A recent stat shows that 23.3% of all US homes are underwater, meaning that the owners of these properties owe more on their home than what it is actually worth.  If these homeowners need to sell, they generally have to do it by means of Short Sales. Unless they have reserves of Cash stashed away, which thy usually don’t, this is about the only option to avoid foreclosure.

Because of the high numbers of short sales, banks are losing a ton of money. In my recent America First Credit Union annual newsletter, it was made apparent that the 2009 loss from bad loans was substantially worse than the year before.

Mortgage Insurance was created to insure banks losses from default home loans. However, the Mortgage Insurance providers are going out of business because they never anticipated losses would be this bad.

In effort too salvage some money, and make up for the lack of funds covered by mortgage insurance, Bank of America is attempting to collect promissory notes from the owners requesting short sales. One of our Cornerstone Agents is working with a client who owes more than $300,000 on a house. They currently have a short sale offer on it for $200,000. The bank is willing to approve the short sale, IF the owner will sign a 20 year promissory note for $55,000. This would give the default borrower a payment of about $250 for the next 20 years.

This is a good move by Bank of America, but the problem is that for borrowers like the one in this example, short sales are less appealing than just letting the home foreclose.  At this point the borrowers credit is already shot, and the only thing they would be saving is the term “foreclosure” on their credit report. Is it worth $55,000 to avoid that term? Not for these borrowers.

From Bank of Americas standpoint, by not approving the short sale they are going to lose even more money by having to pay the legal fees associated with foreclosure. Then, after the foreclosure, they still have to sell the house at a price that is nowhere near worth what the owners borrowed against it.

While it is a good move to try and make the default borrowers more accountable, they have to do it in a way that will actually make sense. Making the guidelines too strict will just make things worse for all parties involved.

Banks are making the short sale approval process easier, but they want the default borrowers to have some skin in the game. This should definitely dissuade sellers from taking low ball offers on short sale homes.

Foreclosure Recovery Rank	Metropolitan Statistical Area	% of Loans 90+ Days Delinquent	% Of Loans 90+ Days Delinquent (Rank)	% Of Loans In Foreclosure	% Of Loans In Foreclosure (Rank)	% Change In Deterioration Ratio Between 10/2008 And 10/2009	Change In Deterioration Ratio Between 10/2008 And 10/2009 (Rank)
1	Harrisburg-Carlisle, PA	2.6	5	1.4	15	20.51	15
2	Austin-Round Rock, TX	2.4	1	0.9	1	12.44	36
3	Ogden-Clearfield, UT	2.9	11	1.4	17	21.30	13
4	Buffalo-Niagara Falls, NY	2.7	7	1.4	14	16.44	25
5	Knoxville, TN	3.5	25	1.1	4	17.06	22
6	Raleigh-Cary, NC	3.1	14	1.1	3	10.90	41
7	San Antonio, TX	3.4	24	1.1	6	11.98	38
8	Syracuse, NY	3.4	22	2.2	46	29.55	2
9	Salt Lake City, UT	3.5	26	1.9	34	21.96	12
10	St. Louis, MO-IL	4.0	44	1.5	19	22.24	10
10	Wichita, KS	2.9	10	1.5	21	10.47	42
10	Rochester, NY	3.0	12	1.7	27	13.12	34
13	Denver-Aurora, CO	3.2	16	2.0	36	15.26	28
14	Richmond, VA	4.0	45	1.2	7	15.01	29
14	Des Moines, IA	2.6	4	2.1	42	12.73	35
16	Oklahoma City, OK	2.8	8	1.8	28	9.14	47
17	Albany-Schenectady-Troy, NY	3.7	33	1.9	33	18.39	19
18	Portland-Vancouver-Beaverton, OR-WA	3.4	20	1.6	24	10.44	43
18	Baton Rouge, LA	4.0	46	2.0	40	38.95	1
20	Dallas-Fort Worth-Arlington, TX	3.9	39	1.3	11	11.68	40
21	Greensboro-High Point, NC	4.5	61	1.4	16	21.08	14
22	Little Rock-North Little Rock, AR	3.5	27	1.1	2	3.89	65
22	Hartford-West Hartford-East Hartford, CT	3.3	19	2.0	38	12.14	37
24	Omaha-Council Bluffs, NE-IA	2.5	3	1.3	10	-1.04	83
25	Minneapolis-St. Paul-Bloomington, MN-WI	3.4	21	1.9	31	10.19	45
26	Louisville, KY-IN	3.8	36	2.3	53	22.93	9
27	Charlotte-Gastonia-Concord, NC-SC	4.7	64	1.8	29	23.24	8
28	Pittsburgh, PA	3.3	17	1.7	26	6.07	60
28	Cincinnati-Middletown, OH-KY-IN	3.9	42	2.6	58	28.33	3
30	Seattle-Tacoma-Bellevue, WA	4.0	43	1.5	20	10.28	44
31	Provo-Orem, UT	3.8	35	2.3	49	16.55	24
32	Colorado Springs, CO	2.6	6	1.7	25	-0.12	79
33	Nashville-Davidson--Murfreesboro, TN	4.1	50	1.3	9	8.18	52
34	Kansas City, MO-KS	3.6	32	1.5	18	4.79	62
35	Madison, WI	2.4	2	1.9	35	1.06	77
36	Tucson, AZ	4.1	49	2.1	43	16.98	23
37	Tulsa, OK	2.8	9	1.9	32	2.28	75
38	Boston-Cambridge-Quincy, MA-NH	3.6	30	2.0	39	8.52	50
39	Virginia Beach-Norfolk-Newport News, VA-NC	3.5	28	1.3	8	-1.72	84
39	Portland-South Portland-Biddeford, ME	3.1	15	2.2	48	6.57	57
41	Columbus, OH	4.1	47	2.8	64	22.01	11
41	Albuquerque, NM	3.3	18	2.3	50	7.49	54
43	Bridgeport-Stamford-Norwalk, CT	3.8	37	3.0	71	19.95	17
44	El Paso, TX	3.4	23	1.1	5	-10.43	98
45	Augusta-Richmond County, GA-SC	3.9	38	1.3	13	1.85	76
46	New Haven-Milford, CT	4.4	58	2.9	68	24.31	6
47	Allentown-Bethlehem-Easton, PA-NJ	4.1	51	2.4	56	16.09	27
48	Grand Rapids-Wyoming, MI	4.7	62	2.1	44	14.50	31
49	Baltimore-Towson, MD	4.2	54	2.1	45	11.74	39
49	Charleston-North Charleston, SC	4.1	48	2.7	60	14.81	30
51	Greenville, SC	3.6	29	2.2	47	4.48	63
52	Houston-Sugar Land-Baytown, TX	3.9	41	1.3	12	-3.40	89
53	Birmingham-Hoover, AL	5.2	73	1.6	23	9.11	48
54	New Orleans-Metairie-Kenner, LA	5.1	70	3.1	74	27.17	4
55	Dayton, OH	4.3	56	3.2	76	18.90	18
56	Columbia, SC	4.2	53	2.0	41	6.42	58
57	Poughkeepsie-Newburgh-Middletown, NY	5.3	76	3.0	72	23.70	7
58	Honolulu, HI	3.0	13	2.4	55	-3.25	88
59	McAllen-Edinburg-Mission, TX	4.8	66	1.8	30	5.62	61
60	Atlanta-Sandy Springs-Marietta, GA	6.6	86	2.6	57	20.09	16
61	Detroit-Warren-Livonia, MI	6.4	85	2.9	70	24.37	5
62	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	3.6	31	2.3	52	0.28	78
62	Worcester, MA	4.9	67	2.7	62	14.30	32
64	Memphis, TN-MS-AR	7.8	92	2.0	37	13.79	33
65	Milwaukee-Waukesha-West Allis, WI	3.9	40	2.6	59	3.45	68
66	San Francisco-Oakland-Fremont, CA	4.3	57	2.7	61	7.94	53
66	Scranton--Wilkes-Barre, PA	3.7	34	2.8	66	3.15	71
68	Chicago-Naperville-Joliet, IL-IN-WI	5.1	71	3.9	83	17.59	20
68	Chattanooga, TN-GA	5.5	79	1.6	22	3.08	73
70	Youngstown-Warren-Boardman, OH-PA	5.2	72	4.8	88	17.41	21
71	New York-Northern New Jersey-Long Island, NY-NJ-PA	4.2	55	3.8	80	8.49	51
72	Akron, OH	4.4	59	4.0	84	9.56	46
72	Cleveland-Elyria-Mentor, OH	5.5	78	4.1	85	16.42	26
74	San Jose-Sunnyvale-Santa Clara, CA	4.1	52	2.7	63	-1.94	86
74	Indianapolis, IN	4.7	63	2.9	69	3.38	69
76	Providence-New Bedford-Fall River, RI-MA	5.0	69	2.8	67	3.83	66
77	Jackson, MS	6.9	87	2.3	51	3.60	67
78	Washington-Arlington-Alexandria, DC-VA-MD-WV	4.7	65	2.4	54	-3.96	91
79	Oxnard-Thousand Oaks-Ventura, CA	5.2	75	3.0	73	4.34	64
80	Boise City-Nampa, ID	4.5	60	3.1	75	-3.91	90
80	Fresno, CA	7.3	89	3.8	81	6.68	55
82	Springfield, MA	5.4	77	2.8	65	-1.86	85
83	Toledo, OH	4.9	68	3.6	78	-0.65	82
84	Sacramento--Arden-Arcade--Roseville, CA	7.0	88	3.9	82	6.12	59
85	Stockton, CA	10.2	98	6.1	91	9.06	49
86	Jacksonville, FL	5.9	82	5.9	90	3.33	70
86	Modesto, CA	9.5	97	5.6	89	6.60	56
88	San Diego-Carlsbad-San Marcos, CA	5.7	80	3.4	77	-2.62	87
89	Palm Bay-Melbourne-Titusville, FL	5.2	74	7.5	94	-0.39	81
90	Phoenix-Mesa-Scottsdale, AZ	7.7	91	4.7	86	3.05	74
91	Los Angeles-Long Beach-Santa Ana, CA	6.2	84	3.8	79	-5.27	92
92	Tampa-St. Petersburg-Clearwater, FL	6.1	83	9.0	95	-0.34	80
93	Las Vegas-Paradise, NV	10.8	100	7.5	93	3.12	72
94	Sarasota-Bradenton-Venice, FL	5.7	81	10.3	97	-5.37	93
95	Bakersfield, CA	9.3	96	4.8	87	-5.70	94
96	Lakeland, FL	7.5	90	9.3	96	-6.82	96
97	Riverside-San Bernardino-Ontario, CA	10.7	99	6.2	92	-6.12	95
98	Orlando-Kissimmee, FL	8.0	94	10.8	98	-9.47	97
99	Miami-Fort Lauderdale-Miami Beach, FL	8.1	95	13.9	99	-14.26	99
99	Cape Coral-Fort Myers, FL	7.9	93	14.5	100	-25.24	100

Methodology
To find the cities that are recovering best from the foreclosure crisis, we used data from LPS to determine how many of all loans were foreclosed in each of America's 100 largest Metropolitan Statistical Areas--census-defined regions used by the government to collect statistics. The fewer foreclosures, the higher the city ranked.

We then factored in the percentage of loans where borrowers were three months or more late on their payments. Metros with fewer mortgages like these, will be able to flush foreclosures out of the market sooner, as these borrowers are likely to end up in foreclosure eventually.

Both of these measures were determined based on a six-month rolling average as of October 2009.

Finally, to assess whether borrowers are keeping up with their payments or starting to slip, we factored in what LPS calls the deterioration ratio, the percentage of loans that are descending further into delinquency to those that are improving. A deterioration ratio of 2.5, for example, means that for every loan that is becoming more current, there are 2.5 that are falling further behind on payments. In other words, the lower the deterioration ratio, the higher the city's ranking.

The full list of the cities best equipped to emerge from the real estate crisis was determined by averaging the rankings for each of these measures for each city.

This is pretty good news for the Utah Real Estate market. Forbes claims that Ogden Foreclosures and Salt Lake Foreclosures are among the top 10 Nationally in Recovering from the foreclosure crisis. Less than 3 perecent of home loans in the Ogden Area are delinquent, and the prices per median income are pretty good.