1 / 17

Foreclosure Activity in Virginia

Foreclosure Activity in Virginia. September 1, 2009. There have been three stages to the foreclosure crisis. High-cost subprime loans were mainly made to weak borrowers who lacked access to traditional credit. A large share involved cash-out refinancing.

alyssa
Télécharger la présentation

Foreclosure Activity in Virginia

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Foreclosure Activity in Virginia September 1, 2009

  2. There have been three stages to the foreclosure crisis

  3. High-cost subprime loans were mainly made to weak borrowers who lacked access to traditional credit. A large share involved cash-out refinancing. Defaults were triggered by a limited ability to repay the costly loan terms that followed the reset from an initial “teaser” rate. Rising subprime foreclosures triggered home price declines that subsequently impacted the overall market. High levels of subprime defaults also ended subprime lending, thereby precluding at-risk borrowers from refinancing their loans. Stage I: Subprime collapse

  4. “Alt-A” loans were used by borrowers with good to fair credit in high-cost markets to purchase homes they would have difficulty qualifying for with traditional, fully documented loans. Many were weakly underwritten ARMs with low initial rates—”Option ARMs” allowed negative amortization. Many borrowers expected to build equity quickly and refinance to other loans before the reset of their loan terms. Defaults were triggered by falling home prices which precluded refinancing under feasible terms and conditions. Rising alt-A foreclosures compounded lender losses from subprime defaults and helped to precipitate the recession. Stage II: Risingalt-A defaults

  5. Rising unemployment and falling home values are now impacting well-underwritten, traditional fixed-rate loans to borrowers with good credit. Prime, fixed-rated loans are impacted mainly by life changes such as unemployment over which the borrower lacks control, which substantially reduce income and repayment ability. In normal times, borrowers no longer able to afford their mortgage due to such life events can sell and move to more affordable housing. However, current market weakness and the sharp decline in home values have closed the exit door for many distressed borrowers. Stage III: Impact of recession

  6. As the housing crisis expands, the foreclosure rate on traditional prime, fixed-rate mortgages is increasing. Source: Mortgage Bankers Association (MBA)

  7. The ability to successfully modify a loan is determined by the magnitude of the write down required to achieve initial and long-term affordability. Declining home values is a major problem—for borrowers deeply “underwater,” a loan modification may not be reasonable, especially if there is a high risk of re-default. Each type of loan and borrower poses unique risks. Subprime borrowers with weak credit pose substantial risk of re-default. Many alt-A borrowers are severely overleveraged and have experienced a substantial decline in home value. Unemployed borrowers may face lengthy periods of reduced income with a high degree of uncertainty regarding future repayment capacity. Many factors are limiting the feasibility of loan modification

  8. Key market trends areimpacting foreclosures

  9. The market recovery in the Northern Tier region is precarious. Year-over-year sales in July were flatafter rising moderately from a low in April 2008.July sales were at the level seen back in May 2000. Source: MRIS

  10. The recent sales recovery has stabilized NoVA prices. Median prices have rebounded for several months and, in July, several submarkets showed year-over-year increases. Source: MRIS

  11. However, the rise in sales has been driven mainly by investors purchasing distressed homes at bargain prices. Unless traditional buyers return to the market, a seconddrop in home prices could occur later this year or next. Source: MRIS

  12. The magnitude of the problem in Pr. William is sobering.It will take until May 2012 to eliminate the County’sforeclosed inventory at the current drawdown pace. Source: RealtyTrac

  13. Downstate markets are lagging NoVA by 12 months. Based on NoVA’s experience, a bottoming out in sales should be imminent, but no clear sign has yet been seen. Source: Virginia Association of Realtors (VAR)

  14. Most downstate markets continue tosee a deterioration in home prices Source: Federal Housing Finance Agency (FHFA)

  15. Price trends lag changes in sales volume. Prices won’t stabilize until rising sales have time to work off the large inventory of unsold homes. Therefore, downstate prices will likely fall well into 2010, leading to increased defaults. Source: MRIS

  16. Rising unemployment will compound the impactof falling home prices in all regions of Virginia. Source: Virginia Employment Commission (VEC)

  17. The impact of unemployment on mortgage loan defaults is likely to be felt well into 2011. Source: Virginia Employment Commission (VEC) and Mortgage Bankers Association (MBA)

More Related