9.7 Million Homeowners Underwater

Author: Tory Barringer May 20, 2014

The number of underwater borrowers continues to fall, but that was about the only good news Zillow had to report in its latest look at negative equity.

The company released Tuesday its Negative Equity Report for the first quarter, revealing an estimated 9.7 million homeowners continue to owe more on their mortgage than their home is worth. That number, down from about 9.8 million in Q4 2013, represents about 18.8 percent of mortgage-paying Americans, according to Zillow.

Conservative estimates from the company call for a negative equity rate of 17 percent by this time next year as home value growth moderates.

While the continuing downward trend in underwater rates is a welcome sign of improvement in the housing sector, the company notes that the “effective” negative equity rate, which includes homeowners with 20 percent or less equity in their homes, remains elevated at more than one in three.

“The unfortunate reality is that housing markets look to be swimming with underwater borrowers for years to come,” said Zillow’s chief economist, Dr. Stan Humphries.

With so many borrowers lacking enough equity to comfortably sell their homes and afford a down payment on a new one, Humphries expects inventory to remain choked, driving home values higher and making affordability a greater concern.

What’s more, Zillow found that homes priced in the bottom third of home values nationwide have a greater negative equity rate, with 30.2 percent of that population currently underwater compared to 18.1 percent of those in the middle tier and just 10.7 percent in the top tier.

For those underwater borrowers who happen to be in the lower tier of home values, listing their home will remain difficult without engaging in a short sale or bringing cash to the closing table—another contributor to the supply shortage and a major obstacle for buyers in search of starter homes.

“It’s hard to overstate just how much of a drag on the housing market negative equity really is, especially at the lower end of the market, which represents those homes typically most affordable for first-time buyers,” Humphries said.


How Would You Like to be Locked out of Your House Right Before Christmas?

stolen savings from a broken piggy bankMay 12, 2014

 I think everyone would answer this one the same. What if I asked the same question but added that the entity responsible for locking you and your 5 year old son out of the house right before Christmas was your friendly bank. Yes the same one that you make your mortgage payment to.

This is actually a true story that happened to a client of mine. I will keep the names anonymous but tell you the story none the less.

My client (single parent of one 5 year old son) wanted to get a loan modification from Bank A and went through the arduous process. Bank A told him to make 3 trial payments and then he would be done. He made 3 trial payments and low and behold Bank A did not cash the checks. They sent all 3 back to him stating that they were not for the actual loan amount so they could not accept them.

I personally saw the modification along with the prior payment amount and the new agreed to payment amount and my client did EVERYTHING that Bank A asked. Bank A should have accepted the payments since they offered to and my client accepted their offer by tendering the payments. Recent case law finds that Bank A could be sued in this in case and would be forced to do what they should have done in the first place.

My client did not sue. Instead he agreed to go through the whole process again (he actually didn’t know at the time that Bank A’s actions were against current law). Right when he was almost done with the whole process for the second time Bank A transferred his loan to Bank B.

This all seemed to be okay until 2 weeks later when he arrived home from a long day at work there was a door hanger attached to his front door advising him to contact Bank B. He called Bank B the next day and had a 20 minute conversation detailing what happened with Bank A and going back over the whole process. Bank B seemed to be okay with everything and my client ended the call feeling okay.

Then 2 weeks after the above friendly conversation with Bank B he came home to a notice on his door that Bank B had hired Safeguard Properties, Inc. to secure the property. His locks had been changed and he could not gain entry to his own house. Desperately he made calls to Bank B, Safeguard Properties, Inc and ADT (his alarm company).

He was assured that it was a big mistake and that Bank B would contact Safeguard Properties, Inc. to let them know that they should change the locks back and let my client have his house back. I have his phone records to prove that every day he made multiple calls and he would be continually told that they would unwind the situation and put a rush on it – day after day after day and yet it didn’t happen day after day after day.

He finally got his house back 3 weeks later! The food in his refrigerator had spoiled since the refrigerator doors had been left open. All his drawers were ransacked like a thief had been looking for money or other hidden assets. Some of his personal items were missing. Talk about a violation of a person’s sacred space. The screens on all the windows were torn off and some of his alarm sensors needed replacement. If the story stopped here it would be a very sad tale of Bank incompetence but it actually gets a little worse.

After all the dust settled he noticed that the locks to his back gate were missing each time he replaced them. He finally stopped replacing them unsure of what was going on. Well his gardener told him about 7 months later that when he showed up on a different day due to scheduling issues he came across someone cutting the grass. When confronted the stranger said the bank hired him and he was not going to stop until the bank told him so.

We did ultimately get the bank to stop the continued trespass but a few months after that my client received a call from Bank B asking how he planned to catch up his past due balance. In shock my client told Bank B that he did not have a past due balance and to please forward any information they could on this discrepancy. Well not only had Bank B done this terrible thing to him but they also had the gall to charge him for it all and to continually add monthly charges for lawn maintenance to his balance due which was just over $3,000.00.

Can you imagine being locked out of your house with no clothes, toothbrush, etc… for 3 weeks? I can’t even comprehend how hard that would be and especially with a 5 year old. Bank B never even said they were sorry and then they started billing him for it all!

Well we have filed a lawsuit for this poor fellow and plan to have justice served on all parties responsible.


The good news for California homeowners is that as of January 1, 2013 we now have the California Homeowners Bill of Rights. This law forces bank to treat homeowners right or else homeowners can get a lawyer like me to help them. This allows the legal system to oversee the banks and punish them when they do the wrong thing. The law is well written and is a blessing to California homeowners. It’s certainly too late for some homeowners but if the action taken by the bank against a homeowner is after January 1, 2013 they may still have a case. At a minimum the banks will have to treat people right and stop the egregious behavior or pay a price. If someone had made 3 payments and the bank didn’t honor the agreement there may still be time left to take action but you must do so right away.


I sometimes have to scratch my head and say “what were they thinking” when I hear some of the stories my clients tell me. The true story above is quite amazing but it really doesn’t matter at what level the bank mistreats you – the answer is the same – it shouldn’t happen and you shouldn’t have to get a lawyer involved to make it right but here we are and sometimes you do. I think the banks just didn’t want to help solve the housing crisis – while getting bail outs and handouts from the federal government. Well they are back now making record profits and still treating some people badly.


If you feel you have been wronged by your bank you should call us immediately for a FREE consultation. We will compassionately analyze your situation and explain your legal options. You can call me at 877.442.4577 or send me an email at tgreene@tedgreenelaw.com. We handle all kinds of civil litigation matters such as wrongful foreclosure and predatory lending and we also can help you with a short sale if that is something that has crossed your mind. You should call us today since most legal actions have time limitations which can cause you to lose your ability to get relief. The banks have lawyers and now you can too!


Ted A. Greene

California Attorney and

licensed Real Estate Broker

3 Signs Foreclosures Are Still Festering in California

California foreclosure activity in the fourth quarter of 2013 dropped to the lowest level since the third quarter of 2006. Foreclosure activity has been steadily declining in the state on an annual basis since the first quarter of 2010.

But there are three signs there are still some old, rotten and fermented foreclosures festering in the California foreclosure pipeline that eventually will be completing the foreclosure process and hitting the market — in 2014 if the market is lucky. If they linger any longer these old foreclosures could really stink things up.

1. Foreclosure starts rebounding

First, California foreclosure starts increased 10 percent on a year-over-year basis in the first quarter of 2014. That might not sound serious, but it stands out because it’s the first annual increase in the state’s foreclosure starts since first quarter of 2012, and even then foreclosure starts increased less than 1 percent from the previous year. The last double-digit percentage annual increase in California foreclosure starts was way back in the first quarter of 2009.

California foreclosure starts increased 10 percent from a year ago in the first quarter of 2014, the first double-digit percentage annual increase in the state’s foreclosure starts since the fourth quarter of 2009.

RealtyTrac predicted this rebound about six months ago after foreclosure starts dropped precipitously in the beginning of January 2013, when a new law called the Homeowner Bill of Rights took effect. That legislation codified in California for all lenders some of the principles of the National Mortgage Settlement for the nation’s five major lenders. Those principles include no dual-tracking (where a foreclosure progresses concurrently while a homeowner is pursuing a foreclosure alternative); and a single point of contact at the mortgage servicer for delinquent homeowners. The law also allows for a fine of $7,500 per loan foreclosed improperly in addition to additional damages that can be pursued by the homeowner for material violations of the law.

The law only applies to California foreclosures pursued using the typical non-judicial process in the state, but interestingly part of the rise in foreclosure starts in the first quarter comes as a result of skyrocketing judicial foreclosures. This indicates lenders in some cases are willing to use the often lengthier judicial process to avoid some of the potential minefields in the re-invented non-judicial foreclosure process.  Out of the 20,228 California foreclosure starts in the first quarter, 1,396 were filed judicially — up from just one judicially filed foreclosure start in the first quarter of 2013.

2. Average default amounts rising

The rise in foreclosure starts is clearly not the result of a new wave of distress hitting the California housing market, but old distress finally entering the foreclosure pipeline. That’s clear because the average default amount on the first quarter batch of foreclosure starts is the highest average default amount RealtyTrac has documented in a single quarter since it began tracking this metric in the first quarter of 2011.

The default amount is the amount a homeowner is behind on payments when the mortgage servicer files a public notice starting the foreclosure process. The average default amount on California foreclosure starts in the first quarter of 2014 was $56,415, up 53 percent from the average default amount of $36,839 in the first quarter of 2013. Assuming a monthly mortgage payment of roughly $3,000 — which is likely on the high side — that average default amount represents homeowners who have been missing their mortgage payments an average of 18 months before the bank starts the foreclosure process. On top of that, the average time to complete a foreclosure once it starts in California is now at 429 days.

The average amount California homeowners are behind on payments was more than $56,000 for properties that started the foreclosure process in the first quarter of 2014.

3. Bank-owned homes lingering

That leaves the California foreclosure process at an average of 993 days — more than two and a half years — from the first missed mortgage payment to bank repossession. But the process to completely resolve that distressed property situation takes even longer because it’s taking longer for banks to sell foreclosed properties even after the foreclosure process is complete.

Bank-owned properties that sold in the first quarter of 2014 had been foreclosed an average of 220 days when they were sold, up from an average of 172 days an year earlier.

Bank-owned properties sold in the first quarter of 2014 took an average of 220 days to sell from the time they completed the foreclosure process. That’s actually down from 247 days in the fourth quarter of 2013, but it’s up 28 percent from an average of 172 days in the first quarter of 2013.

That now puts the entire distressed property disposition process at an average of 1,213 days from delinquency to REO sale — well over three years.

The average time it takes to complete the entire foreclosure process, from delinquency to disposition of the REO, is now more than 1,200 days in California.

Real-life example of a sleeper foreclosure

I recently encountered one of these well-aged foreclosures in my neighborhood. I knew it was in foreclosure several years ago, but I assumed the situation had been resolved because the homeowner continued to occupy the home.

But then one day I was walking by and noticed furniture strewn about the lawn and several signs posted in the front window. One of those signs announced the property owner had been evicted by the Orange County Sheriff. Another announced the property was not yet listed for sale, but provided the name and phone number of a real estate agent who will be listing the property for sale eventually.

My curiosity pricked, I looked the property up on RealtyTrac — which I should have been doing anyway as a responsible neighbor — and discovered it had started the foreclosure process in September 2010, but did not complete the foreclosure process and become bank-owned until January 2013. Then it took more than a year before the bank evicted the homeowner, and it will likely be at least another couple months before the property is listed for sale.

This property started the foreclosure process for the most recent owner in September 2010, was foreclosed in January 2013, and the homeowner was evicted in January 2014. The property is still not listed for sale.

I’d call a property like this a sleeper foreclosure. For the last few years it showed no visible signs of being in distress, but now it certainly is, and the longer it sits vacant the more it could negatively impact the values of surrounding homes in the neighborhood — including mine. As more sleeper foreclosures like this across the state are re-awakened it could become a bit of a reality check for the California housing market in 2014.

source: http://www.forbes.com/sites/darenblomquist/2014/04/24/3-signs-foreclosures-are-still-festering-in-california/