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Former distressed owners slow to return to housing market

house-fall-crackThe rate of North Carolinians who have repurchased homes with restored credit after losing their home in the housing bust has trailed most states, but is expected to outpace the national average between now and 2023, according to data released Monday by the National Association of Realtors.

The NAR did not have data for the Charlotte metropolitan statistical area.

“In Charlotte and surrounding areas, we have found people that would like to own a home but may have lost their previous home due to foreclosure or economic circumstances are reluctant to try again,” Nancy Braun, owner and broker in charge of Showcase Realty LLC, wrote in an email. “The buyers we primarily are seeing have good credit or cash and the prospects that may have challenges with their credit are choosing to rent. While the lenders we work with have advised us that the lending requirements are not as stringent, the buyers are not even trying.  The stigma and damage caused by losing your home doesn’t go away quickly.”

The NAR reported that, nationally, about 14 percent of those who owned homes that were foreclosed, transferred to the lender via a deed in lieu of foreclosure, or sold in a short sale between 2006 and 2014 have again purchased a home.

In North Carolina, the rate was 11.8 percent. The rates ranged from 10.5 percent in Delaware to 20 percent in Wyoming.

The NAR also estimated that another 19.1 percent will repurchase between now and 2023 nationally, and that an estimated 21.6 percent in North Carolina will do so. In North Carolina, the NAR reported that 213,000 homes were lost to foreclosure, deeds in lieu of foreclosure and short sales since 2006. Between then and 2014, 25,000 have repurchased and an estimated 46,000 are expected to by 2023.

The association also reported that the overall share of those eligible to buy within the next decade will be restricted by damaged credit profiles and lender overlays on top of the minimum underwriting guidelines set by Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Veterans Affairs.

Many of those who will be unable to purchase a home likely were borrowers of subprime mortgage loans. When the housing bubble burst, many prime borrowers were taken under by falling home prices and rising unemployment, said NAR Chief Economist Lawrence Yun in a statement.

“Now fueled by a gradually improving economy and the strong rebound in home prices, some of these former distressed owners have returned to the market, and more will likely become eligible in coming years,” Yun said.

In its study, the NAR looked at the time it takes to repair credit, the credit profiles of distressed owners at the time of those purchases, the underwriting standards applied to the loans and whether the potential buyers would meet the stricter credit overlays in the current lending environment.

The NAR concluded that while about one-third will re-purchase a home by 2023, others will be hard-pressed to overcome the obstacles created by their defaults.

“The extended time needed to repair credit scores or save for a down payment, combined with other overlapping post-distress factors on credit quality such as missed auto loan or credit card payments, will limit the ability for many to buy in the current credit environment,” Yun said.

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