According to industry experts, condominiums as low as $20,000 and single-family homes at less than $60,000 are generating multiple offers and overbidding. They said that despite market data showing a slow rise in home prices, it appears that foreclosure houses will prevent further improvement in the pricing trend.

Experts said that many cheap properties are located in neighborhoods severely affected by the foreclosure crisis, including Antioch, Oakland, Richmond, Pittsburg and Vallejo. These cheap properties are mostly short sales or bank foreclosed homes.

As an example, experts pointed out that a one-bedroom condominium at Lakeview complex in Pittsburg is short selling for $48,000. The owner purchased the property in 2007 for $228,000.

Meanwhile, many homeowners’ properties are worth less than the total mortgage they owed to their lenders. This is one factor that is a cause of concern to industry experts. They said that homeowners whose mortgages are higher than the values of their properties are candidates for foreclosures.

They added that these homeowners would lose interest to continue paying their mortgages and instead would walk away from their distressed properties and leave them for lenders to be foreclosed.

Meanwhile, the popularity of bargain-priced properties has helped entice more buyers, who are just waiting for the right time, to get on the bidding frenzy. Industry experts said that banks, burdened with repossessed homes on their inventory, have started to offer properties at very low prices to attract cash-rich buyers, especially first-time homebuyers who are laden with federal tax credit of $8,000.

Furthermore, banks are in a hurry to dispose of properties clogging their inventory because the longer bank repo homes remained unsold, the higher the costs they would incur.

According to industry experts, banks prefer homebuyers with cash for quick closing of sales deals and because many foreclosed homes are uninhabitable which means they could not qualify for a loan.

On the other hand, experts said that condominiums are cheap buys because of some financing issues. They said that government-supported loans which accounted for about 90 percent of loans in the current market, are not made available to owners of these complexes.

They pointed out that many condominium residents are delinquent on their homeowners’ association dues plus the fact that most of these units are not occupied by their owners.

Wells Fargo Home Mortgage Servicing executive vice president Mary Coffin said that the Obama Administration’s repo home prevention goal is on the right track to achieve its target of helping about 9 million troubled homeowners modify or refinance their mortgages.

Coffin said that the bank was able to refinance about 750,000 loans in the first six months of this year. She added that the bank provided about 200,000 loan medications, both trial and completed, which she said was twice the number achieved by the bank for the same period last year

She explained that Wells Fargo represented about 20 percent of the mortgage servicing market and so far this year, about 4 million homeowners have already received loan modifications or refinanced.

Meanwhile, the Obama Administration said that not all lending institutions are performing equally in their programs to help stem the tide of foreclosures, with some doing better than other servicers.

According to Herb Allison, assistant secretary for financial stability at the Department of Treasury, if foreclosure would continue unabated, analysts predicted that over 6 million American families would become victims of the repo home crisis in the coming years.

Meanwhile, Housing and Urban Development’s mortgage finance senior adviser William Apgar warned that the increasing unemployment rate will make the task of helping homeowners meet their mortgage payments even more difficult. He pointed out that as the economic downturn continue to languish, unemployment keeps on rising and pushing some homeowners to default on their payments.

Data released by the Bureau of Labor Statistics showed that the country’s unemployment rate was 9.5 from May to June, representing a 3.9 percent rise from the previous year.

In his statement, Apgar said that the Obama Adminitration has been exploring options to provide mortgage payment assistance to jobless homeowners. The plan would include measures that would provide opportunity for distressed homeowners to remain as renters after banks foreclosed on their properties.

On its part, Bank of America said that the Making Home Affordable Program is the bank’s repo home prevention efforts.

Unlike during the housing boom when banks readily granted jumbo loans, many banks have stopped providing jumbo loans because they are not qualified under the guarantee programs run by Freddie Mac and Fannie Mae.

The two government-sponsored enterprises limit their guarantees to jumbo loans not higher than $729,750 in high-cost markets, wiping out opportunities for higher-income families to move up during this time when there are a lot of higher-end repossessed houses for sale at big discounts.

The conforming loan limits are even lower in low-cost markets, with guaranteed loan amounts ranging from $417,000 through $729,750. Besides, the $729,750 limit for high-cost markets is set to drop back to $625,000 in January next year.

David Adamo, CEO of Connecticut-based Luxury Mortgage, said home loans are available for the extreme ends of the market – the low-cost and the high-cost markets. He explained that borrowers with yearly incomes of about $250,000 can obtain home loans guaranteed by FHA while very wealthy people can borrow from private banking corporations.

But home loans ranging from $250,000 to $500,000 in middle and high-end markets are difficult to obtain especially for families living in areas where starter homes are priced at about $1 million.

When large numbers of repossessed houses for sale battered the mortgage markets, most lenders stopped originating conventional home loans and jumbo loans because of fear of further losses.

For prospective home buyers who are seeking jumbo loans to take advantage of attractively-priced repossessed houses for sale in high-cost communities, there are some banks offering jumbo loans to qualified borrowers. Two of these are community banks Astoria Federal Bank and Hudson City Bank in New York, which use their own money to provide the loans and do not sell the loans to outside investors.

These banks offer jumbo loans only to borrowers who pass their stringent qualifications. Before the housing crisis, they accepted five-percent down for jumbo loans, but now they require 25 percent down, six months of advance monthly payments and a credit score of 700.

For jumbo loans higher than $1 million, mortgage borrowers must make a 30-percent down payment. Additionally, Astoria offers only adjustable-rate mortgage arrangements for jumbo loans.

However, Astoria executives said that the current level of mortgage rates and prices for repossessed houses for sale are particularly advantageous for qualified home buyers.

According to industry experts, banks assigned appraisers who use repo houses for sale as their comparables. Critics pointed out that the rules are promoting the use of appraisers who are willing to accept low fees to conduct property appraisals in areas that they are not familiar with. They added that the practice leads to low-ball appraisals that can affect the real estate market.

Industry experts said that appraisers who are inexperience and do not have knowledge of local market trends would just use repo houses for sale as basis for their appraisals. Banks are reportedly bringing in appraisers that give valuations as low as $60,000 per property.

Experts argued that repo houses for sale should not be used as basis for valuations as some of these repossessed homes are in poor condition and offer fewer amenities.

Enzoco Homes manager Enzo Perfetto pointed out that banks have started assigning out-of-the-area appraisers who often value properties as part of mortgage loans on new homes. He said that some comparables used by these appraisers are short sales and foreclosures which further depress land valuations.

He claimed that the practice of lowballed valuation is starting to become a trend in the real estate market. He added that most bank-assigned appraisers are not familiar with the local markets and they are giving low valuation to be safe.

The new appraisal rules were implemented by government-sponsored enterprises, Federal Home Loan Mortgage Corp. and Federal National Mortgage Association last May 1 and since then, builders, consumers, lenders and real estate agents complained about the lowballed appraisal practice.

The Home Valuation Code of Conduct is a 2008 legal settlement byproduct between Fannie Mae and Freddie Mac and New York Attorney General Andrew M. Cuomo.

Under the law, appraisers will be routinely assigned by appraisal companies. Appraiser assignment was previously handled by loan officers or local mortgage companies. Appraisal management companies get as much as 50 percent from the appraisal fee that consumers paid.

Several efforts have been made to address the controversial appraisal system. The National Association of Home Builders sought a change in system that uses repo houses for sale as comparables for valuation on typical and non-distressed homes.

Furthermore, Representatives Gary Miller and Travis Childers have authored a legislation calling for a moratorium on appraisal code for 18 months.

The stalled program encountered several hindrances that derailed whatever progress it has made. These obstacles include the stringent qualifying rules for homebuyers, reluctance of banks to finance buyers who would not live in properties and an increase in residential loan costs.

So far, the country has an inventory of about 2.1 million empty, repo homes for sale on the market due to a fast foreclosure pace.

Harvard University’s Joint Center for Housing Studies executive director Eric Belsky said that the federal program to subsidize mortgage payments and the as much as $8,000 tax credit for first-time homebuyers have failed to make a dent on the foreclosure problem.

He pointed out that for the past 50 years, housing has been the primary factor that led the country’s economic recovery. He added that for the housing market to recover, more stimulus plan will be needed.

Meanwhile, leading indicators of the housing market showed some signs of improvements, although not much to say that the market is on its way to full recovery, industry experts claimed. Housing construction has been inching up, same with gross domestic product and sales which gained a four-month advance.

Belsky said that homeowners’ expenditures, including transaction fees, luxuries and necessities such as furniture, kitchen renovations and property taxes have fueled the momentum.

In May, sales of existing homes rose by about 2.4 percent to 4.77 million annually, while the median price declined by 16.8 percent compared with the same month a year ago.

Meanwhile, industry experts are identifying some factors that may contribute to the increase in the number of repo homes for sale. Among these factors are the increasing unemployment rate and the excess of 1 million homes on the inventory.

University of Pennsylvania’s Wharton School real estate professor Susan Wachter pointed out that the industry is not seeing the bottom of repo homes for sale because the foreclosure problem is not yet over.

According to city officials, nearly 60 percent of troubled homeowners were helped by the program. Since its inception in June 2008 up to May 31, 2009, the program helped 2,776 properties avoid becoming repo houses for sale. These figures were out of the 4,690 distressed properties referred to the city’s residential mortgage foreclosure prevention program.

The program, handled by the Philadelphia Court of Common Pleas, gives opportunity to troubled borrowers to meet with their lenders, housing advocates, lawyers and judges to try to work out solutions that will allow them to remain in their properties.

Lending institutions and banks are required to refer repossession cases to the Mortgage Foreclosure Diversion program in an effort to find ways to allow distressed homeowners to make their accounts current by modifying their mortgage payments to make them affordable.

Attorney Christopher DeNardo pointed out that under the program, all parties involved are winners. Delinquent homeowners get to avoid repo houses for sale and lenders would be able to avoid the expensive and time-consuming foreclosure proceeding.

Meanwhile, Pennsylvania Senator Arlen Specter cited Philadelphia’s program and initiated a law to emulate the initiative nationwide. Earlier this month, during the U.S. Conference of Mayors, Specter called on various states to approve laws that will require mortgage lending institutions to negotiate with troubled homeowners first before making steps towards foreclosure.

Volunteer lawyer Kari Samuels said that many troubled borrowers are delayed on their payments for as long as two years, representing a mortgage of between $20,000 and $100,000. She explained that she usually tries to create a settlement by convincing lending institutions to accept lower arrears in late fees or interest charges or to totally drop attorneys’ fees.

She added that lending institutions may seek settlements by offering to extend the outstanding loan, reducing interest rate or the principal. She claimed that lenders are willing to work things out with troubled homeowners to avoid costly foreclosure proceedings.

Nationwide market data in May showed that there were about 321,480 homes in the brink of foreclosure or one out of 398 properties were in danger of becoming repo houses for sale.

According to the office of Nassau District Attorney Kathleen Rice, Bareja approved three loan applications that used forged bank and employment documents. Bareja and her co-conspirators allegedly approved mortgage applications based on falsified appraisals that ballooned the loan cost and allowed them to gain huge profits.

One of the loans approved by Bareja was made purportedly by a sales manager who had a monthly income of $15,000. Upon investigation, it was learned that the borrower was in reality a welder who earned $11 per hour. The welder is one of the partners of Bareja in her fraudulent repo homes scheme.

According to the investigation, Bareja and her partners started their fraudulent activity in May 2006. They allegedly used forged financial appraisals and information and employment records to obtain over $1.5 million in mortgage loans.

The scheme involves Bareja’s partners finding new, existing or foreclosed properties to buy. They would then get a false appraisal or increase or falsified assessment on the loan application. The fraudsters would support their loan application with forged personal financial information.

Once the loan with an inflated price has been approved by Bareja, she and her partners would gain profit from the difference between the real and inflated price of the property.

Rice said that the fraudulent activity not only affected lending institutions but also potential homebuyers and Bareja’s employer. She added that fraudulent activities such as the one perpetrated by Bareja and her partners may result on an increase in foreclosure proceedings and affect neighborhoods with abandoned and vacant foreclosed homes.

Meanwhile, investigators found various falsified appraisal and financial documents in Bareja’s e-mail account. Investigators estimate the total amount illegally pocketed by Bareja and her partners to be more than $500,000.

Rice pointed out that her office is currently investigating individuals believed to be involved with Bareja’s fraudulent activity. Superintendent for Banks Richard H. Neiman said that the New York State Banking Department, being the major regulator for brokers and mortgage bankers in the state, will not tolerate fraudulent lending practices. He added that the department will continue to work with law enforcement authorities to aggressively pursue and stop repo homes fraudulent activities.

Irvine-based REDC sold 162 repo homes for a total of $17.1 million while Dallas-based Hudson sold 30 repo homes for a total of $4 million.

Since June 2007, REDC has already sold 1,912 repo homes located in Sacramento for a total of $261.4 million. REDC spokesperson Rick Weinberg said his firm has conducted nine auctions in Sacramento since June 2007, collecting $66.9 million in 2007 and $158.7 million last year for the mortgage lenders who repossessed the properties from homeowners who were not able to pay their mortgage loans. During the first months of 2009, the firm has already sold repo homes for a total of $35.8 million. The firm estimated that 70 percent of buyers were families that plan to occupy the homes and that 30 percent were investors.

Hudson & Marshall has held 8 auctions in Sacramento since the nationwide foreclosure problem started, selling 200 repo homes in 2008. Hudson spokesperson Crystal Wright said Hudson has sold a total of 1,000 repo homes located in Northern California in 2008. The Sacramento auction was one of 8 foreclosure auctions held by Hudson across Northern California that collected $42.5 million for mortgage lenders who owned the repo homes.

Weinberg related that REDC has sold over 6,500 repo homes in Northern California since the wave of forclosure homes began in 2007. He said the defaults were driven by subprime and other high-risk lending and rising unemployment rates.

Based on research from MDA DataQuick, the counties in Northern California with the highest number of repo homes are El Dorado, Amador, Nevada, Sacramento, Placer, Yolo, Sutter and Yuba. MDA said it expects to release a report showing increases in notices of default, which are given by mortgage lenders when homeowners fail to pay several monthly amortizations.

REDC spokesperson Weinberg also cited the large declines in home prices in the auctions held by REDC. In June 2007, REDC sold 107 repo homes for a total of $26.5 million, averaging almost $248,000 for each house sold. Last weekend, the 162 repo homes sold averaged only about $106,000.

Dave Webb, founder of Hudson & Marshall, affirmed the large declines in home values. He said last weekend’s auction averaged only about $133,000 for each house sold.

Fannie Mae and Freddie Mac are continuing their rental program for their repo homes despite lifting their moratoriums. According to Freddie Mac spokesperson Brad German, many homeowners can still stay in their repo homes for a time and pay their rent from month to month until the real estate foreclosed homes are sold.

In response to some housing advocates who expressed dismay when the foreclosure moratoriums ended, German said both renters and former owners can apply to the repo homes rental program. Danilo Pelletiere, research chief at the National Low Income Housing Coalition, supported German by saying that perpetual moratoriums are not effective solutions to the foreclosure problem.

However, banks are not receptive to the concept of renting out their repo homes. They reiterated they are not in the real estate management business. The lenders also argue that they should not be blamed for the neighborhood blight and nuisance caused by vacant homes. Robert Klein, chief executive of Safeguard Properties, even claimed that the mortgage service industry has been spending more than $2 billion yearly for the maintenance of vacant repo homes.

Judith Liben, a principal lawyer of the nonprofit advocacy group Massachusetts Reform Institute, said banks should consider the economic benefits of putting renters on vacant repo homes. She said vacant foreclosed homes typically lose about half of their market values before they are sold as REOs.

David Berenbaum, top executive of the National Community Reinvestment Coalition, has also criticized the way banks have been using broker price opinions (BPOs) to sell their foreclosure properties more quickly. BPOs are cheaper alternatives to full professional appraisals and are usually done by real estate brokers with minimal appraisal training. Berenbaum said the banks’ use of BPOs to sell repo homes to speculators and investors at bargain prices have been driving down home prices and overall property values.

Dean Baker of the Center for Economic and Policy Research, said encouraging mortgage lenders to consider the rental option to solve the problem of repo homes remains difficult because the lending industry is not interested in the rental business and many community advocates have not been promoting the rental option for repo homes.

In Miami, a group of local advocates named Take Back the Land has been looking for repo houses openly and putting homeless people in them.

Some community groups have even supported stronger actions like telling renters or borrowers not to leave if their properties become repo homes and they are told to leave.

The advocates said many neighbors even support their actions, preferring the abandoned repo homes to be occupied by people who clean and guard the properties rather than having the repo homes locked and broken into by vandals and drug addicts.

According to Bill Faith, leader of the Ohio Coalition on Homelessness and Housing, he has observed that sheriff’s departments have been reluctant in enforcing eviction notices and foreclosures on families. He said law enforcement officers have been overwhelmed by the problem of repo homes. Faith, however, said his organization does not engage in putting homeless people into repo homes.

Michael Stoops, head of the National Coalition for the Homeless, said several advocacy organizations around the country have been putting homeless families into abandoned repo homes, either because of lack of facilities for the homeless or because of the rise in cases of vandalism and theft in foreclosure-hit communities.

In Philadelphia, seven vacant repo homes have been seized by Kensington Welfare and established them as human rights houses for 13 families. In Minnesota, 13 repo homes were sequestered by the Poor People’s Economic Human Rights Campaign for homeless families. Cheri Honkala, leader of the Poor People advocacy and who was homeless once, said the work of her group is similar to the Underground Railroad situation in the 1800s, enabling homeless families to have roofs over their heads for up to year before they are finally evicted.

Honkala even related that neighbors are kinder and more supportive now, even giving mattresses and food to the homeless people.

In Louisville, members of the Women in Transition are looking for repo homes to occupy, protesting against the scarcity of affordable housing in the midst of thousands of vacant homes.

In Atlanta, members of the Metro Atlanta Task Force, led by Anita Beaty, ask banks to give them abandoned foreclosure properties to fix and occupy legally.

Take Back the Land’s director Max Rameau said his organization operates openly and requires occupants to clean the repo homes, make repairs, pay the utility bills and help the community look better.