By BOB TEDESCHI – Published: September 10, 2010

This is an excellent article that addresses the underlying concerns that now face lenders in today’s comprised market… and unfortunately it’s real, as we see this everyday in the industry. Experience shows that the Agents involved have an obligation to not only their clients, but also to the lender. Your thoughts?

STRUGGLING homeowners have found some refuge in short sales, in which lenders allow borrowers to escape foreclosure by selling a home for less than what is owed on the mortgage. Government programs offering incentives to both parties will push the number of short sales to 400,000 this year from 100,000 in 2008, according to CoreLogic, a financial consulting firm.

But the jump in short sales has also given rise to a new form of fraud — which, as a recent study by CoreLogic suggests, could undermine the burgeoning practice.

Fraudulent short sales take many forms, but Frank McKenna, the vice president for fraud strategy at CoreLogic and one of the report’s authors, says one arrangement is more common than others.

An agent for the borrower negotiates with the lender to obtain a low selling price for a property, then sells it to a “straw buyer,” or someone with whom the agent is affiliated. The agents are sometimes real estate agents, or employees of businesses that advertise as “foreclosure rescue” specialists, Mr. McKenna said. As the agent negotiates with the lender — and unbeknownst to the original homeowner or the lender — the agent arranges to resell the property at a higher price. The new buyers may not know that they could have obtained the property for a lower price. Or, even worse, they may be victims of identity theft, unaware that their financial information was being used to buy a home.

In other fraudulent transactions, a borrower might purposefully default on a mortgage he or she could actually afford. The borrower arranges to transfer the property to a friend or relative through a short sale, and the original borrower can remain in the home. The new owner can also transfer ownership back to the original owner through a quitclaim deed, Mr. McKenna said.

He estimated that only about 2 percent of the short sales completed in the last two years were fraudulent, but said fraud was becoming more frequent. “It’s happening a lot more in this market because there are so many more short sales,” he said. “There’s more opportunity to go after the quick buck.”

CoreLogic does not track the actual number of fraudulent short sales. Rather, it estimates the figure by identifying short-sale transactions in which the house was quickly sold or “flipped” to a new buyer, or resold for a vastly higher price. The company obtains and analyzes publicly available sales and financial information on most of the nation’s home purchases.

Florida, California, Texas and Arizona had the greatest number of suspicious short sales, according to the CoreLogic report. New York ranked fifth, with roughly 5.5 percent of all short sales falling into the “suspicious” category. New Jersey ranked eighth, with about 3.3 percent of short sales categorized as suspicious. In Connecticut, the percentage of suspicious short sales was close to zero.Mr. McKenna said the rising number of suspicious short sales could undermine the use of these transactions as a foreclosure alternative. That, he said, would be unfortunate, since borrowers and lenders have only recently reported some momentum in successfully completing short sales.

But John P. Bonora, a vice president of the Fairfield County Bank in Ridgefield, Conn., said he did not expect this to happen. Noting that CoreLogic also sells fraud prevention services to lenders, Mr. Bonora theorized that its report might overstate the threat of fraudulent short sales.

“I’d forward the report to my folks and say you should have some of these things in the back of your mind,” he said. “But I don’t think this report would deter us from doing a short sale.”

Still, Mr. Bonora said, the report makes him more suspicious of real estate agents who market themselves as foreclosure specialists.

“They’re probably speaking with borrowers on a daily basis about foreclosures,” he said. “And people are opportunists.”
A version of this article appeared in print on September 12, 2010, on page RE6 of the New York edition.

While I think the article is well written and addresses the overall picture of the market, there are still factors in our immediate market that play a key factor to a complete rebound. We are still looking at increased resets, high unemployment, high underemployment and plenty of other factors. I’m curious, what are your thoughts? Read on and then let me know.

By Les Christie, Staff writer – September 15, 2010: 5:43 AM ET

NEW YORK (CNNMoney.com) — The national housing market is shrouded in uncertainty. But in California, there are glimmers of stability.

Home prices are rising in virtually every corner of the state. They’ve climbed for nine consecutive months, and in July posted a 10.4% gain year-over-year. That puts the state’s median price at $315,000 — nearly twice the national median of $183,000.

And the news is even better in coastal cities.

San Francisco posted the biggest gain of any U.S. metro over the past year, rising 14.3%. The median price there is now more than $607,000. Meanwhile, San Diego has climbed 11.2% (median price: $389,000) and Los Angeles jumped 9.2% (median price: $345,000).

Meanwhile, Florida, Arizona and Nevada — California’s erstwhile bubble-state partners — continue to struggle. So where is the Golden State’s strength coming from?

“I think it comes from the fact that prices went down so far and so quick,” said Lesley Appleton-Young, California Association of Realtors’ chief economist. “That left a lot of people here saying, ‘Wow, affordable California housing.’”

However, a quick home price rebound was delayed by the crush of foreclosures that accompanied the subprime mortgage meltdown. California real estate had become so expensive that a basic single-family home required many buyers to overextend themselves with exotic loans.

That is no longer the case. Most of the subprime-related distressed properties have been flushed from the system. And when a foreclosure does hit the market, it’s snapped up. The median days it took to sell a home in July was just 44 — lightening fast.

“It’s the dearth of supply for distressed properties that has put pressure on home prices,” said Appleton-Young. “More than half the homes on the market last year drew multiple offers.”

Plus, the California economy is picking up. Even in a recession, it has remained one of the world’s 10 largest economies, mainly because it is driven by every major industry — aerospace, tech, software, finance, agriculture, tourism. So as more of those industries recover and employment picks up, demand for housing will jump.

“California is a much larger, stronger and more diversified economy than the other [bubble] states,” according to Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA.

Another factor that has helped lift prices is a trend toward more short sales. Fewer of the distressed properties are going all the way through the foreclosure process. “The shift to short sales in itself would increase home prices,” said Mark Goldman, who teaches real estate at San Diego State University.

That’s because short sellers usually occupy and take care of the homes until they’re sold, leaving the properties in better condition and worth more than similar foreclosed homes.

Goldman added that California markets are, generally, more constrained than any of the other bubble states. Florida and Nevada, for example, still have room to develop and grow in most areas. But the lack of developable land is especially acute in California, pushing home prices up.
Condos for less than the price of a Corolla

Finally, the California state government has not sat idle. “California provided markets with more significant price support,” he said, “That played a role in elevating prices.”

The state support came in the form of tax credits of up to $10,000 for first-time homebuyers and buyers of new homes. Some purchasers were able to combine the state credit with one from the federal government to reduce their costs by $18,000.

For home sellers in other states, what’s happening in California is encouraging. Trends often begin on the coast, so they’re hoping the recovery will roll eastward.