BY IEVA M. AUGSTUMS
ASSOCIATED PRESS

CHARLOTTE, N.C. — Bank of America is giving some of its most troubled mortgage borrowers relief from the threat of foreclosure.

The bank, the largest mortgage servicer in the country, said Wednesday it will forgive up to 30% of some customers’ total mortgage balance. The homeowners must be at least 60 days delinquent on their loans and owe more than 120% of their homes‘ value.

The plan is part of an agreement the Charlotte, N.C.-based bank reached 18 months ago with state attorneys general to settle charges over high-risk loans made by Countrywide Financial. The loans were made before Bank of America acquired the mortgage lender in mid-2008. Bank of America has since stopped making those loans.

Although the motivation for Bank of America’s announcement was to resolve legal problems, it has the potential of setting a precedent for other banks to also start forgiving principal on loans that are in danger of failing. Bank of America is the nation’s largest bank, and it’s among the first to take a systematic approach to reducing mortgage principal when home values drop well below the amount owed.

Millions of homes have gone into foreclosure since the housing market collapsed in late 2007. The loans affected by Bank of America’s announcement include certain subprime and option adjustable-rate mortgages. Option ARMs allow borrowers to start with minimal monthly payments that actually increase the loan’s balance.

The borrowers who can take advantage of the Bank of America program must also qualify for the Obama administration’s $75-billion mortgage loan-modification program.

Bank of America estimates that about 45,000 customers will qualify for its plan.

The offer is to cut total reduced principal by about $3 billion. That could lower the bank’s earnings, which have already been hurt by consumers’ continuing defaults on mortgage and credit card loans. Bank of America was among the hardest hit by the credit crisis and recession.

Even so, “the move helps create the best prospect of avoiding a further downward home price spiral, which would result in even deeper losses” for the bank, said Howard Glaser, a mortgage industry consultant, in an e-mail.

According to the new plan, which begins in May, Bank of America will first offer to set aside a portion of the principal balance, interest-free. That principal can be forgiven over five years, if homeowners don’t miss any payments. The maximum decrease in principal will be 30%.

The forgiveness allows a homeowner to bring a mortgage balance back down to 100% of the home’s value, the bank said.

Full Article Here:

Full article

Nathan Hurst / The Detroit News

Sales of Metro Detroit homes were up 19.71 percent in April over the same month in 2007, a possible sign the region’s moribund housing market is coming back to life.

The figure is part of a report released Tuesday by Realcomp, the region’s largest multiple listing service.

Only Livingston County posted lower sales this April than last, down 2.42 percent to 161 single-family homes and condominiums sold from 165 in April 2007.

Elsewhere, transactions were up:

– In Wayne County, sales gained 25.11 percent to 1,774 units in April from 1,418 the year before. Homes sold in City of Detroit drove much of the growth; sales there rose up 71.32 percent to 932 homes from 544.

– Oakland County: Up 9.87 percent, from 1,003 to 1,102.

– Macomb County: Up 31.58 percent, from 494 to 650.

But the brisker sales haven’t necessarily boosted gains for home sellers.

Foreclosure prices have driven down the Metro Detroit average significantly. The region’s median home price has plunged 27.9 percent in April over the same month a year ago.

In Wayne County — where 857 foreclosure sales were closed in April along with 917 non-foreclosure deals — the average selling price was $28,000 compared to $102,000 in April 2007. That was driven largely by a 68.76 percent slide in Detroit, where the median price fell to $9,200 from $29,450.

Pending home sales are up for the region as well, with Wayne, Oakland, Macomb and Livingston counties all showing gains.

You can reach Nathan Hurst at (313) 222-2293 or nhurst@detnews.com.

By Stephanie Armour, USA TODAY

Home prices are sinking. Banks are seizing properties from owners who can’t pay their mortgages. Yet for Amber Gilmore, the miserable housing market has never looked better.

After searching for a home for more than a year, Gilmore and her fiancé found one in foreclosure. Once the bank cut the asking price by more than $100,000, the first-time home buyers eagerly sealed the deal for $230,000.

In about a month, the couple will move into the two-bedroom house in Chicago with a small fenced yard and garage. The previous owners invested in gleaming granite countertops and hardwood floors. Their loss, Gilmore says, is her gain.

“This is the best time to buy — so many homes are in foreclosure,” says Gilmore, 25, a news coordinator for Telemundo, a Spanish-language media company. “The market right now is, to us, a benefit.”

As home sales and prices drop across much of the USA, many potential buyers remain scared to jump into the market, and sellers are resorting to slash-and-burn prices. The national median price sank to $195,900 in February, down from $213,500 in February 2007. Foreclosures are up nearly 60% from March 2007, according to RealtyTrac.

But to a small but growing number of buyers across the nation, the grim housing recession offers a tantalizing upside: They can get a home at a fire-sale price. In some metro areas, price declines are galvanizing bargain hunters — especially first-timers, foreign investors and out-of-state buyers looking to rent properties they hope to sell later for a windfall.

Those shoppers are forming isolated pockets of real estate activity, especially in cities where foreclosure rates are high but jobs remain available to attract potential home buyers.

In some areas, such as Charlotte and Detroit, home sales are ticking upward, following a trend of upward sales as far back as 2006. In other markets, bargain-hunting activity is still too sporadic to fuel an overall rise in sales.

Few economists expect the sporadic purchases to signal a bottom to the housing market’s slump, but the bottom-fishing for home deals is a hopeful sign amid all the bad news about the troubled housing market.

National housing analysts say they lack hard numbers to quantify the degree to which investors and other bottom-fishers are affecting sales in many markets. However, “We’ve heard anecdotally that there are some investors looking to pick up these properties,” says Paul Bishop, the National Association of Realtors’ managing director of research. “That helps put a floor in some of these markets.”

Some real estate agents are trying to cash in by buying or renting buses and treating prospective buyers to tours — complete with free meals — of foreclosed homes in Las Vegas, Cleveland, Orlando and some parts of Michigan and California. In Auburn, Calif., potential buyers are ferried to bank-owned homes in style — via a 40-foot stretch limousine.

“There are people looking for deals, and the deals are out there,” says Patrick Lashinsky, CEO of ZipRealty. “People aren’t priced out of the market anymore. Two years ago, there was a stigma to buying foreclosed homes. Buyers felt like they were taking advantage of someone’s bad luck. That’s not there anymore.”

‘I’d almost call it a frenzy’

Ruth Ahlbrand, a Realtor in Las Vegas, began noticing new opportunities in the housing market last year, as banks that had seized homes began lowering the prices. In a market where casino projects promise plenty of job opportunities, she knew buyers could be found.

So she hatched a plan. Ahlbrand began training her agents to specialize in foreclosures, revamped her Internet marketing campaign to appeal to buyers intent on finding screaming deals and bought a 40-seat bus, which she spruced up with reclining seats and air-conditioning vents for each rider.

On Feb. 13, Ahlbrand put into service her foreclosure bus — a red, white and blue coach splashed with slogans such as “Hottest Bank Owned Homes!” to take potential buyers on three-hour tours. The tours include free meals after the ride and an agent with a microphone to point out the deals and explain how to buy a home in foreclosure.

So far, Ahlbrand says, more than 700 riders have taken the tour, and prospective buyers frequently drop in to see when the next tour is.

On weekdays, the bus rides up and down Las Vegas Boulevard, without passengers, to drum up more business. Sales have increased more than 10% since she began using the bus.

“It’s like a seminar on wheels,” Ahlbrand says. “Buyers are saving up to 30% or 50%. People are really looking for a deal. I’d almost call it a frenzy. We’ve hit the bottom, and Las Vegas is growing.”

In one sign of the trend, she says, more than 40% of the homes her agency sold in December and January were bank-owned at the time of purchase.

And Las Vegas is one metro area where prices are dive-bombing. After prices soared during the national real estate boom of 2005, the city has absorbed one of the sharpest drops in home prices in the USA, according to a price-index report from S&P/Case-Shiller.

Las Vegas reported a 19.3% decline in home prices in January, compared with January 2007. And the median home price sank from $314,950 in March of 2006 to $243,169 in March 2008, according to the Greater Las Vegas Association of Realtors.

While overall home sales are showing their steepest declines in more than a decade, the allure of low prices to bargain-hunters offers a glint of light in an otherwise bleak real estate landscape.

Boston, Cleveland, Detroit, Sacramento and San Diego have all seen sales increases recently after a period of price declines, according to a March report by Radar Logic, a real estate data and analytics firm. In Detroit, sales of homes and condos rose 12.8% in February compared with a year ago, according to Realcomp.

That doesn’t necessarily mean prices are rising, too: In January, Boston still posted a 3.4% price decline over last year, according to the S&P/Case-Shiller index.

A risk-taker’s market

Joel Naroff, chief economist with Naroff Economic Advisors, says bargain buyers are moving in but some may be getting into deals in which they are expecting too much bang for their investment.

Among the bargain shoppers:

•Investors. Single-family home prices in 10 major metro areas tumbled 11.4% in January — the steepest decline since such figures were first collected in 1987 — according to a March report by the S&P/Case-Shiller composite index.

One result: mouth-watering opportunities for some investors, some of whom are buying multiple properties with plans to rent them out until the housing market picks up and prices rise again.

Alison Diboll, a marketing executive in San Francisco, closed a deal in March on the first of four homes she’s buying in Charlotte and Dallas. She bought the homes, which were previously in foreclosure and have been rehabilitated, for about $100,000 each.

She plans to rent them out for five to seven years and sell them once the market rebounds.

Diboll is so confident that her four homes are a shrewd buy that she hasn’t bothered to see any of them and is having them managed by a third party.

That sort of breezy approach toward buying a home without having seen it firsthand conjures up memories of the risk-taking by buyers during the real estate bubble. But Diboll insists her investment is safer than it would be in the stock market.

“With the stock market as volatile as it is, it’s not a good idea for me,” Diboll says.

“Real estate is the great American Dream,” she adds. “I read that the people who made money during the Great Depression were those who had money and took a risk.”

•Foreign buyers. International investors also are eyeing the U.S. housing market. Thirty-three percent of international buyers from April 2006 through April 2007 were from Europe, according to a 2007 report by the NAR.

Buyers from Asia and North America (outside the USA) were also active, accounting for 24% and 23% of international clients during that same time period.

Sales to international buyers have been turbocharged by the steady drop in the value of the U.S. dollar relative to other currencies. Lawrence Yun, chief economist with the NAR, says the dollar’s dwindling value means that foreign buyers can get U.S. real estate at a relative average discount of 30%. (That percentage can run lower or higher depending on the buyer’s home country.)

Agents are trying to reach out to some of these far-flung buyers, many of whom are seeking vacation homes. Ralph Haverkate, a broker at Tarbell Realtors in Palm Springs, Calif., is dangling an unusual inducement: Buyers from Canada are reimbursed for their travel and hotel expenses — up to $1,750 — if they close on a home. The home doesn’t even have to be one that his agency is selling, but they do have to use his firm as their representative. The agency is now offering the same sort of deal for European buyers, initially targeting Switzerland, Germany and the Netherlands.

“We’ve had buyers flying in back-to-back,” Haverkate says. “My partner and I literally have three or four couples a week coming in, and we take care of them. Prices are low, and if you combine that with the currency exchange, the savings are really big. The market is suffering — but for them, it’s good.”

Economists say the international interest is a hopeful sign in today’s market.

•First-time home buyers. First-time home buyers who found themselves priced out of the real estate market during the frenzied market of 2001 to 2005 are among those who are now tentatively starting to buy properties in some areas where prices have plunged.

In November 2007, about 39% of purchasers were first-time home buyers, up from 36% in 2006, according to the NAR.

Buyers who find a price they can afford still face other obstacles in the current economic climate, says Patrick Newport, an economist with Global Insight.

“It’s still hard to get credit,” he says. “Banks are being careful and requiring bigger down payments. But there are people jumping into the market, including investors, who are hoping to make a killing.”

And buying a home through foreclosure or an auction can be problematic, with properties often sold “as is,” or with potential buyers unable to arrange for a full inspection.

Financing needs to be secure, because homes bought at an auction often require closing within 30 days. And some buyers intent on snatching up low-priced bargains they plan to sell quickly could end up being burned if the housing market remains stuck in the doldrums for years to come.

Meanwhile, foreclosure tours — some in double-decker buses or swanky limos — represent part of a trend that analysts say could help prop up the real estate market in some areas.

“If you have any interest in real estate at all, you can’t ignore the hype about foreclosures,” says Nikki Holmes, a Realtor at Keller Williams Realty in Auburn, Calif., who has begun conducting Saturday-morning tours in a white stretch limo to showcase foreclosed homes to prospective buyers.

“Buyers are getting very savvy and educated,” Holmes says.

“People are saying, ‘It’s a really sad story we have this huge mortgage bust, but it’s an opportunity for me.’ When something fails, something else comes along to take its place, and that will re-energize the economy.”

Remember, we have access to the direct bank lists and our homes are all pre-mls unlike the majority of the garbage out there.

Full article at Detroit Free Press

Detroit’s housing slump is attractive to investors

Some buyers look to get 100 or more

Investors from as far away as Hong Kong and Hawaii are coming to Detroit to make their fortune buying foreclosed homes in bulk.

“This is a millionaire’s market,” said Jeremy Burgess, a 28-year-old investor from Washington state who has been living in Detroit for the past year. “I feel like I’m driving through the city and stopping to shovel diamonds in the back of my truck.”

His wife, Jeanna Kiehle, and partner Jared Pomranky formed Urban Detroit Wholesalers to scour the city for houses they can fix and rent. The idea is to generate cash flow until the market improves, and they then can sell the houses. They own 38 houses now and close on 15 more before the end of the month.

Some buyers are looking to buy larger numbers of homes, perhaps 100 or more at a time.

People tuned in to the Detroit area’s distressed housing market say the majority of sales now are to investors, often in bulk deals.

Sales were up dramatically in Detroit in February, rising 49% from a year before, and realty watchers say foreclosure properties played a key role in the increase.

Some see significant risk to investors who could get low-end properties without being familiar with pitfalls of the market.

“Real estate is not a commodity. You have to know what you are buying,” said Mark Nagy, a broker and consultant for RE Investments Inc. in Southfield. “What typically ends up in bulk sales is stuff that has sat on the market for more than six months.”

Banks see Detroit as a sore spot, Nagy said, because they cannot move the properties and there are so many.

“Bulk buying will become more commonplace by the end of the summer,” Nagy said. “Right now, so many properties in Detroit are like a hot potato. Whoever ends up with it will be crushed.”

Burgess and others say there are plenty of good properties.

Smith Kitporka, 28, an investor in San Jose, Calif., said he has been buying Detroit foreclosures for two years, often paying as little as $10,000.

“No war-zone houses or anything like that. Just good houses in good neighborhoods,” he said.

Burgess said he can pick up an $85,000 house in Detroit for $20,000 to $30,000 these days. Listings on Fannie Mae’s Web site show many Detroit foreclosures for less than $25,000.

Last year, metro Detroit led the nation in foreclosures. Of the 10,342 homes on the market in Detroit as of Wednesday, 3,355 were bank-owned foreclosures, according to Realcomp Inc. And in the tri-county area, 7,104 bank-owned foreclosures were listed out of 47,095 homes on the market.

Eddie Peters, 44, an asset manager for 15 years at various banks who left GMAC’s Homecomings Financial office in Berkley last month in a wave of layoffs, said bulk sales are picking up.

When banks were getting 10-20 foreclosures a month, they would list them with local agents and recover what they could. But now, as foreclosure volume has risen, banks must sell in bulk so they don’t get overwhelmed with property, Peters said.

“The bulk sale is an acceleration of what is normally done,” he said. “About 80% of the houses sold now are being bought by investors.”

Banks contacted for this article either declined comment or did not respond.

Peters said lenders don’t want to be identified with the subprime loan collapse that hit last year and rippled through the U.S. economy as lenders tightened all forms of credit.

The prices in metro Detroit — mainly within the city limits and nearby suburbs — are so low that investors from more expensive markets such as California, Nevada and Florida feel certain they can grab bargains here.

“Right now, people are buying for the thrill because prices keep going down,” said John Graham, a real estate agent with Keller Williams in St. Clair Shores who works primarily with investors. “The rental market is going to be crazy good. That’s what these out-of-state people are seeing.”

Burgess and his partner started out by buying foreclosed houses, fixing them up and then selling for a profit, a practice known as flipping.

But after the subprime loan crash last year, potential buyers had trouble obtaining loans and flipping essentially ended.

The new trend is to buy properties cheap from banks in bulk and then sell the properties to investors who hope to collect rent until the market improves.

Burgess said homes in Detroit’s better neighborhoods are renting for $850 a month. His company manages the properties for the out-of-state investors.

The investors are banking on a Detroit recovery in the next 5-10 years.

Drew Sygit, vice president of the Lending Edge in Bloomfield Hills, said that most of the investors he talks to in Michigan are trying to be wholesalers and sell property to other investors.

“The Michigan people are scared of Detroit,” Sygit said. “It’s not a sure thing. They have to worry about inspections, copper stealing, equity stripping. It’s challenging, but there is a big reward.”

Tarik Dinha II, 30, of Clarkston is the owner of Urban Development Solutions Group LLC and Deeds4Cash.com. He buys 20-40 houses at a time from banks for “pennies on the dollar” and then sells them as fast as possible.

But making those connections with the right people at the banks is not easy.

None of the investors interviewed for this story would divulge which banks they work with.

But Dinha said he has made the right connections and has contacted banks with a list of properties for which he can pay cash within 72 hours.

“I usually buy 40 at once, but anything over 10, 15 is a bulk deal. The key thing is to be able to not get stuck with a bunch of junk,” he said.

More bulk sales are combining hard-to-move property in several states that have been hit hard by foreclosures, said Marshall Mandell, a realty agent and foreclosure expert who deals only in bank-owned properties in metro Detroit.

Nagy, the Southfield broker, said he saw a bulk listing for 256 properties valued at nearly $30 million in five states, with 105 of the properties in Michigan. The deals can be difficult to close, as investor Travis McKee, 35, of Pontiac found. He made an offer recently for clients on 195 houses owned by a bank, but the deal fell apart.

“I haven’t completed any bulk deals yet. I’m still interested,” he said.

Letitia Patterson, a realty agent and foreclosure specialist at RCH Brokerage in Southfield who also runs DetroitCashDeals.com, said banks must prove to auditors that they are getting a reasonable return for each property, she said.

“It is very few brokers who deal with the banks,” Patterson said. “It is really sexy and exciting to say we are buying 100 houses for pennies on the dollar. The deals often don’t close.”

Nagy said that in many cases, there’s still a disparity between what banks want to get for foreclosed properties and what investors are willing to pay.

In many cases, a bank today wants 55-65 cents on the dollar for a suburban property, yet investors want to pay 40-45 cents on the dollar, he said.

In Detroit, the bank may want 30-35 cents on the dollar, and investors want it at 20-25 cents on the dollar.

“Those two points have not met in the middle yet,” Nagy said. “It’s an evolution process. It’s going to evolve that bulk sales will increase.”

Contact GRETA GUEST at 313-223-4192 or gguest@freepress.com.

The bulk craze, by the numbers

Investors are buying foreclosed Detroit homes in large numbers, hoping that the real estate market takes a positive swing and they can make a hefty profit.

$10,000
What some Detroit homes are selling for.

80%
Estimate of houses sold in Detroit being bought by investors.

One-third
Homes listed for sale in the city that are bank-owned foreclosures. It’s 15% in Wayne, Oakland and Macomb counties.