Because of a recent court case (Bank of America v. Caulkett), “lien stripping” is no longer an option for homeowners filing Chapter 7 bankruptcy.
What is lien stripping?
Lien stripping results when a homeowner files for bankruptcy, and the second lien holder (recognizing that there is not a dog’s chance in heaven that they will get any money) decides to release their lien. The result being sellers may now be finding equity that thought they had lost.
Without lien stripping available, many homeowners who participated in a Chapter 7 bankruptcy will be considering short selling.
Additionally other emerging market forces are beginning to weigh heavily such as resetting loan mods and/or resetting “interest only” mortgages.
Many of these homeowners will face several of these factors (and much higher payments) beginning 2016-2018.
Another factor noted by RealtyTrac is that “Banks are finally adjusting to California’s year-old Homeowners Bill of Rights”, which offers new protections for mortgage holders and prolongs the foreclosure process.
The number of homes repossessed by banks in California nearly tripled in December 2014 to the highest level since December 2012, and that’s pushing a wave of repossessions through the pipeline right now.
Is it time to farm for short sales?
All of these factors make farming for listings a prime opportunity. Opportunities for buyers are beginning to emerge as well.
Here are the highest numbers of negative equity properties by metro area:
Los Angeles/Ventura: 137.6K (8.1%)
San Francisco 42K (6.1%)
OC/Riverside/ San Bernardino 110K (16.4%)
San Diego 39.8k (8.6%)
Sacramento 53.1K (14.1%)
San Jose 10.7K (3.7%)