. Some banks experienced a 60 percent default rate among San Joaquin County borrowers on their modified loans. The banks want to make sure they are on solid ground, something they should have done when they were either making mortgage loans or acquiring packaged mortgages in the first place.

They’ve gone from being sloppy to making sure every “t” is crossed and “I” dotted.

There is also another trend going on that requires banks to be overcautious.

It was once the norm for your loan to be “sold” two to three times in the first year of ownership. The reason is simple. Typically, a $125,000 loan translates into close to $350,000 paid over the 30-year life of the loan depending upon the interest rate. There is a lot of money to squeeze out. The initial bank funding the loan could turn around and sell it for $10,000 profit and get its original money back and go out and make another loan. The same is true for those who flipped that loan next. There’s a lot of interest at stake especially at the front end of the loan’s life span.

Banks now need stability. Loans are rarely sold now in the initial years except, of course, from the loan servicing firm to the initial bank buying t hem.

You can understand why. Banks need stability.

At the same time homes bought in 2008, for example, have dropped in value. While the borrowers may be stable and have good payment records and excellent credit, it is tough to get another bank or firm that buys mortgages to do so when what has secured the loan – the house – has dropped in worth.

It’ll all be fine in the long haul but no one is going to repeat the crazy mistakes over the past few years.

So is there a conspiracy? It’s highly unlikely. Is there red tape upon red tape? Absolutely.

For potential buyers with FHA loans, it means lots of work and time before they can finally land a home.

Even so it is the opportunity of a lifetime for most people who wouldn’t otherwise be able to own their own home.
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