Uncle Sam wants you to rent out its foreclosed homes

NEW YORK (CNNMoney) -- Want to become a landlord in one of the nation's hardest-hit foreclosure neighborhoods? Well, Uncle Sam has a deal for you.
Fannie Mae (FNMA, Fortune 500) will offer up nearly 2,500 distressed properties in eight locations to investors who are willing to buy them in bulk and rent them out for a set number of years.
The properties, which are located in Atlanta, Phoenix, Las Vegas, Los Angeles/Riverside, and three Florida regions, include all types of housing units, from single-family homes to co-op apartment buildings.
"This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace," said Edward J. DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae.
The sales, which will cover a small fraction of the more than 180,000 properties Fannie and Freddie Mac (FMCC, Fortune 500) hold, will be open to qualified buyers under strict guidelines.
Most of the properties already house tenants and buyers will be required to continue to rent out the properties
to them for as long as their leases last. Investors will also be required to rent the properties out for a specified number of years. The exact number of years has yet to be disclosed.

Steal this home! 7 foreclosure deals

Investors must post security deposits in order to bid and also must prove that they are financially stable, have property management experience and have strong ties to the local community, such as a history of working with local development organizations.
FHFA said that bidders must purchase all of the homes that are for sale in a given metro area. In Atlanta, that's as many as 572, while in Chicago it's 99.
Despite the fact that the strict requirements could limit the number of applicants seeking to invest in the properties, the government agencies have said there is strong interest in the program. FHFA said it has received more than 4,000 responses to a request for public input on how best to dispose of the vast number of homes Fannie and Freddie Mac (FMCC,Fortune 500) have acquired from borrowers who defaulted on their loans.
Real estate consultant John Burns said there should be no problem at all finding buyers.
"I've got three or four clients myself, maybe more, who will bid on every one of those portfolios," he said.

Multi-million dollar foreclosures

Burns believes the sales should help bolster the housing market. By taking these distressed properties off the market, it will prevent them from further weighing on home prices in surrounding neighborhoods, said Burns. It will also add to the rental property inventory, which should help offset recent rent hikes.
And, by filling up what otherwise could be vacant homes, it should also reduce blight. Vacant homes attract vandals and criminals, which reduces property values and make it more likely that other nearby homeowners will walk away from their mortgages.
"We believe that this initiative holds promise for providing support to local neighborhoods that were especially hard hit by the housing crisis and will help meet the rising demand for rental housing in many communities," said Michael Stegman, a housing finance advisor at the Treasury Department.
FHFA will not say when the first sale is expected to go to contract. Given that it is a complicated process that includes analyzing and comparing bids, it will probably take a couple of months before any final buyers are selected. 

Home prices fell 4% in 2011, lowest since 2002

NEW YORK (CNNMoney) -- National home prices fell 4% in the fourth quarter of 2011, putting them back at levels last seen in mid-2002.

That's the fifth consecutive annual loss and the biggest decline since 2008, when markets were in free fall and prices plummeted more than 18%.

Prices have been falling since they peaked in 2006, and are down 33.8% from their peak, according to the S&P/Case-Shiller national home price index.

"The housing market ended 2011 on a very disappointing note," said David Blitzer, spokesman for S&P. "While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the 

economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended."

After prices fell sharply in 2007 and 2008, declines over the past three years have been more modest. Many analysts thought markets were bottoming out and would soon stabilize, and even pick up. The last quarter of 2011, when national index prices fell a steep 3.8% from the third quarter, may have dashed those hopes.

"While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended," said Blitzer.

The S&P/Case-Shiller 20- and 10-city indexes recorded similar sharp declines during the quarter. Among individual cities, Atlanta recorded a 12.8% year-over-year fall, the worst of any city.

Other big losers were Las Vegas (-8.8%), Chicago (-6.5%) and Seattle (-5.6%). Detroit, where prices crept up 0.5% for the year was, the only city in the 20-city index to register a gain.

Home prices at lowest point in more than 10 years

NEW YORK (CNNMoney) -- Home prices fell to their lowest point in more than a decade in January, but that helped to lift the pace of home sales, according to a report from an industry trade group.
The National Association of Realtors reported that the median home price in January fell 2% from December to $154,700. That's the lowest price reading since November 2001, before the run-up in home prices that became known as the housing bubble.

The median price is the point at which half of homes are sold for a higher price, and half are sold at a lower price. (Multi-million dollar foreclosures)
Serving as a drag on existing home prices is a large inventory of homes in foreclosure. Distressed home sales, which includes homes in foreclosure and so-called short sales in which the home is sold for less than what is owed on the mortgage, made up 35% of sales in January.
'Prices will continue to fall through the first half of 2012 due to the high share of distressed sales,' said Stuart Hoffman, chief economist with PNC Financial. 'The recent agreement between the big mortgage servicers, state attorneys general and the Obama administration will also result in more homes going to foreclosure over the next few months, adding to downward pressure on prices.'
But the pace of sales increased for the third time in four months, helped by the low prices and rock-bottom mortgage rates. The seasonally-adjusted annual sales pace of 4.57 million homes was up slightly from the revised 4.38 million in December. The latest reading was roughly in line with the expectations of economists surveyed by Briefing.com.
'The uptrend in home sales is in line with all of the underlying fundamentals -- pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,' said Lawrence Yun, chief economist for the Realtors.
The housing market has been showing signs of recovery in recent months. The combination of low mortgage rates and a decline in home prices means homes are more affordable than they've been in decades. PNC's Hoffman agreed that the report is a further sign of recovery in the market, although he cautioned 'it will remain a long process.'

New home starts by builders have been rising, along with their confidence and customer traffic, according to an industry survey. A large inventory ofhomes in foreclosure still hangs over the market, serving as a drag on the price of existing homes.
The supply of existing homes on the market tightened slightly in the Realtors' latest report, slipping 0.4% to 2.3 million homes, roughly a 6 month supply. That is down 20% from the supply of homes a year ago. 

The other foreclosure settlement: Millions of homeowners eligible

NEW YORK (CNNMoney) -- Millions of borrowers who suffered financial losses because their mortgage lenders played fast and loose while processing their foreclosures now have two ways of getting a payback.
They can tap the $26 billion settlement between the state attorneys general and the nation's five biggest banks that was inked two weeks ago. But there is also an earlier settlement that has been nearly forgotten -- and that could lead to an even bigger payoff, in some cases.
As part of an enforcement actionby federal authorities last April, 14 mortgage servicers, including Bank of America (BAC, Fortune 500), Chase (JPM, Fortune 500), Citibank (C, Fortune 500), HSBC (HBC), MetLife Bank (MET,Fortune 500), PNC Mortgage (PNC, Fortune 500) and Wells Fargo (WFC, Fortune 500), agreed to hire independent consultants to investigate foreclosure abuses and compensate those who suffered financial harm.
As a result of the program, up to 4.3 million mortgage borrowers who were foreclosed on in 2009 and 2010 will have a chance to request an independent review of how their foreclosure was handled.
So far, only 90,000 eligible homeowners have submitted claims, prompting the feds to extend the deadline for applications by three months to July 31.
The exact amount of money borrowers will receive has yet to be determined. But if a review finds that "financial injury" occurred -- say a bank charged inappropriate fees or it went forward with a foreclosure without a valid claim to the property -- a homeowner could be repaid in full for their losses.

Borrowers who were improperly charged even just a single fee could be repaid for it, according to Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency, one of the federal regulatory agencies that negotiated the agreement.
And borrowers who suffered much larger losses could be in line for much bigger repayments than promised by the AG's settlement, which will pay up to $2,000 to the estimated 750,000 who lost their homes to foreclosure between 2008 and 2011.
The compensation could even repay the cost of regaining a wrongfully lost home if warranted by the facts of the case, according to Hubbard.
The Independent Foreclosure Review was sparked by the robo-signing scandal that exposed the bank's treatment of borrowers in the foreclosure process. The lenders lost documents and recreated them, had low-level employees with no knowledge of what they were attesting to sign legal papers and bent the rules requiring them to halt foreclosures if borrowers sought mortgage modifications.

What the $26B foreclosure settlement means for you

Unlike the $26 billion settlement with the state attorneys general, borrowers didn't have to lose their homes in order to receive compensation, according to Hubbard.
"It could be anyone who suffered financial loss because of errors made in the foreclosure process," he said.
Since the settlements are completely independent of one another, claimants can double-dip, filing for compensation under both settlements. (To seek compensation under the state attorneys general settlement, contact your lender or servicer and ask them to review your case).
To make a claim for the Independent Foreclosure Review, borrowers have to fill out a five-page form that identifies some examples of situations that may have led to financial injury. Borrowers do not have to provide documentation. That will be handled by an independent agency.
No reviews have been completed yet, according to Hubbard. And individual cases may take months to come to decision.
For more information on the forms, go to the website set up by the servicers. And for a full list of the mortgage services involved in the Independent Foreclosure Review, go to the Federal Reserve website 

Home buying: Most affordable in decades

NEW YORK (CNNMoney) -- Buying a home is now more affordable than it has been in the last twenty years.
Thanks to continued declines in home prices and rock-bottom mortgage rates, the National Association of Home Builders/Wells Fargo Housing Opportunity Index hit a record level of affordability.
According to the index, 75.9% of all new and existing homes sold during the three months ended Dec. 31 could have been comfortably purchased by families earning the national median income of $64,200.
That was the highest percentage recorded in the 20-year history of the index, and a sharp increase from just three months earlier when 72.9% of all homes sold were
Unfortunately, being able to afford a home and actually being able to buy one are two different matters entirely. According to Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla., potential home buyers are still finding it difficult to land mortgages.

Mortgages are cheap but you can't get one

"While today's report indicates that home ownership is within reach of more households than it has been for more than two decades, overly restrictive lending conditions confronting home buyers and builders remain significant obstacles to many potential home sales," he said.
Those who do land a mortgage, will be able to take advantage of rates thatseem to hit a new low every week. This week interest rates for 30-year loans averaged a record low of 3.87%, according to Freddie Mac.

Where the deals are

Youngstown, Ohio is the most affordable major metro area in the nation to buy a home, according to the NAHB. The faded steel town, located in eastern Ohio, could be on the verge of an economic renaissance with new gas drilling techniques that could help exploit nearby gas reserves, according to the report.
There, 95.1% of homes sold during the quarter were deemed affordable to typical local households earning the area's median family income of $54,900.
The other metro areas near the top of the list included Lakeland, Fla., Modesto, Calif., Harrisburg, Pa., and Toledo, Ohio.
Among small housing markets, Kokomo, Ind. had the highest housing affordability index with more than 99% of all homes sold there affordable to typical families. Fairbanks, Alaska, Cumberland, Md., Lima, Ohio, andRockford, Ill. were all very affordable as well.
New Yorkers could only shake their heads at the housing opportunities available outside their metro area. Just 29% of the homes sold in the New York metro area during the last three months of 2011 were affordable for the typical local family.
That's the lowest level in the U.S. -- even though locals typically earned $67,400, roughly $3,000 more than the national median. It was New York's 15th consecutive quarter as the least affordable metro area.
Nearly as expensive are housing markets in Honolulu, San Francisco,Santa Ana, Calif., and Los Angeles. 

Foreclosures: America's hardest hit neighborhoods

NEW YORK (CNNMoney) -- The housing collapse has dramatically changed the nation's foreclosure landscape.

Neighborhoods boasting modern homes, cul-de-sacs and tree-lined streets in and around Western cities now dominate the list of the top 100 U.S. zip codes hit hardest by foreclosures and claim and comprise all of the top 10 spots, according to data generated for CNNMoney by RealtyTrac. In 2011, Western states claimed 82 of the 100 worst hit zip codes with 38 in California and another 28 in Nevada.

That's quite a departure from when CNNMoney first looked at the top foreclosure zip codes in June 2007. Back then, the auto industry's ills had turned inner-city neighborhoods in Detroit, Cleveland and Indianapolis into foreclosure ground zero, with the three cities claiming 25 of the nation's 100 hardest hit neighborhoods.

These older working-class neighborhoods were particularly blighted with vacant, repossessed homes lining the streets. In fact, they claimed 6 out of the list's top 10 spots.

These days, however, many of the worst hit zip codes are communities that were built in the past decade or two in and around once-rapidly growing metro areas like Phoenix,San Bernardino, Calif. and Las Vegas, now the poster child of the foreclosure mess.

In fact, Las Vegas claims all five of the top five hardest hit zip codes.The number one spot goes to a neighborhood in North Las Vegas(in zip code of 89031) that recorded 2,469 foreclosure filings last year, according to RealtyTrac.

In California, the towns of Lancaster(93535), in the central part of the state, and Fontana (92336), near San Bernardino, claimed sixth and seventh place -- the highest finishers for any zip codes outside of Nevada.

As far as regions go, the South claimed the second highest number of hardest hit zips with 14. Georgia claimed 12 of those neighborhoods, including one in Atlanta that took 10th place. Interestingly, not a single Northeastern zip code made RealtyTrac's top 100 list.

The foreclosure effect

Foreclosures can devastate housing markets. Properties repossessed by the banks, called REOs, sell for 25% to 50% less than non-foreclosures, said RealtyTrac spokesman Daren Blomquist. Yet, a single foreclosure in an otherwise foreclosure-free neighborhood will rarely impact surrounding values, he said.

"In a normal, healthy housing market an REO sale is the exception and there are many other non-distressed sales that dilute the impact," he said.

NEW YORK (CNNMoney) -- The housing collapse has dramatically changed the nation's foreclosure landscape.

Neighborhoods boasting modern homes, cul-de-sacs and tree-lined streets in and around Western cities now dominate the list of the top 100 U.S. zip codes hit hardest by foreclosures and claim and comprise all of the top 10 spots, according to data generated for CNNMoney by RealtyTrac. In 2011, Western states claimed 82 of the 100 worst hit zip codes with 38 in California and another 28 in Nevada.

That's quite a departure from when CNNMoney first looked at the top foreclosure zip codes in June 2007. Back then, the auto industry's ills had turned inner-city neighborhoods in Detroit, Cleveland and Indianapolis into foreclosure ground zero, with the three cities claiming 25 of the nation's 100 hardest hit neighborhoods.

These older working-class neighborhoods were particularly blighted with vacant, repossessed homes lining the streets. In fact, they claimed 6 out of the list's top 10 spots.

These days, however, many of the worst hit zip codes are communities that were built in the past decade or two in and around once-rapidly growing metro areas like Phoenix,San Bernardino, Calif. and Las Vegas, now the poster child of the foreclosure mess.

In fact, Las Vegas claims all five of the top five hardest hit zip codes.The number one spot goes to a neighborhood in North Las Vegas(in zip code of 89031) that recorded 2,469 foreclosure filings last year, according to RealtyTrac.

In California, the towns of Lancaster(93535), in the central part of the state, and Fontana (92336), near San Bernardino, claimed sixth and seventh place -- the highest finishers for any zip codes outside of Nevada.

Steal this house! 7 foreclosure deals

It's when REO sales rise to 20% or 30% of local sales, as they do in the hardest hit zip codes, that they really begin to affect prices, he said.

"That's when we start to see the average discount between REO sales prices and non-foreclosure sales prices dwindle, particularly in local markets where much of the REO inventory consists of relatively new homes built in the last few years," said Blomquist. "The more REO sales dominate a given market, the more they drag down overall home prices."

In a neighborhood like 32811 in Orlando, Fla., which counted 275 homes with foreclosure filings in just one month last year, home prices have plunged dramatically.

One three-bedroom in the area is currently listed for just under $40,000, for example. In 2005, that same home sold for $120,900, according to real estate agent Jerome Baker.

Not only that, but the listing price is "a little bit on the high end," said Baker. "We'll probably have to lower it to $29,000 to generate some interest."

In Fontana, Calif.'s 92336 zip code, the average home price has been cut in half since December, 2007, according to Zillow.

A four-bedroom, 2,000-square-foot house, was recently listed for $200,500, down 57% from the $465,000 it last sold for in October, 2007. 

Home sales continue to improve

NEW YORK (CNNMoney) -- Home sales ended a difficult year on a high note, resulting in a gain in full-year sales volume.

The National Association of Realtors reported that the annual sales pace in December reached 4.6 million homes, up 5% from November's pace and 3.6% from a year ago.

It was the third straight month of improvement in the pace of sales. The improved fourth-quarter sales volume lifted full-year sales to 4.26 million homes, up 1.7% from 2010 levels.

"The pattern of home sales in recent months demonstrates a market in recovery," said Lawrence Yun, the group's chief economist. "Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market."

Home prices, however, remained depressed, largely because distressed sales continue to make up a significant part of the market.

The median price was $164,500 in December, down 2.5% from a year ago. For the full year, the median price of $166,100 was off 3.9% from 2010 levels.