SAN FRANCISCO – Economists cannot determine the particular impact of foreclosures in the world’s eighth largest economy, California. They reckon it’s either merely a disturbance caused by the subprime issue of the mortgage lending industry or the state is indeed headed for a downturn. Los Angeles-based Beacon Economics’ Christopher Thornberg anticipates California’s economy to worsen as more households cut their spending to adapt with increasing mortgage payments particularly on the subprime and adjustable-rate loans that were availed by borrowers with weak credit.

Furthermore, DataQuick Information Systems’ report shows that 17,408 homes in California are due to foreclose in the second quarter. The foreclosures have spiked to about 800% from a year ago. A portion of California’s 8.4 million residential properties is also pushed by markets that are soaked in subprime loans.

The largest mortgage lender in the U.S., Countrywide Financial Corp. has cut down its 2007 forecast due to an anxiety over delinquencies also coming from borrowers with more stable credits and will no longer be contained within subprime borrowers. On the other hand, president of TheHomeBuyingCenter.com Patrick McGilvray is optimistic towards the market. Sacramento-based firm TheHomeBuyingCenter.com corresponds troubled homeowners with investors and homebuyers. Some experts also contradict Countrywide’s anticipation as they believe the troubles will remain among weak-credited borrowers and their lenders. They also have no worries on potential recession or decline on consumer spending.

Chief economist for the state Department of Finance Howard Roth finds California overcoming the turbulent foreclosures after going through the worse housing market state in early 1990s brought about by gutted aerospace payrolls. More than 500,000 jobs were lost in those years. In June, the state’s unemployment rate was 5.2% far from the almost 10% rate between 1992 and 1993. Roth believes that the housing market in the state will soon recover.

SACRAMENTO, CA – In the first quarter of 2008 home foreclosures in the United States reached a peak and the pain was felt by all types of borrowers, not just those with the now infamous subprime adjustable rate mortgages (ARMs).

While subprime borrowers led the pack in allowing their homes to go to foreclosure many so-called prime and alt-a borrowers were unable to consecutively make payments on their houses as well. According to the Mortgage Bankers Association (www.mbaa.org), .99 percent of home loans in America entered the foreclosure process in the January to March time frame. The number the previous year was .58 percent.

The trade association first began measuring loan delinquency rates in 1979, and this year’s results were the highest on record at 6.35 percent.

On a positive note, the Mortgage Banker’s Association senior researcher, Jay Brinkmann, predicted that most states should see a trailing off of foreclosure activity by years end. But, troubled states like California, Florida, Arizona, and Nevada, which saw record prices spikes in residential real estate values, may see their foreclosure woes persist well into 2009.

For the homeowner who is trying to sell a house in the current market the challenge can be finding a qualified buyer who is pre-qualified for a mortgage loan. Many buyers have reported that they are simply not able to get funding for a house purchase despite having good credit and down payments available.

Real estate and foreclosure expert Patrick McGilvray, J.D., president of Sacaramento, CA-based The Home Buying Center.com (www.TheHomeBuyingCenter.com) said, “For people looking to buy a foreclosure house there are opportunities aplenty. It’s important for these buyers, though, to get pre-qualified for a home loan before they go shopping because sellers, especially lenders with a large inventory of bank owned REO houses don’t want to spend time with people who aren’t ready, willing and able to buy.”

SACRAMENTO, CA – The current housing crisis in the United States has resulted in greater difficulties for borrowers who want to borrow money from mortgage lender to buy a home. Gone are the days when homeowners could sell a home fast and buyers could easily get a mortgage loan .On Wednesday at the Securities Industry and Financial Markets Association (see www.sifma.org) conference Jack Malvey of Lehman Brothers Holdings, Inc. commented, “We’re going through a tough spell with regard to credit…The subprime debacle…will be followed by years of tight credit.”

Malvey blamed excesses in so-called structured finance and collateralized debt obligations, essentially securities created by pooling mortgages together to create bond-type investments, for the crisis. He predicted that the overall market would be healthier after two years or so, but for the country the wait could feel like a long time.

Residential real estate sellers and buyers are likely the ones to feel the brunt of the pain in addition to Wall Street’s financial firms, many of who have seen their stock prices slide during the past year.

One company that helps homeowners and homebuyers buy and sell homes, www.TheHomeBuyingCenter.com, reports that their counseling activities are way up. “We counsel home sellers and buyers about their realistic options in today’s market. We provide the option of selling a house quickly and directly to a nationwide network of investors, but many people don’t have enough equity left in their homes to qualify for an investor purchase. For these folks the counseling process explores their other options including short-sales and ways for them to talk to their lender about loan modifications,” said company president Patrick McGilvray.

The other main thing McGilvray said his company does is help people looking to buy a home find ways to buy a foreclosure home either from an investor or via a bank or other lender after the house has been foreclosed on. These houses are also known as REO homes, and for the pre-qualified buyer, they can represent a tremendous deal.

SACRAMENTO, CA – After 14 years at the helm of one of America’s premier teaching and research universities, the University of California, Davis, Chancellor Larry Vanderhoef announced today that he is stepping down in 2009.

Vanderhoef announced plans to take a sabbatical leave for one year starting in June of 2009 and indicated he would return to his duties as a professor of plant biology in 2010.

Two of the milestones achieved during Vanderhoef’s stint at the helm of UC Davis included an expansion of the student body to 30,000 from 22,000 and an increase in faculty size by 44 percent. In addition to the student and teacher growth, over 4 million square feet of classrooms, laboratories, clinical settings, and performance and office space were added including the Mondavi Center for the Performing Arts.

One of the lesser known yet noteworthy activities, especially in terms of current US-Iranian relations, undertaken during the Chancellor’s time in office was an official university delegation trip to Iran to establish academic and cultural ties with the University of Tehran. Deans of the colleges of agricultural sciences and engineering traveled to Iran with the Chancellor in 2004. The prominent Sacramento real estate developer Mohammed Moe Mohanna, a native of Iran, led this delegation which became the most significant U.S. delegation to Iran since the Revolution of 1979.

Mohanna, a well-known international civic leader, is very involved in numerous philanthropic activities and serves on the board of the UC Davis Foundation. When asked about his thoughts on the retirement of Vanderhoef he commented, “Larry is really a remarkable human being. He is a very courageous and visionary leader with global understanding. Larry promotes the internationalization of education and turns nations into people. He has been a champion of crossing boundaries and building bridges. To me, Larry personifies the great American values that we all cherish.”

Vanderhoef faced considerable pressure from others when he agreed to be a part of the delegation and wrote at the time of the trip, “perhaps in the process, one small step can be taken toward a return to normalcy in the Middle East.”

The current president of the University of California, Robert Dynes said of Vanderhoef, “all the other chancellors [of the UC system] and I look to him for wisdom and experience.” UC president-designate Mark Yudof said, “I have, from afar, watched the UC Davis campus go from relative obscurity to the front ranks among the nation’s research universities.”

All data point to escalating foreclosure numbers through the year

Foreclosures have flooded North County’s housing market, and indicators show that the waters will be rising, not receding through the rest of the year.

Just as April’s sales data was the best in months and provided some encouragement for real estate agents, the month’s huge foreclosure numbers offered more ammunition to housing market bears who see San Diego County’s housing recession dragging on for two or three years.

All indications are that North County will see more foreclosures, not fewer, come up for sale over the next six months:

– Fewer than half of San Diego County variable-rate subprime loans —- where interest rates jump after a set period and typically carry high payments because of a borrower’s poor credit score or low down payment —- have already seen payments escalate, according to a report by the New York Federal Reserve Bank.

– Of all North County foreclosed homes that went back to the bank within the last 120 days, 60 percent have not been listed on the market, according to a North County Times analysis of foreclosure, listing, sales and pending sales data. And there have been more finalized foreclosures —- 1,800 homes —- over the last four months than the previous seven months.

– Notices of default, the first step in the foreclosure process, have shot up in North County, reaching a peak for this recession of 1,100 in April, according to data from ForeclosureRadar, a California foreclosure tracking service. Notices of default preceed bank-owned foreclosures (widely viewed as the chief culprit of San Diego County’s home price decline) by six months to a year.

The data put foreclosure analysts at odds with real estate agents, who say that a flurry of buyer activity foretell a housing market recovery locally.

“I am more wondering when is this thing going to blow up, and you’re already talking about the light at the end of the tunnel,” said Ramsey Su, an investor and former real estate broker in San Diego. “It’s going to get worse before it gets better.”

Small-time investor could lose big

Many housing analysts said they think option-adjustable rate mortgages will further exacerbate the foreclosure problem. The loans allow homeowners to pay less than the interest accrued, meaning the amount owed on the mortgage increases, rather than decreases, with each payment.

Eventually, the mortgage balance becomes so large the lender forces the homeowner to pay all interest and some of the principal each month to start drawing down the balance.

For Diane Goodwin of Oceanside, that move would force her to lose two of her investment properties. And if the market does not improve, she said she could lose her other three homes, including her primary residence, over the next year and a half.

All five properties she owns carry the option mortgages, also known as negative amortization loans.

“Yup, big mistake,” she said. “However, we wouldn’t have any of them except the original house if we didn’t use neg-am, so it was a gamble. And at the time, it seemed like a good one. Obviously, we didn’t know what was going to happen to the market.”

There are 19,200 homes with neg-am, non-suprime loans in San Diego County, according to the Federal Reserve report. All of those loans are known as Alt-A, which indicates a more qualified buyer than subprime loans but less qualified than prime loans. In total, there are about 95,000 non-prime loans in the county, according to the data.

That prevalence has raised concerns among foreclosure analysts that neg-am loans will cause a new tidal wave of bank-owned foreclosures.

“I still haven’t seen a real wumph,” said Ward Hanigan, founder of Innovest, a San Diego-based company that tracks foreclosure statistics and buys bank-owned properties.

Hanigan said he thinks San Diego County’s housing market will decline for two more years before any sort of recovery and that an increase in foreclosures will lead the decline.

Based on that prediction, his company has not invested in foreclosures yet, he said.

A few unknowns will play a significant role over the next year.

For example, Goodwin is desperately trying to get her banks to freeze her mortgage payments to avoid foreclosure. But because she has not missed a payment, she said, they will not talk about such a freeze, known as a loan modification.

If more banks engage in loan modifications, more homeowners and investors like Goodwin might dodge foreclosure.

To help even more families facing foreclosure, the state and federal governments have moved aggressively to pass foreclosure-prevention legislation and have organized networks where homeowners can seek free help in securing loan modifications.

However, much of that legislation will not help Goodwin because she is an investor and politicians have repeatedly said they want to avoid bailing out speculators.

But Goodwin said she does not fit the speculator-investor prototype.

“I just wanted to make sure I wasn’t a burden to my family when I get old. It was not to be rich, but to have something so that my kids wouldn’t have to worry about me when I’m 90,” Goodwin said. “So now, instead of being able to retire when I’m 65 or 62-and-a-half, now, realistically, I’ll have to work until I’m 75.”

The negative intangibles

Some unknown factors could increase, instead of reduce, foreclosure numbers. For some housing analysts, the trajectory of the nation’s economy will play the biggest role in foreclosure numbers over the next year.

Housing analysts have said that the primary cause of foreclosures so far has been creative loan products, such as neg-am or subprime loans, that put people into homes they could not really afford.

In contrast, job loss, divorce and death have been the largest foreclosure factors historically. If significant layoffs come —- as some analysts, such as Su, expect —- foreclosure numbers will multiply as traditional home losses combine with evictions brought about by exotic financial instruments and a housing rush from 2000 to 2005.

“I don’t think it would be a linear growth of foreclosures. It would be exponential. It would be catastrophic,” said Su, the San Diego investor. “It would be a situation we have never seen before.”

Some real estate agents, such as Kurt Kinsey of Oceanside, disagree with analysts such as Hanigan. Though Kinsey said he acknowledges there will be more foreclosures through 2008, that does not necessarily mean they will depress home prices.

“It will definitely add pressure to non-distressed sellers, no doubt about it. But most of them (foreclosures) are coming back at price points that are affordable,” Kinsey said. “And from where they started at, they’re starting to come up in price. So if anything, they’re starting to heal some neighborhoods.”

Shadow inventory

Even if foreclosure numbers leveled off next month, it would take a long time to work through the homes already in the foreclosure process.

Notices of default, the first step of the foreclosure process sent out after homeowners start missing payments, are considered a leading indicator of foreclosures.

Hanigan said his statistics show about 50 percent of notices of default are turning into bank-owned foreclosures in San Diego County.

North County has seen notices of default escalate recently, accumulating 4,100 notices in the first four months of the year, according to ForeclosureRadar.

With Hanigan’s 50 percent conversion rate, the notices of default during the first four months of this year will translate into 525 foreclosures per month. During those four months, North County posted an average of 460 foreclosures over the same time period.

And even many of the homes that have completed the foreclosure process have yet to hit the market.

Of the 1,300 North County homes to be seized by banks over the last 120 days, 750 are still not on the market, according to an analysis of ForeclosureRadar data and listing, sales and pending data from Sandicor, a service real estate agents use to post homes for sale.

“I think that the banks are in an analysis paralysis,” said Norm Miller, a real estate professor with University of San Diego’s Burnham-Moores Center for Real Estate. “They’re trying to figure out whether to put it on now and bite the bullet or wait because they think we’re at the bottom. But everyone else is thinking the same way and there’s no way to avoid the rash of foreclosures.”

Some housing analysts disagree with Miller, saying that banks are moving the foreclosures as quickly as possible, but that the process of evicting families and readying homes for sale is time-consuming.

Either way, there are plenty of homes to be sold not listed on the market, called by some as “shadow” or “phantom” inventory.

Many analysts look at inventory, the number of homes for sale divided by the number of sales, to determine the relative health of the housing market.

Some analysts, like Miller, think that current inventory numbers —- though high —- are artificially low because of foreclosure properties not on the market and regular homeowners who do not want to sell in a struggling market.

Still, some neighborhoods, especially those along the coast, have exhibited strength in pricing and few foreclosures.

Further, some areas, such as parts of Oceanside and Escondido, have been so wracked by foreclosures that prices have dipped to $160,000 and most analysts do not expect further declines.

“You look at 10 homes for sale, one is aggressively priced and another is priced at the same price as a year-and-a-half ago. … They’re going to be on the market for a long, long, long time,” Miller said. “So this home is close to bottoming out, and the other one is in la-la land with the assumption that real estate never goes down.”

 By David Prosser,

Confidence in Britain’s housing market has sunk to its lowest level for more than 30 years, figures to be published today will reveal, as property prices continue to fall and mortgage lenders restrict home loan finance. The Royal Institute of Chartered Surveyors (Rics) says that 95 per cent more surveyors reported a fall in house prices in April than a rise, the worst figure it has reported since it began publishing monthly property market surveys in January 1978.

In some areas of the country, including East Anglia, the North and North-west of England, not a single surveyor reported house price increases, with 100 per cent reporting declines during April. Even in Scotland, where the housing market has been more robust in recent months, Rics says more surveyors are now reporting house price falls than rises.

“Many would-be-buyers are either struggling to raise the necessary finance or are exercising caution in the light of current economic uncertainty,” Rics warns. “With the official interest rate cuts not being fully passed on to the high street, lenders continue to pull back on the range of mortgage products and further scale down loan-to-value ratios, there is little expectation that demand will improve in the near term.”

Rics also warns that Britain’s property market may yet deteriorate even further, because a shortage of supply of homes coming up for sale is acting as a brake on price falls. If economic problems were to cause an increase in the number of homeowners forced into selling their homes, much more significant price falls would be likely.

Worryingly, there is some evidence that this trend has already begun. Stephen Thornton, a spokesman for Rics, said that there had been a sharp increase in the number of properties coming on to the books of surveyors in London last month. He warned: “When there is a big jump upwards in new instructions it can indicate forced sales – either repossessions or sales from those attempting to avoid the repossession process.”

This may reflect the sharp rise in the number of homeowners facing the prospect of losing their homes that was reported by the Ministry of Justice last week. It said the number of repossession orders made in the English and Welsh courts during the first quarter of the year was 17 per cent higher than in the first three months of 2007.

The Ministry of Justice also said the number of repossession claims from lenders, the first stage in the legal process of confiscating the home of someone who falls behind on their mortgage payments, had risen by 16 per cent in the first quarter. It is at this stage that many borrowers would seek to sell their homes, in order to avoid the repossession process.

Nevertheless, estate agents insisted yesterday that Britain was not on the verge of a house price slump. “The house prices falls that are taking place are modest and the picture is still patchy, with some areas of the country finding it tougher than others,” said Peter Bolton King, chief executive of the National Association of Estate Agents. “It is still important to remember that the underlying factors that support the property market remain – low unemployment, historically low interest rates and a pent-up demand for houses.”

However, the figures from Rics show an increasingly gloomy picture across every important housing market indicator. The number of sales completed by surveyors over the three months to the end of April was the lowest since 1997. The number of unsold properties on their books is at its highest level since 1998, and the number of sales as a proportion of unsold properties is now at a 12-year low.

Moreover, Rics’ figures are in line with the most recent warnings on house prices from Halifax Bank and Nationwide Building Society, the country’s two biggest mortgage lenders. Both have said that annual house price growth went negative in April for the first time since the property market began correcting, taking the average home below its value 12 months ago. Halifax is now expecting prices to fall by an average of 10 per cent during the course of 2008 and 2009.

There are also increasing fears about the impact of housing market setbacks on the wider economy. “The real issue is the collapse in the number of housing transactions, which has very real implications, not just for the property industry but also the high street and the wider economy,” added Ian Perry, a spokesman for Rics. “Sellers of white goods, for example, are likely to suffer if this low level of turnover persists for much longer.”

The British Retail Consortium said yesterday that retail sales during April were at the lowest level for three years. However, despite calls for aggressive interest rate cuts from estate agents and other housing market professionals, the Bank of England’s Monetary Policy Committee is finding it increasingly difficult to justify reductions in the cost of borrowing, in the face of rising inflation. Official statistics yesterday revealed that prices at the factory gate are now at record levels, with rampant cost increases in the energy, food and transport sectors now beginning to feed through.

Michael Saunders, an economist at Citigroup, said: “The housing market is already extremely weak, and house prices are likely to fall further in coming months. Consumer spending is starting to give way and also seems likely to slow sharply in coming months.

“The strength of cost pressures adds to the economy’s downside, not least because it greatly reduces scope for the MPC to respond to the credit crunch with rapid easing [of interest rate policy].”

By Les Christie  

NEW YORK  — The wave of foreclosures sweeping the nation are driven in part by a nearly unprecedented decline in home prices and require a concerted government and private-sector response, Ben Bernanke, chairman of the Federal Reserve, said Monday.

“Realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment,” Bernanke said in a speech before the Columbia School of Business.

Bernanke’s comments come as concern about the housing crisis and debate about how to help homeowners in trouble is growing.

Foreclosure filings of all kinds - delinquency notices, auctions sale notices and bank repossessions - were up 112% during the first three months of 2008 compared with the same period a year ago. Community advocates and policy makers are worried that the problem will worsen as the interest rates on as many as 1.8 million mortgages reset this year.

“High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets, and the broader economy,” concluded Bernanke. “Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It’s in everybody’s interest.”

In explaining the forces behind the problem, Bernanke cited the “increasing role” of declines in home values. He unveiled a series of “heat maps” that showed delinquency rates, job losses and home price changes.

Unemployment statistics, according to Bernanke, do not explain the increased delinquencies of many areas, including California, Florida and parts of Colorado, where foreclosure filings have increased even when unemployment generally have fallen.

More revealing was the close correlation between declining home prices and high delinquency rates. On the home price decline map, states like California and Florida were drenched in red, indicating the worst losses. On the map revealing the highest foreclosure rates, the same states were also covered in red.

Piggy-back problems

Bernanke pointed to the use of so-called piggy-back loans in helping drive foreclosures. These loans, which required low down payments or none at all, were used with increasing frequency during the bubble years to enable borrowers to purchase homes in high-priced states.

Because of price drops, many of the borrowers are now “upside-down,” meaning they owe more than their homes are worth. Many of the owners had counted on the idea that their home values would continue to soar, increasing their home equity, which they could then tap to pay their bills. Now, they can’t afford to pay off their mortgages and they have no assets to rely on.

In the past, said Bernanke, lenders and companies that service loans were “used to dealing with mortgage delinquencies related to life events such as unemployment or illness. . . . A widespread decline in home prices, by contrast, is a relatively novel phenomenon, and lenders and servicers will have to develop new and flexible strategies to deal with this issue.”

In some cases, such as when the value of a home has fallen below the mortgage balance, a writedown of principal may be the best solution, according to Bernanke, although, he added, to be effective they must be targeted to cases facing the highest risks of foreclosure.

What Washington can do

Bernanke outlined the steps that the Federal Reserve was taking to try to minimize the impact and scope of the foreclosure crisis.

The response includes working with community groups trying to acquire and restore vacant properties; encouraging lenders and mortgage servicers to work with at-risk borrowers; and developing new lending standards to prevent some of the abusive lending practices of the past from continuing.

The Fed, according to Bernanke, has worked closely with the Hope Now alliance - an industry foreclosure-relief effort spurred on by the Bush administration - to support help for troubled borrowers, develop protocols to standardize loss-mitigation approaches and improve reporting standards.

Bernanke also threw his support behind the expanded use of the Federal Housing Administration (FHA) and government-sponsored enterprises such as Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) to address problems in mortgage markets.

Opening up the lending markets has already helped thousands of at-risk borrowers to refinance into lower cost loans and save their homes, Bernanke said.

But with more than 156,000 families who lost their homes during the first three months of the year and with as many as 1.8 million adjustable rate mortgages scheduled to reset to higher rates this year, there’s still much work that needs to be done, he said

SACRAMENTO, California – Real estate on the internet has been a big topic in recent years and the trend for people who want to buy or sell a house is increasing. The National Association of Realtors predicts that more than 80% of home buyers and sellers are using the internet in their search.

One company that helps put home sellers in contact with real estate investors, www.TheHomeBuyingCenter.com, recently reported, despite the housing slowdown and subprime mortgage meltdown, that they are having to expand their call center operations to deal with increased lead flow. The company also helps prospective home buyers purchase foreclosure homes from investors and lenders.

Company president, Patrick McGilvray, J.D., commented, “We’re hiring more home selling counselors to help homeowners understand the process of selling their house fast to an investor. We talk with thousands of people every month and many of them don’t understand what investors look for in a house purchase. By providing education and guidance to our customers we are able to do right by them and make money at the same time. We’re glad to be part of the solution for America’s real estate crisis.”

Jose Canseco, the former AL MVP who made millions during his baseball career, has had his home foreclosed.

Canseco told the syndicated TV show “Inside Edition” that he walked away from his $2.5 million, 7,300-square foot home in suburban Encino because it didn’t make sense to continue making payments.

“I do have a judgment on my home and it to me is very strange because it didn’t make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else,” he said in an interview that aired Thursday.

“You know my life, this financial thing, is a very complicated issue. Obviously, when you make all that money, people think, `OK, let’s assume it is $35 million.’ People have to understand that $35 million, you’re paying the government 41 percent. That leaves you with about $17 or $18 million, not even. Then you’re taking care of your whole family.”

He added that a couple of divorces cost him $7 million or $8 million.

Canseco said his top earnings year was $6 million and that his financial situation obviously is different than most people who are losing their homes.

“What about other families that we’re hearing on TV, that they’re saying, `We have nowhere else to go,’” he said. “I mean, that is amazing. I’ve got books (he’s put out two expose-type books on drug use in baseball), we’re now trying to produce the movie to both.

“Like I said, my situation was a little more different than most. I decided to just let it (the house) go, but in most cases and most families, they have nowhere else to go.”

By Nick Carey

LIVONIA, Michigan (Reuters) - Realtors in many U.S. states say lenders are demanding excessively high prices before allowing distressed borrowers to offload their homes in “short sales,” making the housing crisis worse.

In a short sale, a borrower dumps the home at below-market value and the bank forgives the rest of the debt. The borrower’s credit rating is hurt but for less time than in a foreclosure. Such sales have been touted by banks as a way out for homeowners unable to pay their mortgages.

But Realtors complain many lenders harm their own interests by refusing to accept bids below internal targets, even though that may eventually force lenders to sell homes in foreclosure, where bids are usually far lower.

In addition, many lenders simply do not have the people or processes in place to handle a swelling tide of short sales around the country, Realtors say. As a result, lenders are taking far too long to evaluate offers, leading many would-be buyers to walk away from deals.

“The system is broken,” said Ron Rosen, a Realtor in Lighthouse Point, Florida. “The only question banks should ask is can they make more in a short sale than in foreclosure.”

“The answer is that in nine out of 10 cases they will lose more money in a foreclosure,” Rosen aid. “But some banks seem to be asking a different question.”

On Tuesday the National Association of Realtors cited the slow pace of short sales in reporting a 2 percent drop in sales of previously owned U.S. homes last month as inventories swelled and prices slid.

“This has been a frustration of our members,” said NAR chief economist Lawrence Yun. “Lenders have been dragging their feet.”

Borrowers like Judie Quinn echo that, saying their lenders have been uncooperative and have passed up solid offers.

Quinn, 67, is a steel industry sales representative whose home in the Detroit suburb of Belleville had been on sale since August 2005. After back surgery in 2007 left her with large medical bills and out of work for two months, she decided she could not afford the $2,200 monthly mortgage payment.

“I wanted to save my credit rating, so I tried to arrange a short sale,” Quinn said at the Livonia, Michigan, office of Linda McGonagle, a Realtor at Quality GMAC Real Estate.

The loan was from Wells Fargo & Co (WFC.N: Quote, Profile, Research) and serviced through an affiliate, America’s Servicing Co.

Between April and October 2007, Quinn received four offers, McGonagle said. The first offer of $289,900 — the asking price was $299,000 — was rejected by the lender because Quinn was not yet in loan default. “No one at the bank mentioned she had to be in default until after that offer was rejected,” she said.

She said the lender ignored the third and best offer of $299,000 long after the bidder had given up. The home went into foreclosure in October.

“The lender was unresponsive and unhelpful, so Judie wasted time and money trying to do the right thing,” McGonagle said. “I tell other agents to avoid short sales because you just can’t win. This is a commission-based business and if you can’t get deals done, you don’t get paid,” she added.

EXPECTATIONS DASHED?

Wells Fargo said in an email that customer confidentiality prevented it from discussing Quinn’s case but said it had seen an increase in short-sale requests from borrowers.

“Lenders have pre-established guidelines from investors that we must follow when doing a short sale, and this includes the minimum amount an investor (or) mortgage insurer… will accept,” the bank said.

Gary Reggish, a Realtor at Remerica United in Novi, Michigan, said most of the owners he has worked with on short sales have been kept waiting months for word from their lender, which had caused many deals to fall through.

“Some banks are simply overwhelmed,” he said. “But they need to fix the short-sale process and start closing deals faster, which would cut inventory levels and push prices up. If it isn’t fixed, it will cost the banks a lot of money.”

Some Realtors said banks have an inflated view of what they can expect when home values in many areas have fallen sharply.

“Some lenders harbor unrealistic expectations of what they can get in a down market,” said Van Johnson, president of the Georgia Association of Realtors.

He said widespread use by lenders of “broker price opinions” — quick, inexpensive online property assessment — resulted in only a “simple best guess.”

Andrea Gellar, a Realtor at Sudler Sotheby’s in Chicago, said property appraisals there are fair because “appraisers are being called on the carpet to be accurate” after years of inflated evaluations during the property boom.

But Gellar added that in Chicago the length of time it takes a lender to respond to an offer is the real problem.

“It can take several months to get approval on a short sale and few buyers will wait that long,” she said.