The three-story Magpie condominium building located in Glenwood Meadows neighborhood in Sacramento, California was foreclosed by a bank in 2008 and last month, it was sold to investors for about $3 million, way below the original mortgage amount of $7.4 million.

Bank repo properties in commercial and multifamily real estate market such as the Magpie development are expected to surge in the next two years.

Industry experts said that the commercial real estate market in Sacramento, as well as nationally, is facing a scenario similar to that which the residential real estate market had faced years ago. They added that the decline in market values has affected even borrowers who have good credit standing.

Concern over the rising bank REO properties in the commercial real estate market is widespread, though there is varying opinions about the level and depth of its effect.

A report by the Real Estate Econometrics showed that the current default rate of the national commercial mortgage is at its peak in 15 years, surging by almost 2.25 percent in the first three months of this year, a 1.62 percent increase from the last quarter of 2008.

Meanwhile, the multifamily mortgage default rate in the first quarter inched up 2.45 percent from 1.77 percent the previous quarter.

The New York-based analyst, which used the Federal Deposit Insurance Corp. for its report, predicted that commercial default rate may increase by as much as 5.3 percent by the end of 2011, and it will slide down gradually thereafter.

The report also noted that even borrowers who have good credit standing are having difficulty finding new financing for their mortgages, which contributed to the increasing number of bank REO properties.

Furthermore, the report stated that the drastic decline in labor markets and the real economic activity since September 2008 has undermined property fundamentals.

However, Sandler O’Neill and Partners research analyst Tim O’Brien believed that there will be a rise in commercial mortgage defaults but some banks will be able to avoid it.

He explained that community banks could not compete with those that issue conduit loans where single mortgages are combined and transferred to trusts. He concluded that many of these banks may have less risk of exposure to defaults.

Real Estate Econometrics pointed out that the projected increase in bank REO properties in the commercial real estate market needs immediate policy intervention.

A report has been released showing that a growing number of homeless people were forced to leave their homes because of the repo home crisis.

The report “Foreclosure to homeless 2009: The forgotten victims of the subprime crisis,” has been released by several national homeless and housing organizations, including the National Low Income Housing Coalition (NLIHC), the National Coalition for the Homeless, the National Health Care for the Homeless Council and the National Alliance to End Homelessness.

According to the report, about 80 percent of homeless services and advocacy groups have clients who became homeless because of the repo home crisis. Additionally, one out of five homeless services estimated that over 40 percent of their clients were forced out of their homes due to foreclosure.

The report is based on a survey of 178 homeless service providers across the country. Respondent providers were requested to provide the number of their homeless clients who lost their homes to foreclosures, coping strategies of distressed families and available services and protections provided to families evicted due to foreclosures in the local as well as state levels.

The report also studied several related factors that contributed to homelessness and foreclosures, such as costs of health care and access to legal help. It also recommended several policies that would help both renters and homeowner who are facing repo home problems. It features an appendix list of survey questions and local homeless service providers and advocacy groups that responded.

Sheila Crowley, president of NLIHC, said that the results of the survey showed that foreclosure is a major factor that pushes up the number of homeless people in the country.

Last May, about 321,480 households received default notices, filings of bank repossession and scheduled auctions, representing a 6 percent decline from the April numbers but an 18 percent rise from the May 2008 total. Data also indicated that one out of 398 homeowners received a filing of foreclosure in May.

According to industry experts, May figures was the third consecutive month where the reported total number of foreclosure filings surpassed 300,000. Bank repossessions also rose by 2 percent due to significant increases in foreclosure rates in several states, including Arizona, Nevada, Michigan, Washington, New York and Oregon.

And industry experts are expecting an increase in the number of repo home in the coming months as foreclosure moratoriums are starting to end across the country.

Three out of nine parcels of the Dragon City Casino development in Las Vegas, Nevada are scheduled for bank REO properties sale on June 26. The foreclosure auction will be conducted by the Community Bank of Nevada.

The bank REO properties sale stem from the result of an agreement between Community Bank and the property’s bankrupt owner, Spring Mtn, Wynn Investments. Community Bank is the holder of the almost 9.4 acres of land used by developer Andrew Lai as the collateral for the mortgages amounting to $11.3 million.

Lai is the major owner of the said investment company and he took out the loan from Community Bank for the purpose of buying the land. A portion of the development project that Community Bank has on its portfolio runs through the center which was previously planned as a 356-casino and hotel with conference and retail facilities.

When the investment company defaulted on its loan with Community Bank, the latter initiated repossession proceedings. To protect itself against foreclosure, Spring Mtn. Wynn filed for bankruptcy in January to buy some time to find new financial backers or line up refinancing deals to push through with the development project.

Under the agreement, Spring Mtn. Wynn would give up bankruptcy that protects the property from bank foreclosure properties sale if it could not find a buyer or buyers in escrow until the end of May.

All hope was lost to rescue the Dragon City Casino property when a May 16 auction of the whole site, measuring 22 acres, was unable to receive any sale offer despite its bargain price of $27.5 million. The auction also includes a land property owned by Desert Inn Pioneer that decided to sell instead of file for a bankruptcy.

Both Desert Inn Pioneer and the said investment company have paid a total of $25 million for the development site which started in 2002. According to Spring Mtn. Wynn’s bankruptcy financial statements, its total land of 12.2 acres is estimated to be worth $97.9 million.

However, with myriad of cancelled building projects, new rooms as well as declining tourists in Las Vegas, no one wants to take any risk and invest on Lai’s attempt to target middle-income Asian visitors.

On the other hand, a lender placed Desert Inn Pioneer’s 2.1-acre share of the development project on bank REO properties sale after it defaulted on its $9 million loan.

Free counseling will be available for distressed homeowners who are facing the prospect of losing their properties to foreclosures and who are struggling to make their monthly mortgage payments at a repossession houses rescue fair in Panorama City, California on June 27.

The loan refinancing portion of the Obama administration’s repo property prevention program is running slowly, according to officials of the Mortgage Bankers Association.

Sales of pre-owned homes and foreclose homes for sale in the U.S. increased in May by 2.4 percent, according to an analysis of national real estate data.

A family of four has recently bought a craftsman house in Pasadena for $330,000, a price unthinkable for such as beautiful house two years ago when large numbers of foreclosure homes were unheard of.
The family has been planning to move to less-expensive San Fernando Valley communities so they can buy their first home, but the [...]

The city of Detroit in Michigan has found another way to address the growing REO property listing in the area. This time, the help comes from artists who heard about the city’s very low home prices.

A nonprofit in Phoenix called Neighborhood Housing Services of Phoenix cares so much about the Washington School District that it is working with the city and the school district to help fix and resell repossession properties in the areas covered by zip code 85304 so that the school district would not lose its funding.

To help contain the growth of foreclosed property inventories in Delaware, Governor Jack Markell has proclaimed the month of June as Homeownership Month in the state.