Taking back homes
by Andrew Gomes
Advertiser Staff Writer
As the brunt of the economic downturn weighed on the local housing market last year, banks and other mortgage firms around the world became some of the largest homeowners in Hawai'i.
Major lenders last year took title to 968 properties statewide, according to a compilation by Title Guaranty Hawaii.
That's a significant fraction of all Hawai'i homes that changed hands through traditional sales last year — close to 10 percent of nearly 10,000 home sales.
The count actually may be a bit higher because Title Guaranty's tally was limited to homes acquired by the most active lenders in the state. Still, the list is a fair indication of the extent to which homes are being repossessed through foreclosure.
The activity reflected a dramatic buildup of homeowners beset by foreclosure last year, but there is some debate over whether the number of repossessions will increase this year.
Jon Mann, an agent with Prudential Locations leading a team selling homes for lenders, said he expects the trend will continue this year because of the lag between an economic recovery and a decline in foreclosures.
Others anticipate that new federal incentives taking effect in April will encourage more loan modifications and pre-foreclosure home sales that will inhibit further proliferation of lender-owned homes.
Last year, Deutsche Bank National Trust Co. owned the most Hawai'i homes — 199, according to Title Guaranty data. Not far behind was U.S. National Bank with 163, followed by Federal National Mortgage Association and Wells Fargo Bank NA, each with 86.
Local lenders including Bank of Hawaii, First Hawaiian Bank, Central Pacific Financial Corp. and American Savings Bank owned only a few homes last year, according to property records.
The list of lenders doesn't necessarily reflect which lenders issued mortgages to borrowers who later defaulted. That's because loans often were sold among lenders and investors.
For example, dominant subprime mortgage lender Countrywide Financial wasn't among lenders with the most Hawai'i homes, though Bank of America, which acquired Countrywide, was near the top.
The tally also isn't a count of foreclosed home inventory, because lenders have already sold some of the homes that they acquired last year.
For instance, property records show that Deutsche Bank at the end of last year owned 106 homes, indicating the lender sold 93 of the homes it acquired during the year.
Brokers involved in selling homes for lenders say it can take many months for a lender to dispose of a home acquired through foreclosure, including the time it takes to evict tenants, list the property, contract with a buyer and complete a sale.
In one example, Deutsche Bank acquired a Waipahu house in February but hasn't listed the property for sale yet. According to property records, the bank took back the five-bedroom duplex for a value of $616,000. The previous owner paid $880,000 in January 2007.
The time it takes to put lender-owned homes on the market at least so far has resulted in such homes representing a small slice of inventory for sale. According to oahure.com, there were about 80 lender-owned single-family homes and condominiums for sale on O'ahu last week, or nearly 3 percent of the roughly 2,900 total listings.
By comparison, there were about 400 pre-foreclosure homes, also known as short-sales, for sale on O'ahu last week representing about 14 percent of listings. Short-sales involve homeowners trying to sell their property for less then they owe their lender in an attempt to avoid foreclosure.
Georgia Roberson, an agent with Coldwell Banker Pacific Properties who sells homes for lenders, said buying a home from a lender isn't much different from buying a home through a regular owner-occupant sale. She said lenders typically want to sell the property for the fair market value, though in some instances lenders are motivated to make fast sales at more attractive prices.
In one recent deal, Deutsche Bank listed a 612-square-foot unit in the Hillside Villa low-rise in Salt Lake for $199,900 in August then reduced the asking price to $170,665 in October. The two-bedroom condo sold last month for $167,000.
Bryn Kaufman of Realty Executives Oahu said one reason lender-owned properties aren't piling up on the market and inflating inventory is because the properties typically sell fast. "The (lender sales) are pretty good deals," he said. "They just want to sell it and sell it fast."
Lender-owned homes often draw more interest than short-sales, according to some brokers. That's because short-sales are subject to evaluation and approval by lenders that sometimes let offers languish for months.
New incentives to entice lenders to expedite short-sales, which were announced by the Treasury Department in November and become effective in April, aim to boost short-sale activity and could lead to fewer foreclosures.
"That should have a positive effect," said Kalama Kim, an agent in charge of the short-sale program at Coldwell Banker Pacific. "(More homes) should get to short-sale before foreclosure."
But Mann with Prudential Locations said he expects to see lenders continue to acquire more homes through foreclosure this year and move slowly to sell the properties, in part because selling homes pre-foreclosure or post-foreclosure usually means the lenders have to recognize a financial loss.
"The banks are hiding their losses," said Mann, a former bank examiner.
Amount of lender-owned properties reflect foreclosure troubles in Isles