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SHORT SALES INCREASE IN Q3 According to RealtyTrac, short sales of properties not in the foreclosure process increased 15 percent in the third quarter when compared to the second and were up 17 percent over Q 3 2011. These non-foreclosure short sales represented about 22 percent of all residential home sales during the July-to-September period. On average, their final sales price was $82,312 below the amount of outstanding mortgage debt attached to the property. Short sales of properties in default or scheduled for foreclosure auction also rose in Q 3, increasing by 22 percent both quarterly and yearly. They sold for an average price of $191,025—$94,896 below the average loan amount and 27 percent below non-foreclosure property prices. "The shift toward earlier disposition of distressed properties continued in the third quarter as both lenders and at-risk homeowners are realizing that short sales are often a better alternative than foreclosure," said Daren Blomquist, RealtyTrac's VP. Although short sales continue to be utilized more and more, RealtyTrac suggested the trend may change if the Mortgage Debt Relief Act of 2007 is not extended. The act, which is scheduled to expire at the end of this year, exempts borrowers from paying taxes on debt forgiven in a short sale, loan modification, principal reduction, or foreclosure. "The prospect of being taxed on potentially tens or hundreds of thousands of dollars in additional income may motivate more distressed homeowners to forgo a short sale," Blomquist said. "Additionally, if the mortgage interest deduction is eliminated due to the fiscal cliff quagmire, it would give many underwater and otherwise distressed homeowners one less reason to hang on to their homes." As for REO properties, purchases rose 19 percent from the previous quarter but 14 were down 20 percent from the prior year. RealtyTrac found REOs sold 38 percent below the average price of non-foreclosures during the third quarter of 2012, compared to a discount of 33 percent in Q2 and 39 percent a year earlier. Unlike the trend seen in recent years, RealtyTrac says sales of in-process foreclosures (pre-foreclosure properties since they haven't yet reached final foreclosure sale) outnumbered sales of foreclosed bank-owned properties in the third quarter. Pre-foreclosure sales totaled 98,125 in Q 3; REO sales tallied 94,934. When combining REOs and homes in some stage of foreclosure, a total of 193,059 distressed properties sold in the third quarter of last year, a 21 percent increase from Q2 but a 3 percent decrease compared to Q 3 2011. As a share, foreclosure-related sales remained relatively flat in Q 3, accounting for 19 percent of all residential sales. That's down from 20 percent in Q2 and unchanged from a year earlier. Add in the 22 percent share of nonforeclosure short sales, though, and the total distressed sale share jumps to an estimated 41 percent for the quarter. The states with the highest share of foreclosure-related sales were Georgia (38 percent), California (36 percent), Arizona (34 percent), Nevada (31 percent), and Florida (26 percent). Among the metro areas, California metros took the lead for having the highest share of foreclosure sales. In Modesto, foreclosure sales represented 54 percent of all sales. Other California metros with a high percentage of foreclosure sales included Stockton (53 percent); Riverside-San Bernardino-Ontario (47 percent), and Sacramento (40 percent). Non-California metros with a large share of foreclosure properties changing hands in Q 3 included Atlanta (41 percent) and Tucson (40 percent). HARP'S LOAN TALLY AT 1.7M Fannie Mae and Freddie Mac refinanced more than 90,000 mortgages through the Home Affordable Refinance Program (HARP) in September, bringing the program's total reach to 1.7 million since its inception in 2009, according to the latest refinance report from the Federal Housing Finance Agency. In total, about 431,000 Fannie and Freddie loans were refinanced in September, 90,000 of them through the federal program. Yearto-date, 709,000 loans have been refinanced through HARP, already far exceeding last year's total of about 400,000. In the third quarter, 24 percent of all loans refinanced were completed through HARP. The rate of HARP refinances has increased since the program was revised in the fall of 2011 to expand eligibility to borrowers with high loan-to-value (LTV) ratios. Half the loans refinanced through HARP in September had LTVs of more than 105 percent. About onequarter had LTVs exceeding 125 percent. Additionally, HARP refinances make up a significant portion of refinances in the states hardest hit by the housing crisis. In Nevada, Arizona, Florida, and Georgia, HARP refinances made up 45 percent of all refinances completed in September. This compares with HARP's 21 percent nationwide share for the month. More than 70 percent of HARP refinances that took place in Nevada, Arizona, and Florida during the month had LTVs of more than 105 percent, and in California, the rate was 60 percent. The share of HARP refinances that put homeowners in 15- and 20-year loans as opposed to 30-year loans is also rising. In 2011, 15- and 20-year loans accounted for just 10 percent of HARP refinances. From January to September of this year, about 18 percent placed homeowners in these shorter-term loans. KNOW THIS Americans hold $8.03 trillion in mortgage debt, according to Q3 2012 figures released by the Federal Reserve Bank of New York.

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