The number of bank repo homes in August declined by 12.7 percent compared to the previous month, but default rates remained high, according to a real estate research firm.

As the number of foreclosure cases dropped by 0.5 percent compared to July, the number of repossessed houses repossessed by banks also dropped by 12.7 percent. More than 540,000 homes have been taken bank by lenders from January 1 to August 31.

According to housing analysts, the efforts of the federal government to pressure lenders and servicers to slow down their foreclosures and work out loans could be now making a significant dent on foreclosure filings. Another reason could be the decision of banks to delay their foreclosures or repossession of properties as they wait for better options.

Some lenders who have a lot of unsold vacant foreclosures may have decided not to pursue immediately repossessions and evictions to save themselves from maintaining the properties. They may have assumed that the delinquent borrowers would care for the properties.

Additionally, there had been many cases where delinquent homeowners were able to restore their loans to current status without help from loan modifications, reducing the number of units going to lists of bank repo homes.

According to data released recently by the Boston Federal Reserve, 30 percent of homeowners who failed to make two monthly payments were able to pay their arrears and make their accounts current.

The rise in short sales could be another reason for the drop in foreclosure actions, according to HBN Interactive president Duane LeGate. Lenders prefer short sales if they see that the home price is reasonable.

The one thing that is clouding the horizon is the scheduled resetting of option adjustable rate mortgages starting this fall. Based on a recent Fitch Ratings report, $29 billion of the $200 billion worth of option ARMS taken out during the housing boom will reset to much higher monthly payments by the end of 2009 and $67 billion will adjust next year.

The average monthly payment increase would be 63 percent, which is equivalent to $1,053, an amount too high and unaffordable for many borrowers.

Based on data from First American LoanPerformance, more than 60 percent of all borrowers who took out option ARM loans and more than 80 percent of all borrowers who took out option ARMs from 2006 to 2007 only pay the minimum amount. These very low monthly payments have actually pushed up the principal balances, making monthly payments unaffordable when they reset and pushing more mortgages into bank repo homes listings.

You can find a foreclosure listing for U.S. government foreclosures on the web sites of the HUD, VA, and DA or on homesales.gov. You can find commercial and land foreclosures at fasrp.sc.egov.usda.gov, which is the web site of the Federal Asset Sales Real Property.

Anybody can buy a foreclosed residential or commercial property from any federal agency, but you must find an accredited real estate broker, servicing representative or agent to submit your bid.

If you are a first-time home buyer looking for a home foreclosed by the government, it is best if you contact first a housing counselor working with the HUD. There are HUD counselors available across the country.

On the other hand, if you have already found an HUD-foreclosed house on homesales.gov, look for a trusted real estate agent who will submit your bid online. Your agent can submit your bid any day of the week, even during holidays and weekends. Your bid will be examined together with other bids submitted within a certain offer period. If your bid is accepted, HUD will notify your agent. If your bid is rejected, you can bid again in the next round if the home was not sold.

If you found a home you like in the USDA foreclosure listing, contact your local USDA servicing unit, which will give you further information on the conditions of the home and your eligibility for USDA housing programs. The USDA has bidding procedures that vary depending on the conditions of the property and your financial qualifications.

Just like HUD, the VA also requires you to find a real estate agent to prepare the VA form titled Offer to Purchase and Contract of Sale and complete all other documents. Your agent will submit your purchase offer through a listing broker accredited by VA. You can look at the required documents and VA forms at the REO section of ocwen.com.

If you are looking for commercial foreclosures by the government, you can visit the web site of the Federal Asset Sales Real Property. Other federal agencies that sell foreclosed properties but do not use the FASRP site are the Treasury, IRS, Marshals Service, SBA, FDIC, BLM, and Corps of Engineers.

In addition, the foreclosure listing for commercial properties foreclosed by the HUD and DA are also presented in other sites other than the FASRP site. Look for the multifamily properties sections of the web sites of Fannie Mae, HUD, USDA and the Corps of Engineers Properties.

The impact of foreclosure home sales on house prices differs state by state, according to researchers of Lender Processing Services Applied Analytics.

The researchers contend that the percentage of sales of bank owned foreclosed properties or REOs is correlated with the rate of house price declines.

Nima Nattagh, one of the key LPS researchers, said that REO sales has risen significantly in almost all areas of the country, but there are some states where REO sales reached a stunning 60 percent of all home sales. She explained that housing markets are much more battered when foreclosures are unprecedented and REO sales comprised a big majority of total home sales.

The LPS researchers focused on two different states – Massachusetts and Michigan – to illustrate their contention.

Michigan was chosen as a representative of the battered housing market because the state, along with Nevada, had the highest percentage of REO sales in the first 6 months of the year. Over 60 percent of total home sales in Michigan were REO sales in the first 6 half of 2009.

The other battered housing markets, Arizona and California, also had large percentages of distressed sales and REO sales, but they had lower REO percentages than that of Michigan. Over 50 percent of total home sales in California and Arizona in the first 6 months were REO sales.

LPS reported that REO foreclosure home sales comprised 64 percent of total home sales in Michigan in the first 6 months. This rate pushed down the prices of non-REO homes by over 26 percent since their highest price levels in 2005. But if REO sales are included in the computation, the drop in home prices was nearly 47 percent.

On the other hand, Massachusetts, which is one of the states which have avoided record foreclosure sales, REO sales did not push down home prices as sharply as in Michigan.

In the first 6 months of this year, only 14 percent of total home sales in Massachusetts were REO sales. This lower percentage pushed down the prices of non-REO homes by only 15 percent. If REO home sales were included in the computation, the home price decline was 19 percent, which is still close to 15 percent.

Another important finding in the LPS report is the increase in the percentage of REO foreclosure home sales despite the decrease in total home sales in the first 6 months of the year in several states.

Foreclosed homes continue to be part of the operations of mortgage companies Fannie Mae and Freddie Mac. While their finances are being battered by foreclosures, they play big roles in the prevention of more foreclosures.

Fannie Mae had almost $171 billion in delinquent home loans as of the end of June and had allocated $55 billion to cover further home loan losses.

Freddie Mac meanwhile had almost $78 billion in distressed loans and had allocated $25 billion for future home loan losses.

Despite these big losses and big loan loss reserves, Fannie and Freddie have been helping the Obama administration implement its loan modification program to prevent more foreclosures.

Freddie Mac has hired around 600 employees to help modify troubled home loans and monitor the compliance of lenders to the foreclosure prevention program. Fannie Mae meanwhile said it has hired hundreds of additional workers to help carry out the foreclosure prevention program.

Fannie Mae was established in 1938 to help stabilize the mortgage market after the Great Depression. It was later privatized to control budget deficits in the late 1960s. Freddie Mac was created in 1970 to provide competition to Fannie Mae.

The two mortgage entities grew fast in the past decades as they bought home loans from banks, packaged them into securities and then sold them to investors.

When they collapsed last September due to the overwhelming weight of foreclosed homes, the federal government had to save them. Since their rescue, they have used up around $96 billion of taxpayer money allotted to them to prevent the mortgage market from totally collapsing.

As of date, the federal government now controls almost 80 percent of each entity, bearing their increasing problems arising from continued defaults and foreclosures in the housing sector.

Previously, the percentage of borrowers missing their monthly loan payments by three months or more was only 1 percent for both entities. Now the percentage has risen to almost three percent for Freddie Mac and nearly four percent for Fannie Mae.

Barclays Capital predicted that Fannie and Freddie will spend up to $200 billion out of the $400 billion reserved by the government for the two entities.

In the first 6 months of the year, Freddie and Fannie guaranteed almost 70 percent of all mortgages issued nationwide, an increase from 62 percent in 2008 and a significant jump from 33 percent during the boom years when lenders provided loans easily, causing a lot of foreclosed homes.

The prices of repo homes for sale in Annapolis, Maryland have been falling as foreclosures and unsold inventories continue to push down prices.

The fact that no one made a bid among the prospective buyers in a court-supervised foreclosure auction held last week at the county courthouse in Annapolis showed that the minimum bid prices were too high for their budgets or too high compared to the market values of the foreclosed properties.

Another public showing of homes for sale in downtown Annapolis during the same week as the court auction showed that the housing downturn is not yet over in the city. A total of 13 new houses in the high-end Acton’s Landing development site were put up for discounted sale because the developer failed to sell them at their original asking prices of over $1 million for many of the properties.

Annapolis seemed insulated from the foreclosure crisis that clobbered a lot of cities, but in reality, the city has also been suffering from sharp home price declines.

The court originally set a public auction for 15 foreclosed houses, but some were canceled a few days before the auction, according to auction firm Alex Cooper. Apparently, some were able to delay the foreclosure sale through special deals with the lenders.

At this particular public auction, although there were investors and real estate agents in the audience, no one made a bid. Ultimately, all the foreclosure properties were sent back to the lender through absentee bids.

Millersville realtor Marcy Gaines said that the prospective buyers apparently surveyed the foreclosed properties and determined that they could not make a profit from the minimum bid prices set by the lender. She added that the Bay Ridge Avenue home was not worth the $145,000 set by the bank.

Meanwhile, the Acton’s Landing housing units are being shown to the public before it will be sold off in an auction later in the month. According to auctioneer Michael Russo, many of the units were already sold before the construction, but buyers backed out when the housing market collapsed even if it meant forfeiting their deposits.

The lowest opening bid is $249,000 and the higher-priced units start at $400,000 and $500,000.

The low auction prices show how sharply home prices have dropped in Annapolis. Condo residents who bought their units in 2007 at around $529,000 have been frustrated at how low the values of their condo units have fallen.

Nearly 10,000 residential units will be sold off in court-supervised foreclosure home auctions in 13 counties in the Atlanta region in September, according to an Alpharetta-based real estate firm.

The number of residential properties to be auctioned off this month is the third highest in the history of the Atlanta metro area. In 2008, the number of foreclosed homes for auctions never exceeded the 8,000 level. This year, all monthly totals surpassed 8,000 except one.

In August, the highest number of foreclosure filings occurred in Gwinnett County, with a total of 2,120. Fulton County had 1,929 filings; DeKalb County posted 1,571; Cobb County had 1,107 filings; and Clayton County posted 785.

To help stop the increasing number of foreclosures, Reverend Jesse Jackson and the members of his Rainbow PUSH Coalition carried out a protest prayer vigil at the Federal Reserve Bank in downtown Atlanta. They particularly denounced the foreclosure sales held by courts across the Atlanta metro area.

Jackson cited the billions of money given by taxpayers to big banks and expressed frustration at the failure of these banks to help these taxpayers during difficult times.

In July, Georgia ranked seventh in a chart of foreclosure filings provided by a real estate research firm. With one household out of 356 households notified with default or foreclosure, Georgia posted more than 11,000 foreclosures in July. More than 3,500 of these were already repossessed by banks while more than 7,600 were already posted for trustee sales.

Meanwhile, in a chart of 203 metro areas surveyed across the U.S., the metro area covered by Atlanta, Marietta and Sandy Springs was 35th based on foreclosure rate in the first 6 months of this year. More than 2 percent of all households in the metro area were in the foreclosure process, putting a total of 42,799 housing units in danger of actual foreclosures.

With one in 49 homeowners in the Atlanta area notified with delinquency or foreclosure in the first half of this year, the foreclosure rate of the area increased by nearly 11 percent from the rate in the previous quarter of July to December 2008 and nearly 11.5 percent from the rate in the same 6-month period in 2008.

According to Jackson, he and his group will continue to campaign against bank foreclosures. His group planned to meet with pastors nationwide to plan a strategy against foreclosures, starting with the Rainbow PUSH Coalition regional conference in Atlanta in October.

Two neighboring high-end foreclosed homes for sale in the Town of Hamburg, New York was bought back by mortgage holder and seller John Russo and the firm Greenacres Inc. which was represented by lawyer Bruce Zeftel from a foreclosure sale held by a court in Erie County.

The two luxurious homes were purchased by Michael Wilson, a 22-year-old hedge fund trader based in Cleveland, in 2008 for $6.3 million. At the time, the purchase became the talk of the town as it pushed up the benchmark for residential real estate transactions in Erie County.

But Wilson was able to pay only slightly over $1 million for each mortgage loan. After Wilson failed to make the required payments this spring, Russo and Greenacres filed for foreclosure.

Greenacres is a company affiliated with the Russo family, who founded South Buffalo-based cheese producer Sorrento Cheese Co. The company was later sold to S.A. Perrier over 10 years ago. Today, Sorrento Cheese is still one of Buffalo’s top manufacturing companies.

Zeftel and Russo were the only bidders during the court-conducted foreclosure auction. Zeftel made a $1.9-million bid for the residential building at 6523 Boston State Road and made a $1.85-million bid for the neighboring building at 6553 Boston State Road. The bidding was largely a credit bid or a paper transaction because Greenacres and Russo held the mortgages on the properties.

According to Anthony Colucci Jr., the Buffalo lawyer chosen by the court to hold the foreclosure auction for the 6523 Boston State Road property, said that the foreclosure decision was easy to make because the defendant, Michael Wilson, clearly defaulted on the loans. It was lawyer Kenneth Case who handled the foreclosure sale for the 6553 Boston State Road building.

Court documents filed by Russo and Greenacres also listed real estate company Phantom One Holdings One LLC as defendant together with Wilson. The company was formed by Wilson to purchase the two homes.

Recently, the high-end residences were raided by FBI investigators looking for documents in connection with their investigation of hedge fund trader Wilson. Until now, however, Wilson has not been charged for anything.

The residence at 6553 was built in 1992 and has over 15,500 square feet while the residence at 6523 was built in 1995 and has 15,000 square feet. Both have indoor pools, in-home theaters and other luxurious amenities.

According to lawyer Zeftel, Wilson has left the residences. He also added that the Russo family will put back the houses on the market soon.

Cities and counties are now being urged by housing advocates and homeowners to stop foreclosure process for homeowners who are delinquent in their property tax payments.

In the past, local governments have not been quick in foreclosing residential properties whose owners are delinquent in paying their real estate taxes. They have more consideration, giving time to homeowners to find ways to pay their arrears. Besides, they do not like seeing families being forced out of foreclosed homes.

But now that cities and counties are reeling from low revenues largely due to low tax collections, they are now forced to find ways to obtain cash to be able to continue funding essential public services and facilities such as public schools, police and fire departments.

Many local governments now are selling delinquent property tax bills to private investment firms, which have no qualms in foreclosing homes if homeowners are unable to pay their debts.

For instance, Lucas County, Ohio has sold over 3,000 unpaid tax bills to a private firm for $14.7 million. Because of the quick accumulation of interests and fees on the tax bills, many homeowners have been put into worse financial situations, with their $1,000 tax bills turning into several thousands in just a short time.

City and county officials say they are in a bind because they do not want residents to be forced out of their foreclosed houses and at the same time they want to obtain cash so they are able to continue operating. They also argue that payment of real estate taxes is a responsibility of any citizen of the country.

Community advocates however reiterate that the short-term gains from turning liens into cash are defeated by the social costs of homeless families and abandoned foreclosed properties.

Additionally, many homeowners assume that property taxes and insurance premiums are included in their monthly loan payments, according to housing advocates.

In 2008, the Federal Reserve required lenders to include real estate taxes and insurance premiums in monthly loan payments, but they imposed the rule only on subprime loans and limited it only to the first year of the home loan.

For other borrowers, the exclusion may mean flexibility in their personal budgets. But for many borrowers, the inclusion of insurance and tax bills in the monthly loan payments for at least five years can step up their ability to save their homes from tax foreclosures.

Total home resales and house repo sales in Greater Phoenix in July slowed down, according to the Realty Studies Unit of the Arizona State University Polytechnic Morrison School of Management and Agribusiness.

In July, a total of 11,500 existing homes were sold in the Phoenix metro area, a decrease from the 11,820 units sold in June and a substantial increase from the 8,165 units sold in July 2008.

With 4,200 foreclosure units sold in July, foreclosure sales comprised 37 percent of total home resales. A total of 7,300 units were traditional sales. Comparing foreclosure sales to traditional sales, about 46 percent of recorded sales were foreclosure properties.

The percentage of foreclosure sales declined in July, compared to the 51 percent share in February 2009 when 4,295 foreclosure properties were sold. Analysts explain that the decline resulted from various federal and state efforts to reduce foreclosures. Foreclosure filings did not immediately result into repossessions as lenders delayed actions to allow homeowners to apply for loan modifications.

In July 2008, a total of 3,470 units or 42 percent of total sales were foreclosures. In July this year, the share of foreclosure sales differed in several areas of the Valley. In Goodyear, 42 percent of total sales were foreclosures while in Mesa, 36 percent were foreclosure sales. In Surprise, 38 percent of total sales were foreclosure properties.

ASU analysts said that although the share of foreclosure sales declined, foreclosure properties still drove total home sales.

Jay Butler, director of the ASU Realty Studies unit, explained that the major participants in the current housing market are still the same as during the housing boom. He added that investors looking for cheap properties to profit from are still the main drivers of sales.

Until the share of foreclosure sales decline to around 3 to 5 percent, according to Butler, a housing market recovery cannot be established. He added that the market has recovered if it is primarily driven by sales of owner-occupant homes.

Butler also said that job losses and reduced income due to furlough programs and reduced salaries have blocked many potential home buyers despite historically low mortgage rates and low-priced homes.

Meanwhile, the median sales price for foreclosure homes across the Phoenix metro area in July was higher than the median sales price for traditional sales because of the rising number of higher-priced properties being foreclosed and sold. The median sales price for foreclosures in July was $148,045 while the median price for traditional sales was $135,500.

The servicing of 180,000 Ginnie Mae-guaranteed home loans in the loan portfolio of Florida-based mortgage servicer and broker Taylor Bean & Whitaker has been assumed by Bank of America.

Taylor Bean filed for Chapter 11 bankruptcy in Jacksonville in the first week of August after the U.S. Housing and Urban Development started investigating its business practices and after business contracts with federal agencies were terminated.

TBW has been the country’s 12th biggest mortgage writer before it closed in the week covering August 8. It had $15.25 billion in total deposits and had 158 offices in the Tampa Bay region and operations in other states such as North Carolina. In the Tampa Bay region, TBW ranked first in the mortgage industry, having captured 20 percent of the market.

The lender was little known nationally, but it gained attention when it announced its plan of leading a bank consortium to save Colonial Bank from collapse. The deal however failed and the FDIC decided to close Colonial and sell it to BB&T.

Additionally, the North Carolina Office of the Commissioner of Banks has issued a cease and desist order against the servicer for its role in the continued rise in number of bank repo homes in the state despite its commitment not to proceed with foreclosures pending a state audit.

In the first week of August, the Federal Housing Administration told Taylor Bean to stop processing FHA home loans because of its submission of questionable loans.

Freddie Mac and Ginnie Mae soon followed, suspending the servicer’s authority to provide Ginnie – and Freddie – guaranteed loans. Because of the cancellations, Taylor Bean had to lay off around 2,000 employees.

Taylor Bean said that it will appeal the cancellations, but analysts wonder how the servicer can continue its normal operations. The following week, the Florida Office of Financial Regulation stopped the lender’s operations across the state. It specifically ordered the lender to stop foreclosure filings, stop assessing late fees and stop reporting delayed payments to credit bureaus.

In response to questions from the public, Taylor Bean issued a press release explaining that its problems may have arisen from various investigations on the collapse of Colonial Bank, which has been Taylor Bean’s primary bank for many years. The lender further explained that Colonial has frozen around 100 of Taylor Bean’s accounts and that this caused delays in the payment of borrowers’ real estate taxes and insurance premiums.