In our monthly unofficial and official real estate statistics blogs, I have spent a fair amount of time discussing the inventory of properties on the market. Maui has seen the number of properties listed for sale dip almost 20% since last year. This has been a trend across the board for the last 18 months. There had been rumors that inventories might get a boost via a surge of bank owned properties hitting the market this summer. The thought process was that banks had worked through the issues created by their robosigning practices. As a result, they would be able to release more of the bank owned listings that they had been withholding from the market. Anecdotal evidence from the summer suggested that the anticipated new bank owned inventory never came to fruition. I decided to go beyond the anecdotal evidence and look at the numbers. Here is what I found.

The chart above shows the number of bank owned properties coming on the market each month in Maui County between January of 2010 and last month. During 2010-2011, the new bank owned inventory ranged between 30 and 70 new listings per month. During 2012, the bank owned inventory topped out at 34 new listings per month. This summer, those number have shrunk to between 15 and 17 listings. It’s pretty clear there was no summer REO bump.

At this point, it is tough to say if and when we are going to see any upticks in bank owned inventory. Many of the properties facing foreclosure are going through the judicial process. Judicial foreclosures take a minimum of 14 months. It also appears that banks are embracing short sales as an alternative to foreclosures. Bank of America has been proactively reaching out to borrowers who are delinquent on their mortgages and encouraging short sales. They have gone so far as to offer cash incentives to help with moving expenses to facilitate sales. This is likely to curtail the total number of future bank owned properties. If we see any real upticks in bank owned activity, we will keep you posted on the Maui Real Estate Blog.

Last week I had the opportunity to attend a meeting on ACT 48, the new foreclosure law for Hawaii. The meeting was put on by the title and escrow company Title Guaranty. One of TG’s attorneys gave an overview of the law as well as some of the early implications and the initial fall out. The bill was signed into law in early May. The intent of the law was to protect residents facing foreclosures on their primary residences. Consumer advocates were arguing that non-judicial foreclosures were not giving owners adequate opportunity to renegotiate loan terms. They also argued that the banks were not providing adequate documentation establishing their right to foreclose. The law hoped to address these issues by subjecting non-judicial foreclosures to third party mediation.

Early returns are showing that the law may have some unintended consequences. Fannie Mae recently announced that it was shifting all of its pending foreclosures from non-judicial to judicial foreclosures. This circumvents the mediation process that was to be a part of non-judicial foreclosures. It also has the potential to put serious strains on the judicial foreclosure process. I have read anywhere between 4 out of 5 or 9 out of 10 foreclosures in Hawaii were non-judicial. If we see a marked shift to judicial foreclosures, it is clear that there will be a huge backlog. These issues have been generating quite a bit of press. Here are two articles that I encountered on Act 48 in the last week:

This article from Hawaii Reporter takes a more balanced look at the pros and cons of the law and the issues being encountered.

This article published in Forbes takes a more critical look at the law.

The good news is that the Hawaii State legislature is aware that there are issues with the law and appear to be open to changes. The attorney from TG was on his way to testify in front of state senators after our meeting. He was one of a number of industry experts including attorneys, Realtors and lenders who were going to be providing their feedback on the new law. We will continue to follow ACT 48 and its impacts on the Maui Real Estate Market on the Maui Real Estate Blog.