It was revealed that foreclosures drove US property sales up 7% in 2008 after a 40% plunge in 2007, accounting for one-third of all property transactions in 2008.
Sales of foreclosed houses – often known as ‘motivated sales’ – soared 177% last year while all other sales, tracked by Radar Logic, fell by 17%.
In California, sales of foreclosed properties accounted for 47% of total sales in December, up from 23% a year earlier.
But US buyers still need large deposits, no matter how cheap the property, with buyers unable to get mortgages for more than 60% of loan to value.The reason for the caution is that 20% of US mortgage borrowers are now in negative equity with thousands more expected to be in negative equity this year.
As from this week, some will be helped by a billion mortgage bail-out programme, which allows them to modify their mortgages so that their monthly payments do not exceed 31% of their gross monthly income. To qualify, they have to live in the property, declare financial hardship and agree to attend financial counselling if their debts come to more than 55% of income.
In another scheme, people with little or no equity in their homes will be able to refinance their mortgages to reduce costs. Previously, those with a loan to value of more than 80% could not refinance their loans.
Fannie Mae and Freddie Mac, the state-controlled mortgage giants, are to be given up to billion by the Government to improve loan conditions. Lenders will get bonuses of up to ,500 per loan where borrowers are helped to stay in their homes.
Meanwhile, legislation is going through Congress giving powers to bankruptcy courts to force lenders to modify mortgage payment terms.
