2008 November — Refinance .net

Los Angeles Foreclosures Fall by Half in October

subprime mortgage NEW YORK (Reuters) – Los Angeles home foreclosures fell sharply in October from September as a new California law came into effect, while the number of foreclosures in Miami continued to grow at a slower rate, real estate research website PropertyShark.com said on Tuesday.

The number of newly scheduled auctions on foreclosed properties in Los Angeles county fell 51 percent, the greatest monthly decline in two years.

The law, passed on July 8, requires lenders to contact homeowners and explore options to avoid foreclosure before initiating the process. Some sections of the law became effective on Sept 8.

Its implementation accounted for most of the decline, to 2,389, in the number of newly scheduled auctions foreclosures in Los Angeles County, said PropertyShark.com Chief Executive Bill Staniford.

By comparison, such auctions fell only about 1 percent to 4,863 between August and September.

However, the law requires only a 30-day waiting period before the lender files the foreclosure notice, which means the closure of that period might result in a reversal of this month’s dip, Staniford said.

“We could see this snap right back,” he said.

Foreclosures are at the heart of the slump afflicting the U.S. housing sector, its worst since the Great Depression. The boom that peaked in 2006, fueled by a wave of lending to risky subprime borrowers, was followed by a bust as those borrowers began to default on their mortgages.

Foreclosures force supply up and prices down, setting off a vicious cycle in which a growing number of otherwise creditworthy homeowners default as well because they are “underwater” on their mortgages, or owe more than their homes are worth.

Metropolitan areas such as Los Angeles and Miami, where subprime lending and the accompanying overbuilding was most common, saw the highest price spikes, the steepest declines and the sharpest surges in foreclosures.

But in localities where prices have dropped more precipitously, as in Los Angeles, the rate of increase in foreclosures is slowing.

“Buyers will be there at the right price,” Staniford said.

October’s foreclosures in Los Angeles are still up year over year, but only 10.9 percent versus an increase of 338 percent to 2,155 between October 2007 and October 2006.

In Miami, however, foreclosures increased 34.9 percent to 861 from October of 2007. Between September and October, foreclosures in the city rose 93.5 percent.

30 Year Mortgage Rates drop to 6.20 Percent November 2008

U.S. 30-year mortgage rates fell in the week ending Nov. 6, according to a survey released on Thursday by home funding company Freddie Mac. Last weeks survey showed rates climbing at the end of October.

U.S. 30-year mortgage rates dropped to an average of 6.20 percent from 6.46 percent last week. U.S. 15-year mortgage rates also dipped to an average of 5.88 percent from 6.19 percent last week.

Home Mortgage Loan Interest Rates One-year adjustable rate mortgages, or ARMs, fell in the week to an average of 5.25 percent from 5.38 percent last week.

Freddie Mac said the “5/1″ ARM, set at a fixed rate for five years and adjustable each following year, fell to an average of 6.19 percent from 6.36 percent a week earlier.

A year ago, 30-year mortgage rates averaged 6.24 percent, 15-year mortgages 5.90 percent and the one-year ARM 5.50 percent. The 5/1 ARM averaged 5.89 percent.

“Mortgage rates fell this week amid new indications of a pullback in consumer spending and a weaker jobs market,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.

The Commerce Department reported last week that the economy shrank at a 0.3 percent annual rate in the third quarter, the sharpest contraction in seven years. As fears of a recession grew, consumers cut back on spending, creating the first decline in quarterly spending since the fourth quarter of 1991.

“With the economy contracting and experiencing record home foreclosures, lenders tightened their credit standards further, according to the October Federal Reserve Senior Loan Officer survey,” Nothaft said. “Approximately 70 percent of banks raised their lending standards for prime mortgages and about 90 percent of banks that offer nontraditional mortgages did so as well.”

Lenders charged an average of 0.7 percent in fees and points on 30- and 15-year mortgages, unchanged from last week.

Fees and points averaged 0.4 percent on the one-year ARM, down from 0.6 percent a week ago. The 5/1 ARM had an average of 0.6 percent in fees amd points, down from 0.7 percent last week.