Brevard County Florida Real Estate – Blog

I recently received an email from the Broker/Owner of Re/Max locally …. Mr. Ralph Cochran who shared his opinion of what to expect for the coming year in Brevard County Florida … I HAVE TO TELL YOU … I wholeheartedly agree …. the inventory of “non distressed homes” is getting so low and the demand is continuing to rise … I have especially seen that rise during the month of January that we are in. Distressed homes are at such a price that the ones that are any good are being snapped up by investors and other buyers almost overnight with a high percentage of times for cash … so very little inventory out there … and one finds themselves chasing short sales that end up falling apart because of the length of time that it takes along with some STILL UNREALISTIC banks as they play their games… OR just being ready to jump when that right new seller comes on the market … ALL this leads me to believe that we will begin seeing price increases during 2012 … NOW IS THE TIME TO BUY … ACTUALLY last 6-9 months was probably the best time to buy …. but that is now history … IF I CAN HELP … just drop me an email or give me a call.

Regards, Dave Congdon, Broker Associate, Islands International Realty..

2012: The Turnaround Year for Housing

I’m going against the tide of the pundits, economists and government experts. My experience is just telling me there too many arrows pointing in the right direction. And in my 35 years in this business, I have found that those of us in the trenches always see the shift well before the so-called experts.
Brevard MLS statistics show that last year, the number of homes that came to market was down 20%, yet both the number of homes sold and total dollar value were up about 7%. This means we have less supply than demand, which always leads to higher prices. This is supported by the fact that we are seeing appraisal problems crop up for the first time in years – and appraisers are always behind the market since, by necessity, they work from historical sales data.
Good equity homes (Those not involved in a short sale and are in move-in condition,) are in extremely short supply. As a result, builders with speculative (ready to occupy) homes are selling extremely well. The stock market, a future predictor, has picked up on this and is rewarding builders with higher stock prices. As an example, check out Lennar (LEN,) which closed Friday at a four-year high.
There are also a number of other supporting factors on the national level that point to a turnaround. Mortgage rates hit yet another new low last week and rent rates continue to increase. This further tilts the scale in favor of buying rather than renting. Household formation is a key factor in home sales, and household formation has not gone away during the past five years – these folks are simply in a state of suspended animation. They are renting, living with parents, doubling up, etc. Sooner or later, the gap between renting versus buying widens; this pent-up demand will break out into a home buying frenzy. The biggest factor holding back the flood has been unemployment, under employment and uncertainty. The job picture is slowly improving, with the unemployment rate now standing at 8.5% – down from 9.9% at the peak. This is reflected by the significant improvement in consumer confidence.
A huge fear factor that everyone continues to talk about is the “phantom inventory” held by the banks that will supposedly be dumped on the market at some point. I don’t believe this will happen because the cake is already baked. Last week the FED issued a 26-page report recommending that all Fannie and Freddie inventory be packaged and sold to large investors. There will be restrictions that the homes must be rehabbed and fed into rental market. After a five-year holding period, they can then be sold in the open market. I believe this is a done deal. The cronies are in place, the capitol, the buyers, the management companies – even the details of the deal. In other words, they have set up the program behind closed doors and will soon announce it. Of course, this is more meddling in the free market, but there is no free market anymore anyway- especially as relates to housing.
Conclusion: The forces are in play for home prices to move up – especially good, clean, well-priced equity homes and new homes. These will, in turn, pull short sale and foreclosure homes along. It is time for all good listing agents to sharpen their skills and go to work. Buyers may be the immediate bread and butter, but good listings are money in the bank, so push hard.

Smart Real Estate News & Commentary by Chris McLaughlin January
11, 2012

Time running out to avoid short sale tax penalty

Since 2007, the Mortgage Debt Relief Act has allowed owners
selling their homes through a short sale to do so without having
to pay tax on the amount their mortgage holders forgave them.
The tax change means that if a house is sold for $75,000 less
than what’s owed on the mortgage, the seller would owe federal
income taxes on that amount. If the seller is in the 15% tax
bracket, they would owe the IRS $11,250. Some real estate
analysts think doing away with the tax incentive will sabotage
the government’s efforts to gradually move people out of homes
they can no longer afford. That will end in 2013, giving
homeowners until the end of this year to get out from under their
debt without facing tax consequences. Tim Becker, director of
the University of Florida’s Bergstrom Center for Real Estate,
said the tax change may force some owners to walk away from their
homes outright. Letting the tax exemption expire doesn’t make
sense and runs contrary to the government’s attempts to bring
some financial stability to the housing market, Becker said.

Fed returns $76.9 billion to Treasury

The Federal Reserve said yesterday it will send about $76.9
billion of its estimated 2011 net income over to the Treasury.
That was down from a record $78.4 billion in 2010, and comes
primarily from the interest payments on securities held in the US
central bank’s massive multitrillion-dollar portfolio. Each
year, the Fed sends its earnings, minus operating costs and other
expenses, to the fiscal authority. The Fed estimated its net
income for last year at $78.9 billion, down from a record $80.9
billion in 2010. Through its conduct of unconventional monetary
stimulus, which has been implemented with purchases of government
bonds, the Fed has more than tripled its balance sheet since the
start of the 2008 financial crisis, to about $2.9 trillion. The
Fed turns over profits to the Treasury annually and has never
posted a loss. But it took a number of extraordinary actions
during and after the 2007-2009 financial crisis that critics say
may have left it with some poor-quality holdings.

RealtyTrac – good news for investors in 2012

Buyers, investors and real estate agents should brace themselves
for a resurgent short sale and REO market this year — and look
for the opportunities that more foreclosure activity may
represent for them. RealtyTrac previously projected that close
to 1.2 million properties would be foreclosed in 2011, based on
foreclosure start activity in 2010. But REO activity through
November puts the nation on pace to reach only about 800,000
properties foreclosed for the year. See our year-end report for
the final number. So what happened to the 400,000 difference in
REOs? Many of them will likely be pushed into 2012. Evidence of
this coming wave of deferred bank repossessions in 2012 is a
recent surge in the earlier foreclosure filings that start the
foreclosure process. These default filings spiked 33% back in
August and have remained elevated since then. Scheduled
foreclosure auctions, the second stage of the foreclosure process
in most states, reached a nine-month high in November, indicating
this wave of delayed foreclosures is gradually making its way
through the foreclosure process.

On top of the foreclosures deferred from 2011 to 2012, RealtyTrac
expects an additional 600,000-plus REOs as the result of
foreclosures that started the process in 2011. That will add up
to close to a million REOs in 2012, provided that the foreclosure
industry begins to function more normally and the rules of the
foreclosure game don’t change once again. Last, RealtyTrac
expects to see more batches of properties beginning the
foreclosure process in 2012 as lenders process more of the
delayed delinquencies — not to mention brand-new foreclosures
caused by the twin threats of high unemployment and severely
underwater homeowners.

Resurging foreclosure activity in 2012 will look less like a
tsunami and more like a series of smaller waves rolling into
shore over the course of the year — which should allow the
market to absorb this inventory without another 20 or 30% hit to
home prices. Still, the steady influx of foreclosure activity
will also keep home prices from appreciating substantially during
the year. Increasing foreclosure activity will slowly push the
shadow foreclosure inventory higher, and that could be good news
for buyers, investors and real estate agents in markets with a
scarcity of inventory. In select markets hard-hit by the
foreclosure crisis, local real estate professionals have been
telling RealtyTrac for several months now about a shortage of
inventory and bidding wars on foreclosure properties. This is
happening in places like Stockton, Calif., and Detroit, where a
member of The RealtyTrac Agent Network recently said he believes
there is a “backlog of buyers” in his market just waiting on
more properties to become available. Legal issues, property
maintenance costs and other issues complicating the foreclosure
process will lead lenders to more likely approve short sales in
2012.

Many of the properties that started the foreclosure process in
the third and fourth quarters of 2011 will end up as bank-owned
properties in 2012, but many will also end up as short sales.
This all spells opportunity for buyers, investors and real estate
agents in 2012. Prices and affordability will stay low, allowing
buyers and investors to still find good bargains. Available
inventory of pre-foreclosure and bank-owned property will
increase, providing more options for those buyers to find the
bargain they’re looking for. And lenders will continue to
slowly streamline the process of selling both short sales and REO
properties — making life easier for everyone involved.

Fannie Mae CEO steps down

Fannie Mae Chief Executive Michael J. Williams, who took over the
mortgage giant in 2009 after it was seized by the federal
government, is stepping down, telling CNBC that “it’s been a
demanding two years.” “It was time,” Williams said in a phone
interview. “Its personally hard knowing there was not enough
recognition how much good work the company has done to move the
housing industry forward.” Williams, who has been with Fannie
Mae since 1991, said he expects the company to name his
replacement within three months. Williams oversaw the
restructuring of Fannie’s foreclosure-prevention efforts and
managed the troubled firm’s reorganization and transition to
conservatorship. Freddie’s CEO, Charles E. “Ed” Haldeman Jr.,
announced in October that he would resign within the next year.
The departures amount to the biggest leadership shake-up for the
agencies since their takeover. Williams’ announcement comes as
about a quarter of a million foreclosed properties sit on the
books of Fannie Mae, Freddie Mac, and the Federal Housing
Administration (FHA), and millions more are coming.

MBA – mortgage applications up

Mortgage applications increased 4.5% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending January
6, 2012. The results include an adjustment to account for the
New Year’s Day holiday. The Market Composite Index, a measure
of mortgage loan application volume, increased 4.5% on a
seasonally adjusted basis from one week earlier. On an
unadjusted basis, the Index increased 34.4% compared with the
previous week. The Refinance Index increased 3.3% from the
previous week. The seasonally adjusted Purchase Index increased
8.1% from one week earlier. The unadjusted Purchase Index
increased 41.9% compared with the previous week and was 17.9%
lower than the same week one year ago. The four week moving
average for the seasonally adjusted Market Index is down 0.53%.
The four week moving average is down 1.92% for the seasonally
adjusted Purchase Index, while this average is down 0.09% for the
Refinance Index. The refinance share of mortgage activity
decreased to 80.8% of total applications from last week’s
survey high of 81.9%. The adjustable-rate mortgage (ARM) share of
activity increased to 5.4% from 4.7% of total applications from
the previous week.

Banks probed over home insurance

The New York state’s financial regulator is probing several large
banks, including Bank of America Corp and Citigroup Inc, on
whether they overcharged customers on force-place insurance, a
source familiar with the matter said. The probe centers on
so-called force-place insurance — where the loan servicer steps
in and buys an insurance policy in the event of a homeowner
failing to keep up their insurance premiums — an increasingly
common practice, the source said. JPMorgan Chase & Co and Wells
Fargo & Co are among the other major banks involved in the
inquiry by the office of Benjamin Lawsky, the superintendent of
New York State’s Department of Financial Services, the source
said. Lawsky’s office has been probing banks and insurance
companies on whether they are overcharging on forced place
insurance, the source, who declined to be named as the matter was
private, said. Lawsky was formerly an official in the New York
State Attorney General’s Office under Andrew Cuomo, now the
state’s governor. In the State Attorney General’s Office, Lawsky
was involved in other probes of banks, including a high-profile
investigation of the US student loan industry.

The present probe would look into whether policies being taken up
by the investigated banks were issued by their own affiliates.
Kickbacks between unrelated companies would also face scrutiny,
according the source. An important focus for the probe will be
the potential conflict at Bank of America involving a unit called
Balboa Insurance that it owned until last year, the source said.
A Bank of America spokesperson declined to comment on the
investigation but said it is the bank’s policy to cooperate with
regulatory investigations. The investigation will also probe
JPMorgan because in recent years the bank held a small financial
stake in an insurance company called Assurant on behalf of its
clients, the source said.

Olick – private equity gets ready to run on foreclosures

“As the Obama administration and federal regulators work on a
program to sell government-owned foreclosures in bulk to
investors, those investors aren’t wasting any time stockpiling
cash and buying foreclosed properties at auction and from the
major banks. Oakland, California-based Waypoint Real Estate
Group, a major acquirer of so-called ‘REO to Rental’ (Real Estate
Owned) just announced a partnership with a private equity firm,
Menlo Park, California-based GI Partners, to buy foreclosed
properties. GI Partners has approximately $6 billion of capital
under management, according to its website. ‘Our approach to
buying distressed single-family houses, renovating them, and
leasing to residents who are committed to a path to future home
ownership is a viable solution to our nation’s housing crisis,’
said Colin Wiel, managing director and co-founder of Waypoint in
a press release. ‘Our partnership with GI Partners ensures we can
take the next step in our company’s evolution.’ GI is taking
an increasingly popular bet on distressed real estate, closing on
a $400 million fund with Waypoint, which has plans to purchase $1
billion in distressed real estate assets over the next two years,
according to its release. Waypoint already owns nearly 900 single
family rental homes in California.

This deal is clearly a sign of things to come, as millions of
distressed properties will likely come to market over the next
few years. As reported yesterday on CNBC and on this Realty Check
page, the conservator of Fannie Mae and Freddie Mac is working
with the Obama administration on a plan to sell not just the
quarter of a million foreclosed properties already owned by the
GSE’s, but hundreds of thousands more in the pipeline heading
to foreclosure. Waypoint is likely positioning itself to be a
player in a government bulk REO program. When the Federal Housing
Finance Agency (FHFA) last August put out a request for
information regarding what to do with all the foreclosed
properties on the GSEs’ books, Waypoint filed a response. Those
responses are so far not public. Other private equity firms,
such as Greenwich, Connecticut-based Carrington Mortgage
Services, are working on deals with major banks to buy
foreclosures in bulk. Carrington says it is planning to invest
nearly $1 billion in foreclosed single-family homes and turn them
into rental housing. ‘The market is going to move down this path
with or without the FHFA program. We’re seeing movement on the
part of some of the larger lenders, and we’re ready to go out
and buy properties,’ says Carrington executive vice president,
Rick Sharga.

This emerging industry of investors in distressed real estate
face large management issues, as unlike multi-family apartment
buildings, the investors have to deal with many properties spread
over wide areas. ‘One of the biggest problems investors have
executing these programs are that they will underestimate the
difficulties of deploying property management on a local level
across the country,’ says Sharga. That’s one of the advantages
Carrington has, since it already manages several thousand Fannie
Mae properties across the country under the mortgage giant’s
‘Tenants in Place’ program and its deed-for-lease properties.
Carrington uses its own staff and contract employees for property
management as well as a proprietary software system that lets
them monitor properties from a central location. Waypoint is
also well-positioned to take advantage of this new market, having
acquired 900 properties already and putting many of them up for
rent. After buying the properties, Waypoint renovates them and
then offers a ‘lease rewards’ program, which they say helps to
put families on a path to future home ownership and keep families
connected with their communities. ‘We believe Waypoint has the
potential to thrive given the current market dislocation in
single family housing and the sustained tenant demand for rental
property,’ said Rick Magnuson, executive managing director of GI
Partners in the release.”

LPS – price declines in 2011

Lender Processing Services, Inc., a leading provider of
technology, data and analytics for the mortgage and real estate
industries, today announced that its LPS Applied Analytics
division updated its home price index (LPS HPI) with residential
sales concluded during October 2011. The LPS HPI summarizes home
price trends nationwide by tracking sales each month in more than
13,500 ZIP codes. Within each ZIP code, the LPS HPI tracks five
price levels from low to high. “While Michigan continues to
show notable improvements in home prices, with significant price
increases each month this year, Georgia is emerging as the region
with the greatest difficulty recovering from the home-price
meltdown,” observed Kyle Lundstedt, managing director for LPS
Applied Analytics. The LPS HPI national average home price for
transactions during October 2011 was $200,000 – a decline of
0.8% during the month relative to September, reaching a price
level not seen since October of 2002. This is the fifth
consecutive month of decreases in prices. The partial data
available for November suggests more moderation of price declines
to approximately 0.5%. LPS reported partial data from October
transactions in its December report, which proved a reasonable
indicator for October’s performance: it showed a preliminary 1.1%
estimated decline, compared to the 0.8% for the full month’s
data.

LPS HPI average national home prices continue the downward trend
begun after the market peak in June 2006, when the total value of
US housing inventory covered by the LPS HPI stood at $10.6
trillion. Since that peak, the value has declined 30.1% to $7.5
trillion. During the period of most rapid price declines, from
June 2007 through December 2008, the LPS HPI national average
home price dropped $56,000 from $282,000, which corresponds to an
average annual decline of 13.8%. Since December 2008, prices have
fallen more slowly, interrupted by brief seasonal intervals of
rising prices. During this period of more slowly declining
prices, the national average price has fallen approximately
$26,000 from $226,000. The October national average price is
down 2.7% from the average price at the beginning of the year.
Home prices in October were consistent with the seasonal pattern
that has been occurring since 2009. Each year, prices have risen
in the spring, but have reverted in autumn to a downward trend
that has not only erased the gains, but has led to an average
4.2% annual drop in prices to date. The national average home
price has declined 4.8% over the most recent year to October
2011. Price changes were largely consistent across the country
during October, increasing in six% of the ZIP codes in the LPS
HPI. Higher-priced homes had somewhat smaller declines: 0.8% for
the top 20% of homes (prices above $314,000), compared to 0.9%
for the bottom 20% (below $101,000). The highest-priced homes,
representing the top 1% (prices above $844,000), declined 0.7%.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved

Smart Real Estate News & Commentary by Chris McLaughlin January 3, 2012

************************************************************

Details – anti-flipping rule waiver

I reported last week that the waiver on the anti-flipping rule
was extended by the Federal Housing Administration (FHA) through
the end of 2012, but here are some more details, courtesy of
DSNews.com. The new extension will permit buyers to continue to
use FHA-insured financing to purchase HUD-owned and bank-owned
properties, no matter how long the homeowner has held the title,
through December 31, 2012. FHA says the waiver will allow homes
to resell as quickly as possible, helping to stabilize real
estate prices and revitalize communities experiencing high
foreclosure activity. “This extension is intended to
accelerate the resale of foreclosed properties in neighborhoods
struggling to overcome the possible effects of abandonment and
blight,” said Carol Galante, FHA’s Acting Commissioner.
“FHAremains a critical source of mortgage financing and
stability and we must make every effort that to promote recovery
in every responsible way we can.”

According to the FHA, the waiver contains strict conditions and
guidelines to prevent the predatory practice of property
flipping, in which properties are quickly resold at inflated
prices to unsuspecting borrowers. Among these conditions, all
transactions must be arms-length, with no link between the buying
and selling parties. In addition, in cases in which the sales
price of the property is 20% or more above the seller’s
acquisition cost, the waiver will apply only if the lender meets
specific conditions, and documents the justification for the
increase in value. FHA’s property-flipping waiver is limited
to forward mortgages, and does not apply to the agency’s Home
Equity Conversion Mortgage (HECM) for purchase program. Since
the original waiver went into effect on February 1, 2010, FHA has
insured nearly 42,000 mortgages worth more than $7 billion on
properties resold within 90 days of acquisition. The agency says
its own research has found that in today’s market, acquiring,
rehabilitating, and reselling foreclosed properties to
prospective homeowners often takes less than 90 days. As a
result, FHA says prohibiting the use of its mortgage insurance
for a subsequent resale within 90 days would adversely impact the
willingness of sellers to consider offers from potential FHA
buyers, namely because they would be required to cover holding
costs and the risk of vandalism that comes with allowing a
property to sit vacant over a 90-day period of time.

Consumer spending tepid

After a strong start on Thanksgiving weekend, a pronounced lull
followed, causing retailers to mark down products heavily in the
week before Christmas. While final numbers for the season are not
in, analysts say they are worried that retailers had to eat into
profits to generate high revenues. Consumer spending makes up
70% of the economy, so until it ignites, general growth is likely
to be sluggish. Macroeconomic Advisers, a forecasting company,
projects growth of around 2% for the first half of this year,
down from an estimate of 3.6% in the fourth quarter of 2011 and
just 1.8% in the third quarter. For consumers, the reasons for
the sluggishness are clear: incomes are essentially flat, job
growth is modest, and more than 40% of the new jobs in the last
two years have been in low-paying sectors like retail and
hospitality. While consumer spending is not “going to
collapse,” said Joel Prakken, senior managing director at
Macroeconomic Advisers, “there are some headwinds there.”

DSNews.com – broad-based price decline

Data released last week by Standard & Poor’s indicates the
fourth quarter of 2011 started with broad-based declines in home
prices. The 20-city composite of S&P’s closely watched
Case-Shiller index was down 1.2% in October versus September,
while the 10-city composite reading registered a 1.1% drop. Home
prices fell in 19 of the 20 cities covered by the
S&P/Case-Shiller index. Phoenix was the only metro area to see a
month-over-month increase, with prices there rising 0.3%. David
M. Blitzer, chairman of the index committee at S&P Indices, says
Atlanta and the Midwest are regions that really stand out in
terms of recent relative weakness. He notes that Atlanta was
down 5.0% over the month of October, after having fallen by 5.9%
in September. Chicago, Cleveland, and Minneapolis – some of
the strongest markets during the spring and summer buying season
– all saw monthly declines of 1.0% or more in October. On a
year-over-year basis, the 10- and 20-city composites posted
declines of 3.0% and 3.4%, respectively, when compared to October
2010.

Detroit (+2.5%) and Washington D.C. (+1.3%) were the only two
cities to record positive annual returns. Atlanta posted the
worst year-over-year result with an 11.7% decline. S&P notes,
however, that 14 of the 20 metros and both composite readings
recorded improved annual returns when compared to the agency’s
previous report. Miami saw no change, while Atlanta, Detroit, Las
Vegas, Los Angeles, and Minneapolis saw their annual rates
worsen. According to the S&P/Case Shiller index, the crisis low
for the 20-city composite was back in March 2011. The 20-city
reading in October is about 1.9% above that recent double-dip
mark. The index’s 10-city composite hit its crisis low quite
earlier in the cycle, in April 2009, S&P says. October’s
10-city assessment is about 2.4% above its relative low.

Shhh – the US is broke, but don’t tell anyone!

The General Accounting Office has released its fiscal 2011 annual
report. When companies and governments have bad news to release,
they try to release it at the moment when journalists and the
public are paying the least amount of attention — thus,
hopefully, generating the least possible amount of grumbling and
complaints. So it’s no surprise that the GAO released its 2011
report on the Friday before Christmas, possibly the day of the
year on which the country was paying the least amount of
attention. As you might expect, the GAO’s annual report on the
financial condition of the United States contains tons of bad
news. The country can print its own money, so it’s not “broke”
in the classic sense of the word (can’t pay its debts, can’t fund
its operations). But the country is also clearly on an
unsustainable course.

Here are the highlights:

- The US ran a $1.3 trillion budget deficit in 2011, flat with
2010 and the third year in a row of deficits over $1.3 trillion
- The US federal debt load continues to climb as a percentage of
GDP and is expected to explode over the next few decades
- The big problem in our current and future finances is NOT
spending on Defense, Education, the Environment, and the other
government programs that Democrats and Republicans love to fight
about.
The big problem in our budget is a combination of:
- Taxes that are currently off their peak as a percentage of
GDP
- Future unfunded commitments to Medicare and Social Security

To be perfectly clear: The amount of the “unfunded liability” for
our Social Insurance programs (Medicare and Social Security) is
now $34 Trillion. This is an increase of $3 Trillion from last
year. This number has increased at about $1.7 Trillion per year
for the past 10 years. If not for some absurd assumptions about
how Congress is going to eventually chop the cost of Medicare
(the so-called “doc-fix” that pays doctors more for Medicare
procedures that Congress passes every year), the liability would
be $46 Trillion. So, what’s the implication and solution? Over
the long haul, the intelligent solution is a combination of
modestly higher taxes and reductions in Medicare and Social
Security benefits. The other option is bankruptcy.

Miami-Dade sales up 25%

Pending home sales in Miami-Dade County jumped 25% in November
from a year earlier, the Miami Association of Realtors said
Tuesday. The number of listings hit 3,348, up from 2,598 a year
ago, the trade group said. Single-family home and condo sales
pending during the month jumped 43% and 14%, respectively, over
their November 2010 levels. “Miami pending home sales have
consistently increased over the past couple of years,” said Jack
Levine, 2011 chairman of the Miami Association of Realtors. “We
continue to see increasing pending sales, which points to
increased future closed sales, price appreciation, and market
strengthening.” The pending sales home index nationally
increased 7.3% to 101.1 during the same month, showing a greater
deal of confidence from an level of 83.3 a year earlier, the
report said.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin December 26, 2011

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http://www.DaveCongdon.com

Merry Christmas – anti-flipping regulations extended through
2012!

Acting Federal Housing Administration Commissioner Carol J.
Galante announced FHA will extend its temporary waiver of the 90
day anti-flipping regulations through the end of 2012. According
to Commissioner Galante, “the new extension will permit buyers to
continue to use FHA-insured financing to purchase HUD-owned
properties, bank-owned properties, or properties resold through
private sales. It will allow homes to resell as quickly as
possible, helping to stabilize real estate prices and to
revitalize neighborhoods and communities.” All terms of the
existing waiver will remain the same. The waiver contains strict
conditions and guidelines to prevent the predatory practice of
property flipping, thus it continues to be limited to sales
meeting the following conditions:
- All transactions must be arms-length, with no identity of
interest between the buyer and seller or other parties
participating in the sales transaction.
- In cases in which the sales price of the property is 20% or
more above the seller’s acquisition cost, the waiver will only
apply if the lender meets specific conditions and full “documents
the justification for the increase in value.”
- The waiver is limited to forward mortgages only and does not
apply to the Home Equity Conversion Mortgage (HECM) for purchase
program.

Yuan at all-time high

The yuan hit an all-time trading high against the dollar on
Monday, guided by a stronger mid-point by the People’s Bank of
China, and looks set for an over-4-percent appreciation for 2011,
traders said. The yuan is expected to remain stable or rise
slightly in the last week of the year to close 2011 near 6.30
versus the dollar, in line with market expectations. The
currency is likely to continue to appreciate next year as China
continues to post big trade surpluses despite a slowdown in
exports and amid pressure from the United States to let the yuan
rise to balance bilateral trade, traders said. But the yuan’s
appreciation is likely to slow to around 3% in 2012, with much of
the rise seen in the second half of next year as China may keep
the yuan relatively stable in the first half to assess the impact
of the euro zone crisis, they said. The yuan has appreciated
4.1% so far this year, with most of the gain being recorded in
the first 10 months of the year as China tries to rebalance trade
and use the currency to help fight high inflation.

New home sales up 1.6%

The Commerce Department says new-home sales rose 1.6% last month
to a seasonally adjusted annual rate of 315,000. That’s less
than half the 700,000 new homes that economists say should be
sold to sustain a healthy housing market. It’s also below the
323,000 homes sold last year — the worst year for sales on
records dating back to 1963. December would have to produce its
best monthly sales total in four years for 2011 to finish ahead
of last year’s total. New homes account for less than 10% of
the housing market. But they have a big impact on the economy.
Each new home built creates roughly three jobs for a year and
generates about $90,000 in taxes, according to the National
Association of Home Builders. Economists note that housing is a
long way from fully recovering and that many people are opting to
rent because they can’t afford to buy or don’t feel a home is
a wise investment right now. Home construction has begun a
gradual comeback and should add to economic growth in 2011. But
the main reason for that increase is that the rate of apartment
construction is nearly twice as fast as it was two years ago.
Single-family-home construction remains depressed.

Stock market investor uncertainty at 6 year high

The latest poll by American Association of Individual Investors
shows that 38% of respondents expect stock prices to remain flat
in the next six months. That’s the highest level since April
2005. European sovereign debt problems, domestic politics and
lackluster economic growth are all weighing on the sentiment,
according to the survey. Only 33.7% of respondents expect stock
prices to rise over the next six months. It is the fifth time in
the past six weeks that bullish sentiment has been below its
historical average of 39%. Bearish sentiment, expectations that
stock prices will fall over the next six months, is down to
28.2%. This is the first time in six weeks that bearish sentiment
has been below its historical average of 30%. While volatility
is widely expected to continue, respondents predicting an up year
for S&P 500outnumbered those expecting a down year by a margin of
three to one. Expectations were modest, however, with more of
than half of those predicting gains saying the S&P 500 will rise
by 10% or less. According to the survey, a notable number of
AAII members are anticipating another pullback in stock prices in
2012.

DSNews.com – Freddie expects low rates through mid-2012

Mortgage rates will likely remain very low, at least through
mid-2012, according to Freddie Mac. Rates on 30-year conforming
mortgages have hovered around 4.0% or lower for the past quarter.
The GSEsays that in large part due to the Federal Reserve’s
program for extending the maturity date for mortgage securities
it holds. This program is expected to continue through the middle
of next year. This should keep fixed-rates for 15- through
30-year mortgages relatively low during the first half of the
year, with rates edging up during the second half, Freddie Mac
said in its latest market outlook. In addition, the GSE says the
Fed’s guidance that it will likely keep the target range for
its benchmark federal funds rate near zero though mid-2013
ensures that initial interest rates for adjustable-rate mortgages
(ARMs) will also remain extremely low throughout 2012. Freddie
Mac also said in its outlook forecast that housing activity will
be better in 2012, but not robust. The GSE says to expect fewer
single-family originations but more multifamily lending next
year.

Looking at the macroeconomic picture, Freddie expects stronger
growth, in the range of 2.5% in 2012. While the national
unemployment will decline going forward, the GSE expects it to
remain above 8% through next year. “While the headwinds remain
strong going into 2012, there are indications the economy and the
housing market are gaining ground, albeit slowly,” commented
Frank Nothaft, Freddie Mac’s chief economist. Nothaft says
sustained and increased job growth are essential to move the
recovery forward – and by that he means monthly payroll gains
well above the 130,000 average seen in 2011. In housing, Nothaft
says to look for the rental market to lead the way and for some
improvement in the single-family space to pop up in parts of the
country. While green shoots of recovery appear to be beginning
to take hold, the industry shouldn’t set expectations too high.
“All told, next year will be another bumpy ride,” according
to Nothaft.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin December 21, 2011

************************************************************

MBA – mortgage applications down

Mortgage applications decreased 2.6% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending December
16, 2011. The Market Composite Index, a measure of mortgage loan
application volume, decreased 2.6% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index
decreased 2.8% compared with the previous week. The Refinance
Index decreased 1.6% from the previous week. The seasonally
adjusted Purchase Index decreased 4.9% from one week earlier. The
unadjusted Purchase Index decreased 7.5% compared with the
previous week and was 6.9% lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market
Index is up 0.26%. The four week moving average is down 1.53% for
the seasonally adjusted Purchase Index, while this average is up
1.32% for the Refinance Index. “Continued anxiety surrounding
the fragile economic situation in Europe led interest rates lower
last week.

However, refinance applications fell slightly, and purchase
applications dropped further as we head into the end of the
year,” said Michael Fratantoni, MBA’s Vice President of
Research and Economics. “Remarkably low rates are not enough,
as many homeowners continue to hold back due to lack of equity in
their properties, poor credit and a weak job market.” The
refinance share of mortgage activity reached a high this year of
80.7% of total applications from 79.7% the previous week. The
adjustable-rate mortgage (ARM) share of activity decreased to a
low this year of 5.1% from 5.6% of total applications from the
previous week. The average loan size of all loans for home
purchase in the US was $217,774 in November 2011, up from
$213,430 in October 2011. The average loan size for a refinance
increased from $217,153 in October to $220,523 in November. The
average government purchase loan size declined from October to
November, from $186,263 to $170,742. The largest purchase loans
were made in the Pacific region at $308,307. The largest
refinance loans were also made in the Pacific region at
$304,509.

Chinese hackers hit US business

According to the Wall Street Journal, hackers in China broke
through the computer defenses of the US Chamber of Commerce last
year and were able to access information about its operations and
its 3 million members. The Journal, citing unidentified people
familiar with the matter, reported the operation against the top
American business lobbying group involved at least 300 internet
addresses and was discovered and shut down in May 2010. The
newspaper reported it was not known how much information was seen
by the hackers, or who may have had access to the network for
more than a year before being discovered. The group behind the
breach is suspected by the United States of having ties to the
Chinese government, one of the sources told the newspaper. The
FBI informed the Chamber of Commerce that servers in China were
pilfering its information, the source said. Chinese Foreign
Ministry spokesman Liu Weimin dismissed the report. “There’s
nothing to be said about the baseless whipping up of so-called
hacking and it won’t come to anything,” he told a daily news
briefing in Beijing. “Chinese law bans hacking.” The Chamber of
Commerce employs 450 people and represents business interests in
Congress, including most of the largest US corporations.

Almost half of all sales were short sales and REOs

A whopping 46% of homes sold in November were either short sales
or REOs — as homes foreclosed on and repossessed by lenders are
called, according to a survey by Campbell/Inside Mortgage Finance
released yesterday. “The huge glut of distressed properties
coming to market is why there will be no home price rebound this
coming year and maybe into 2013,” said Guy Cecala of Inside
Mortgage Finance, a publisher of mortgage information and news.
Distressed homes sell for a lot less than homes sold by
conventional sellers. The average price for a short sale (when
borrowers owe the bank more than their homes are worth) was
$209,000 in November. For a regular sale, the average is about
$259,000. The numbers are even worse for REOs, which averaged
about $190,000 for properties in move-in condition. “Distressed
properties have the lowest prices for any category of home sold,”
said Cecala. “To a large extent, that’s why we’ve seen continuous
home price drops over the past three years and why those drops
are likely to go on.” There is no shortage of distressed
properties: More than 6 million borrowers are delinquent 30 or
more days, according to LPS Applied Analytics. Two million are
already in the foreclosure process, and most of these homes will
be repossessed or sold as short sales. House hunters have gotten
accustomed to shopping for homes in foreclosure and any stigma
that may have attached to REOs or short sales in the past has
diminished. But many of these properties have been damaged,
making them hard to sell and depressing their prices. Indeed,
the average price for a damaged REO was just $99,000 in November
– 62% less than conventional sales, the survey found.

Corporate borrowing way up

Consumers may be cutting debt and banks may be tightening up
their balance sheets, but borrowing by US corporations is in full
swing. At a time when the popular narrative centers on how
tight-fisted banks are getting with their lending, end-of-year
data for syndicated loans tell a different story. Corporations
use syndicated loans for longer-term financing. The loans usually
are provided by a group of deep-pocketed lenders who can
distribute liability among them and thus decrease their risk. Big
Wall Street investment banks are usually the source of such
loans. So far in 2011, syndicated loan volume has increased a
whopping 56% compared to 2010, according to Dealogic. The total
of $1.76 trillion is the highest single-year sum since the
pre-financial crisis days of 2007. This came even though
fourth-quarter activity saw a pretty big tail – the $354.5
billion total was the lowest in more than a year, since the
$246.6 billion in the third quarter of 2010, Dealogic said.
Moreover, the US was the biggest player in the space, with 47% of
the total global loan volume, up 9 percentage points over 2010.
The bulk of the loans went to the most credit-worthy. Investment
grade volume increased to $1.03 trillion, also the highest since
2007, representing a 68% year-over-year gain. Globally,
syndicated loan volume grew 27% to $3.74 trillion – again, the
highest since 2007, Dealogic said.

NAR – existing home sales up

Existing-home sales rose again in November and remain above a
year ago, according to the National Association of Realtors
(NAR). Also released today were periodic benchmark revisions with
downward adjustments to sales and inventory data since 2007, led
by a decline in for-sale-by-owners. Although rebenchmarking
resulted in lower adjustments to several years of home sales
data, the month-to-month characterization of market conditions
did not change. There are no changes to home prices or month’s
supply. The latest monthly data shows total existing-home sales,
which are completed transactions that include single-family,
townhomes, condominiums and co-ops, increased 4.0% to a
seasonally adjusted annual rate of 4.42 million in November from
4.25 million in October, and are 12.2% above the 3.94
million-unit pace in November 2010. Lawrence Yun, NAR chief
economist, said more people are taking advantage of the buyer’s
market. “Sales reached the highest mark in 10 months and are
34% above the cyclical low point in mid-2010 – a genuine
sustained sales recovery appears to be developing,” he said.
“We’ve seen healthy gains in contract activity, so it looks
like more people are realizing the great opportunity that exists
in today’s market for buyers with long-term plans.”

MF Global “not missing money” – just can’t find it

James Giddens, the court-appointed trustee liquidating the
brokerage, told a teleconference with MF Global clients that he
was trying to recover $70 million in cash and $630 million in
T-Bills from MF Global UK, according to John Roe, co-founder of
the Chicago-based Commodity Customer Coalition, which represents
more than 8,000 MF Global customer accounts. A spokesman for
Giddens later clarified that the U.K. funds were separate from
the $1.2 billion that he estimates are missing from US customer
accounts. Typically brokers account for US and foreign exchange
collateral separately, with US funds more closely regulated.
“It’s not the missing money. This doesn’t change the $1.2 billion
at all,” Kent Jarrell told Reuters. “We’ve known this was tied
up with the UK administrator. This is not suddenly found money.

This is money that we knew would be hard to get.” Regulators
have been seeking the lost money since MF Global executives said
it was missing, hours before the once leading brokerage filed for
bankruptcy on October 31. Jarrell said the trustee was in
discussion with UK trustee KPMG over recovering the funds. “We
are going to claim that those are the assets of our customers but
we don’t have control over that money. We’ll pursue them
vigorously but it’s been our experience that we may not get that
money back. The recovery of those assets may take some time and
we may not get that back. Any money that we don’t get back would
translate into a shortfall for our customers.” The Commodity
Futures Trading Commission’s Jill Sommers last week told Reuters
in an interview that the CFTC’s investigation was “far enough
along the trail” to be able to determine where customer money
went. MF Global filed for bankruptcy on October 31 after it was
forced to reveal that it had made a $6.3 billion bet on European
sovereign debt, spooking investors and customers.

Florida ends mandatory foreclosure mediation

Florida is giving up on a program designed to help keep
struggling homeowners in their homes and out of foreclosure.
When the state created the foreclosure mediation program two
years ago, it was heralded as a creative way to try to address
the crush of foreclosures moving into courts and causing huge
backlogs in the judicial system. The idea was to get lenders and
borrowers together with a mediator, who would help find a
solution to keep cases out of court. But it didn’t work. Only
about three percent of the cases resulted in revised mortgage
agreements. Plus, Anthony DiMarco of the Florida Bankers
Association says lenders were already working to resolve mortgage
problems before taking homeowners to foreclosure. “It’s very
duplicative since we were trying to do it ahead of time and
throughout the process. If someone came to us with a meaningful
loan modification through the process, I think we would sit down
and work with them and figure out a way to keep them in the
home.” DiMarco says lenders paid for all the mediation costs so
they were motivated to make it work. “There was no cost to the
homeowner to take part in it and we spent tens of millions of
dollars and I think if you look at the program results, they
don’t bear out that it worked.” DiMarco says the program was
also fatally flawed because lenders had a terrible time trying to
locate struggling borrowers. Nearly 60% of the homeowners
eligible for mediation could never be found or contacted. But
while the mediation program is ending, cases already under way
will be settled.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin December 20, 2011

************************************************************

Housing starts up

The Commerce Department said on Tuesday housing starts jumped
9.3% to a seasonally adjusted annual rate of 685,000 units, the
highest since April last year. October’s starts were revised
down to a 627,000-unit pace from a previously reported 628,000
unit rate. Economists polled by Reuters had forecast housing
starts rising to a 635,000-unit rate. Compared to November last
year, residential construction was up 24.3%. Building permits, a
gauge of future construction, rose by 5.7%. The increase was
spurred by more apartment permits. New homes have an outsize
impact on the economy. Each home built creates three jobs for a
year and $90,000 in taxes, according to the National Association
of Home Builders. Although the overall housing market remains
weak, rising demand for rental apartments is boosting the
construction of multifamily homes.

Housing is becoming less of a drag on the economy and residential
construction has now grown for two straight quarters. Even home
builders are adopting a more optimistic view of the sector, with
confidence rising to a 1-1/2 year high in December. Last month,
housing starts for the volatile multi-family homes segment surged
25.3% to a 238,000-unit rate, and groundbreaking for projects
with five or more units hit the highest level since September
2008. Single-family home construction — which accounts for a
large portion of the market — rose 2.3% to a 447,000-unit pace.
New building permits unexpectedly increased 5.7% to a
681,000-unit pace in November. Economists had expected overall
building permits to fall to a 635,000-unit pace last month.
Permits were pushed up by a 13.9% jump in the multi-family
segment. Permits for buildings with five or more units were the
highest since October 2008. Permits to build single-family homes
rose 1.6%. New home completions dropped 5.6% to 542,000 units
last month.

Still, the total is far below the 1.2 million homes that
economists say would be built each year in a healthy housing
market. A full recovery for the sector, which was one of the
main triggers of the 2007-09 recessions, remains far off in the
future given a glut of unsold homes, weak prices, high
unemployment and tight credit. Housing starts are still less
than a third of their 2.273 million rate peak in January 2006.

Tax hike coming?

With a tax cut for 160 million US workers set to expire in less
than two weeks, Republicans and Democrats in Congress on Monday
were mired in a last-ditch battle over extending it. In a
surprise turnabout, Republicans in the House of Representatives
are now pushing for a one-year extension of the payroll tax cut
and have rejected a short-term compromise struck by Republicans
and Democrats in the Senate at the weekend. House Republicans
had initially expressed concerns over the economic benefits of
renewing the tax break, which expires on Dec. 31, and
soon-to-expire jobless benefits. The House is set to vote
sometime during the day on Tuesday to formally request
negotiations with the Senate on a new bill. But the path to
compromise was far from clear as Democrats took a hardline
stance. Democratic Senate leader Harry Reid said he was
unwilling to reopen negotiations. Almost all senators have
already left Washington for the holidays and the
Democratic-controlled chamber has no legislative business
scheduled until Jan. 23. The stand-off between Republicans and
Democrats raised the specter of a $1,000 tax hike on the average
American worker and millions of unemployed losing their
benefits.

Olick – beware of sale revisions

“We already know the housing crash was bad, perhaps the worst in
history; tomorrow we will learn that it’s worse than we
thought. The National Association of Realtors, for a number of
reasons I won’t get into because they’ve been widely
reported, over-counted home sales during part of the last decade
and has spent the better part of this past year figuring out just
how badly they did that. They consulted with economists at the
Federal Reserve, Fannie Mae, Freddie Mac, the Department of
Housing and Urban Development, the mortgage bankers, the home
builders, as well as umpteen other housing specialists, and
tomorrow they will release their results. Expectations are that
home sales could be revised down anywhere from ten to twenty%.
The Realtors’ chief economist said the revision would be,
‘meaningful.’

The revisions will likely not change the fact that last year saw
the fewest homes sold on record. They will not change estimates
of home prices, nor the home price drop since the 2006 peak, nor
will they change inventories of unsold homes in month’s supply
(how long it takes to sell that many homes) although absolute
inventories will be revised lower. They will not affect monthly
or annual percentage changes in sales recently. The revisions
will also have nothing to do with how many newly built homes
sold, nor will they say anything about the health of the
nation’s home builders. Far more importantly, the revisions
will have nothing to do with how many borrowers are behind on
their mortgage payments or in the process of foreclosure, which
is 6.26 million, according to numbers just released from Lender
Processing Services. The Realtors’ revisions will not change
the losses at banks, losses to investors, and losses to the now
government-owned mortgage giants Fannie Mae and Freddie Mac, nor
to the Federal Housing Administration. The Realtors’ revisions
will change perception; they may even change consumer sentiment.
Headlines will scream Wednesday morning, and reporters like me
will jump in with the ‘breaking news,’ that far fewer existing
homes sold over the past four years than previously thought. The
crash will look bigger, as the Realtors are only revising numbers
starting in 2007, because ‘they did a side-by-side comparison of
the calculations and the drift began only in 2007,’ says an NAR
spokesman. ‘So there was no need to revise earlier data. It
appears that roughly half of the revisions come from the drop in
FSBO’s [For Sale By Owner].’

Let me repeat what I just wrote: The crash will look bigger. Will
that change anything in the economy today? Will it affect the
housing market going forward? Will it hamper the fledgling
recovery (which I’m not 100 percent sure is really taking
hold)? My guess is no, but the revisions, and the hue and cry
surrounding them, will hurt consumer confidence, which was
beginning to come around ever so slightly. The home builders
reported an increase in buyer traffic and buyer inquiries in
December, and said gains in the past months are ‘an indication
that pockets of recovery are slowly starting to emerge in
scattered housing markets.’ These new numbers will hurt that
new-found confidence, not because of anything real on the ground,
but because of the perception of just how far we fell. It is
commendable that the Realtors are correcting their
miscalculations, but equally distressing that just as our outlook
for the future was brightening ever so slightly, and home buying
demand was beginning to awaken, we have to be reminded of a very
dark past, darker than we knew. There are still considerable
headwinds facing housing’s recovery, not the least of which are
foreclosures, and potential buyers have to factor that into their
decision making. They should not, however, be spooked by nasty
new numbers that really just put an exclamation point on what we
already knew … that housing went from an unprecedented boom to
an unprecedented bust and took down our economy with it.”

Economy to expand?

The US economy will continue to expand moderately next year and
inflation will remain under control, Richmond Federal Reserve
Bank President Jeffrey Lacker said on Monday. While he did not
comment specifically on monetary policy, Lacker, an inflation
hawk who will rotate into a voting seat in the policy-setting
Federal Open Market Committee next year, indicated he does not
see the need for further monetary stimulus. “The macroeconomic
experience of 2011 provides vivid illustration. Despite
large-scale efforts to provide more monetary stimulus, growth has
disappointed and inflation has ratcheted upwards,” Lacker said in
remarks before the Charlotte Chamber of Commerce.

Counseling doubles chance of modification

Borrowers who received foreclosure counseling through a national
program were twice as likely to receive a modification, according
to a study released yesterday. The Urban Institute evaluated
roughly 800,000 homeowners who took help from the National
Foreclosure Mitigation Counseling program from January 2008
through December 2009. NeighborWorks America administers the
program with federal funds. The counselors are approved by the
Department of Housing and Urban Development. They work on
homeowner budgets and guide borrowers through the various options
provided by the mortgage servicer to avoid foreclosure. Those
who went through the program were at least 67% more likely to
remain current within nine months of receiving a modification,
according to the study. Borrowers who went through the program
had their payment reduced by an average of $176 per month.

Congress slashed funding for HUD housing counseling programs
earlier in the year. The mortgage industry called for lawmakers
to restore the money because of the more than 5 million
homeowners who are at least 30 days delinquent, according to
Lender Processing Services. In November, Washington restored
some of the money, and HUD was allowed to grant $40 million to
counselors. Eileen Fitzgerald, CEO of NeighborWorks America,
said the program and others like it help homeowners and servicers
alike by reducing redefaults. “In short, the personalized work
nonprofit housing counselors do to help homeowners improve their
overall financial situation had the greatest effect on a
homeowner not falling behind again on their mortgages in the
future,” Fitzgerald said.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin December 12, 2011

NAR – housing and jobs are voters’ main concerns

A recent survey by Houselogic.com, the consumer website from the
National Association of Realtors (NAR), finds that jobs and the
housing market will be two of the most important issues for
voters in the 2012 election. Nearly one-third of respondents said
housing will be the top issue on their mind when they head to the
polls next November. Respondents were asked “What issue area
will have the greatest impact on your vote in 2012?” National
security, healthcare, and energy/environment trailed housing and
unemployment by wide margins. With unemployment still high, it
is easy to see why so many Americans are concerned about the job
market. However, employment and the housing market are
inextricably linked because economic growth and job creation
cannot occur without a housing recovery.

Housing accounts for more than 15% of the US. Gross Domestic
Product – it’s a key driver of the national economy. Home
sales generate jobs. NAR estimates that for every two homes sold,
one job is created. New spending on homebuilding products,
furniture, and other residential investments also have a
significant economic impact. Some recent indicators show that
the economy might be starting to rebound, with pending home sales
rising strongly in October, according to NAR’s Pending Home
Sales Index. However, any changes to current programs or
incentives must not jeopardize a housing and economic recovery.
Unemployment, consumer confidence and consumer spending will not
rebound until a number of issues are addressed.

Shopping strong into December

For the week ending Dec. 9, consumers spent $5.9 billion online,
up 15% from the same period a year earlier, according to
comScore, which tracks Internet activity. E-commerce spending
for the first 39 days of the 2011 holiday season reached $24.6
billion, also up 15% versus the corresponding days last year,
comScore added. Earlier in the season, the day that has become
known as “Cyber Monday” saw a record $1.25 billion spent online
in the United States, up 22% from last year. Other early season
shopping days were also strong, with “Black Friday” e-commerce
sales jumping 26% from a year ago. That sparked concern that
sales could weaken later in the season, but so far that has not
happened, comScore Chairman Gian Fulgoni said on Sunday. “These
highlights represent another very positive sign for the holiday
shopping season, as the week following ‘Cyber Week’ often
experiences relative softness in spending momentum due to
retailers pulling back on their promotional activity,” he said.

BOA develops rental program

Bank of America is looking at a new program to rent a home back
to the borrower after foreclosure. “There are programs that we
are quite interested in,” said Ron Sturzenegger, who leads the
bank’s legacy asset servicing division. “We are talking with
investors that would come in and buy these houses and would lease
them back to who would now be the now tenant.” In February, BOA
formed the division to handle the servicing for delinquent
mortgages, loans no longer being written, and to sort out
outstanding representation and warranty claims. Currently, more
than 35,000 employees at the bank are sorting through 1.1 million
loans 60 days delinquent or worse, according to its third-quarter
financial statement. The Federal Housing Finance Agency (FHFA)
is working on an REO rental program for Fannie Mae and Freddie
Mac. It received more than 4,000 ideas on how to do it. But
private banks own $50.4 billion worth of REO properties, too,
according to the Federal Deposit Insurance Corp., and millions of
these homes are sitting vacant. Sturzenegger described how their
idea would work.

“We are looking at programs where you can capture somebody before
the REO process and offer a deed-for-lease. We would go to the
customer and say, ‘We’ll do a short sale. Will you be interested
in leasing your property back? We’re still going to sell the
property. You will no longer be the owner. But you can be a
tenant now in that same property and save you from moving on,’”
he said. Sturzenegger stressed the bank would still sell the REO
as before in areas where there is a market for them and they can
still get reasonable bids. But some areas are so saturated with
inventory, there isn’t enough investor or homebuyer demand and
properties can sit for years uninhabited. Rick Sharga, the
executive vice president at Carrington Mortgage Holdings, said in
an interview that many firms, including Carrington are preparing
to participate. “We already have the infrastructure and assets
in place to participate effectively,” he said. “Everyone is
waiting on final direction from the FHFA.” Sturzenegger stressed
the private program at BOA is in its infancy. “It’s in the very
early stages,” he said.

US stocks down

US. stocks fell Monday after Moody’s Investors Service said last
week’s European fiscal pact will not deter it from reconsidering
the credit ratings of all European Union nations. The Dow Jones
industrial average fell 170 points in the first hour of trading.
The euro weakened against the dollar and the yields on Italian
and Spanish government bonds rose as investors became more
nervous about holding the debt of those countries. European stock
indexes fell broadly. Moody’s said that last week’s summit of
European leaders produced “few new measures” and that Europe’s
financial crisis remains in a “critical and volatile stage.” The
17 nations that use the shared currency and the region in general
remains “prone to further shocks and the cohesion of the euro
under continued threat,” Moody’s said. As a result, the agency
said it would still review the creditworthiness of European
countries in the first three months of 2012. The warning from
the credit rating agency deflated optimism about last week’s
pact, which called for tougher fiscal discipline in countries the
euro and greater oversight of national budgets by a central
authority.

Hot markets to cool

Top real estate markets in the United States are beginning to
cool down, according to Clear Capital, a provider of housing data
and valuation services. The markets are still growing and
improving, its latest report finds, but not at the rates seen in
recent memory. “Even though as a whole, this group hasn’t
experienced returns this low since June 2011, each of the 15
markets continued to post quarterly gains,” the Clear Capital
report states. “The overall performance of the group has
stabilized and tightened, with only 3.1% separating the highest
performing market, Washington, D.C., from the 15th place market,
Cleveland.” Four Florida markets — Orlando, Tampa,
Jacksonville and Miami — continue to keep their positions among
the highest performing markets quarter-over-quarter, rebounding
from the steep drops and high levels of foreclosures they
experienced over the past two years, the report states.
According to Clear Capital, Orlando and Miami also show strong
year-over-year performance, topping the list with 5.9% and 5.4%
growth respectively. “The strong upward price movement for these
Florida markets has correlated with a 12% drop in REO saturation
over the last year at the state level,” the report says. “The
growth in Florida’s MSAs must be described in proper
perspective against the state’s precipitous -59.1% drop in
prices from peak values in 2006 to today.” Atlanta is now the
market feeling the most acute drop in housing. The city is down
nearly 20% year-over-year and the REO saturation rate is reaching
43%, second only to Las Vegas and Detroit.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin December 8, 2011

************************************************************

Chicago foreclosures, selling, renting, being demolished

With more than one in 10 houses in Chicago vacant, and experts
expecting the foreclosure crisis to continue to grow, nonprofits
and the city are renting out more of those properties and
offering incentives for those willing to buy. Neighborhood
Housing Services, a 35-year-old Chicago non-profit, this year
will lend $18 million for single-family home purchases and
re-financings of one- to four-unit buildings. The non-profit also
is expanding its lending focus to help local residents and/or
investors buy vacant foreclosed properties and rent them out,
said Ed Jacob, executive director of the Neighborhood Housing
Services. “This will be a new lending initiative, and we’re
hoping to partner with the Community Investment Corp. and other
organizations with expertise to help people do tenant screening,
property management and other skills required of a landlord,”
he said.

A separate program, the Neighborhood Stabilization Program run by
the city and the non-profit Mercy Portfolio Services, a
subsidiary of Mercy Housing, has received $169 million in federal
Recovery Act money to acquire and tear down vacant and distressed
properties. So far, the program has paid for 51 demolitions and
the purchase of 161 properties comprising 819 housing units in 22
neighborhoods on the South, West and North sides, said William
Towns, regional vice president for Mercy Portfolio Services. Of
those properties, 75% are for rent and 25% are for sale due to
market conditions. The agency’s goal is to rehab and acquire
as many as 2,500 housing units in the next few years in order to
rent, sell or demolish them. The program is available to people
at or below 120% of the Chicago region’s median household
income. Experts say as many as 18,000 vacant properties worth an
estimated $1.3 billion are in some stage of foreclosure in
Chicago, concentrated in South and West Side neighborhoods.

A federal report released this week reveals that Chicago
experienced a 60% increase in its vacant housing stock between
2000 and 2010, with a majority of those vacancies the result of
foreclosures. The 2010 vacancy rate stood at 11.6% of
Chicago’s housing stock, according to the report by the General
Accounting Office, the nation’s Congressional watchdog that
tracks how the federal government spends taxpayer dollars.
“City officials told us they spent $875,000 to board up 627
properties in 2010 alone,” said Matthew Scire, director of
financial markets and community investment for the GAO. The
number of foreclosed properties that went to public auction in
2010 rose nearly 20% from 2009, to 10,569, according to the
Woodstock Institute. The numbers are based on the institute’s
tracking of completed foreclosures and the number of foreclosed
properties that remain lender-owned after a public auction.
Non-profit housing leaders expect the situation to worsen,
according to a survey being released Thursday by the Pierce
Family Foundation, a Chicago-based foundation that supports
non-profit groups that provide housing and other opportunities
for the homeless.

The survey reveals that 85% of the directors of Chicago’s
leading non-profit housing agencies foresee an increase in
foreclosures, and 82% expect an increase in underwater borrowers
walking away from their homes. Sixty directors completed the
survey, each representing a different agency. The most pressing
issues in the near future include the availability of affordable
rental housing, the number of vacant or abandoned properties and
levels of unemployment and loss of income. To solve the
problems, most respondents (70%) said reducing the principal that
homeowners owe on delinquent mortgage loans would do the most
good. And more (59.6%) blamed federal leaders rather than city
leaders (7.3%) for lacking the will and fortitude to tackle the
situation. Despite the glum outlook, Marianne Philbin, the
foundation’s executive director, said the foundation wanted to
show positive steps that are being taken even as the foreclosure
and affordable housing crisis continues. For non-profit agencies
seeking to put people inside the vacant homes, the biggest
dilemma is finding eligible home buyers and willing lenders to
provide credit, experts agree. “The issue is jobs, jobs, jobs.
If a person isn’t working, how can we modify his or her loan?
How do we stop the pipeline of new vacant buildings?” Jacob
said.

Jobless rate falls

Initial claims for state unemployment benefits fell 23,000 to a
seasonally adjusted 381,000, the Labor Department said, the
lowest since late February. The prior week’s data was revised up
to 404,000 from the previously reported 402,000. Economists
polled by Reuters had forecast claims slipping to 395,000 last
week. The drop in claims last week more than unwound the prior
two weeks’ increase, and pulled them back below the 400,000 level
usually associated with improving labor market conditions.
Claims were the latest data to suggest an acceleration in
economic growth in the current quarter after output expanded at a
2% annual rate in the July-September period. The four-week
moving average of claims, considered a better measure of labor
market trends, fell 3,000 to 393,250, the lowest since early
April. The number of people still receiving benefits under
regular state programs after an initial week of aid dropped
174,000 to 3.58 million in the week ended Nov. 26, the lowest
since mid-September 2008. Economists had forecast so-called
continuing claims falling to 3.7 million from a previously
reported 3.74 million. The number of Americans on emergency
unemployment benefits declined 178,610 to 2.79 million in the
week ended Nov. 19, the latest week for which data is available.
A total of 6.57 million people were claiming unemployment
benefits during that period under all programs, down 431,397 from
the prior week.

Olick – modifications down, foreclosures heat up

“Mortgage modifications under the government’s bailout program,
permanent and trials, and as well as proprietary modifications
made by the big banks continue to fall and are falling at an
increasing clip. You might think it’s because there are fewer
troubled loans, and there are, but there are still plenty there.
It appears the drop is because so many borrowers don’t qualify
and because banks are instead pushing these loans to foreclosure
or short sale. And then there is the re-default rate on the
modifications already completed. Around 17% of permanent
modifications failed under the government’s program, but repeat
foreclosures made up nearly 45% of October foreclosure starts,
according to Lender Processing Services. There are still 1.8
million loans that are 90+ days overdue but not in foreclosure,
according to LPS and 665,800 that are 60+ days. So there are
still plenty of loans out there to be modified, even if that’s
down from a peak of 3 million 90+ delinquent in January of 2010.
Again, many just don’t qualify.

With the delinquencies in the millions, the modifications only in
the tens of thousands, and re-default rates running high, we know
that the vast majority of troubled loans will go to foreclosure.
Rather than relying on modification programs to clean up the
foreclosure mess, government and the private sector need to focus
on what to do with the growing number of foreclosed properties
sitting on the books of the banks, Fannie Mae, Freddie Mac and
the FHA (I know I know I keep pressing this, and trust me, I
won’t stop.) With regards to a potential government program to
sell off these foreclosed (REO) properties in bulk to investors,
the acting director of the Federal Housing Finance Agency (FHFA),
Fannie and Freddie’s conservator, told Congress last week: ‘We
are not trying to develop a single, national program for REO
disposition. We are most interested in proposals tailored to the
needs and economic conditions of local communities. Based on the
input of RFI responders we understand the magnitude of the task
at hand. FHFA is proceeding prudently, but with a sense of
urgency, to lay the groundwork for the development of good
initial pilot transactions.’ There is a clear lack of urgency,
despite the excuse of prudence. The housing market is struggling
to find its footing, but buyers appear to be testing the waters
again. A commitment to cleansing the market of these already
foreclosed properties quickly could be just the boost these
buyers need to jump in again.”

Americans don’t want automatic cuts

Americans overwhelmingly reject the consequences of the failure
of the so-called “super committee” to reach a deal — $1.2
trillion in automatic budget cuts, divided equally between
military and non-military programs. In the legislative deal
Democrats and Republicans struck to create the super-committee,
those cuts were intended to be so unpopular that they would force
super committee members to reach a bi-partisan deal. The CNBC
survey shows that Washington got it half right — the part about
the unpopularity of automatic cuts. Just 16% of Americans favor
proceeding with the cuts, which are due to take effect in January
2013. Some 25% prefer an alternative plan with deeper budget
cuts. A 43% plurality favors an alternative plan containing
fewer budget cuts. In a reflection of the limited appetite for
cutting defense at a time when the nation is at war, even a 39%
plurality of Republicans prefer fewer cuts than the automatic
reductions call for. That broad opposition to the automatic cuts
underscores the opportunity Congress has over the next year to
devise a new deficit-reduction plan.

But the survey shows that a broad majority of Americans agree it
won’t happen. Fully 52% call it “very unlikely” Congress will
reach a spending-cut deal in coming months, while another 21%
call that “somewhat unlikely.” Where consensus breaks down is on
the issue of income inequality, an issue that has become
embroiled in the broader debate about the economy, taxes, and
federal spending programs. Asked to choose one factor that’s most
responsible for the widening gap between high-income workers and
everyone else, American split among economic and political
factors. On the economic side, some 22% blame excessive salaries
and bonuses for corporate executives. Another 16% cite economic
shifts that have reduced manufacturing jobs and increased demand
for highly skilled workers. Some 15% cite competition from
overseas, while 7% point toward wage and hiring practices by US
companies. On political causes, 16% point toward policies of the
Obama administration. Another 14% blame policies of the Bush
administration. Nor have those attitudes changed much as a
result of the financial crisis and recent recession. The results
are substantially similar to responses to the same question in
Sept. 2006.

Fixed rate mortgage rates below 4%

Fixed-rate mortgages rates (FRM) were largely unchanged and near
record lows, according to Freddie Mac and Bankrate mortgage
surveys. The 30-year fixed dipped to 3.99% for the week ending
Dec. 8 with an average 0.7 point, and at 3.27%, the 15-year,
fixed-rate mortgage with an average 0.8 point, was just slightly
above its all-time low of 3.26%, which it hit on Oct. 6,
according to Freddie Mac. The 30-year FRM dipped from last week
when it averaged 4%. Last year at this time, the 30-year FRM
averaged 4.61%, the GSE said. The 15-year FRM is down from last
week’s 3.3%. A year ago it averaged 3.96%. Freddie said the
5-year Treasury-indexed hybrid adjustable-rate mortgage averaged
2.93%, up from last week’s 2.9% but down from 3% a year ago. The
1-year Treasury-indexed ARM averaged 2.8%, up from last week’s
2.78% but down from 3.27% a year ago. Bankrate reported that the
benchmark 30-year, fixed-rate mortgage fell 1 basis point this
week to 4.24%, according to its survey of large lenders.
Mortgages in the survey had an average total of 0.36 discount and
origination points. One year ago, the mortgage index was 4.89%.
The benchmark 15-year, fixed-rate mortgage was 3.48%, unchanged
from last week. The 5/1 adjustable-rate mortgage fell 3 basis
points, to 3.18%.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin December 6, 2011

************************************************************

Foreclosures down in Colorado

According to a report re-leased Tuesday by the Colorado Division
of Housing, foreclosure auction sales in Colorado’s
metropolitan counties were up 7.9 percent in November compared to
November of last year. Foreclosure sales in Larimer County rose
47 percent in November compared to a year ago but filings dropped
37 percent. Overall, sales and filings dropped in Larimer County
in the first 11 months of the year compared to the same time
frame in 2010. However, comparing the first 11 months of this
year to the same period last year, foreclosure filings were down
28.6 percent through November while foreclosure auction sales
were down 20.7 percent. New foreclosure filings fell year over
year during November with total filings dropping 21.7 percent
from 2,932 filings in November 2010 to 2,296 filings in November
of this year. Foreclosure auction sales increased during the same
period from 1,195 to 1,290. From October 2011 to November 2011,
foreclosure filings fell 2.3 percent, and foreclosure sales at
auction rose 37.5 percent.

Foreclosure auction sales through November fell year over year
from 2010’s 11n-month total of 18,728 to 14,854 during the same
period this year. Foreclosure filings were also down through
November, falling to 23,556 filings year-to-date this year from
last year’s 11-month total of 32,982. Year-to-date through
November, the counties with the largest decreases in foreclosure
filings, year-over-year, were Mesa County and Denver County,
where filings decreased by 35.2 percent and 32.2 percent,
respectively. Pueblo County reported the smallest decline in
filings with a decrease of 12.5 percent from the first 11 months
of 2010 to the same period this year. All counties surveyed
reported year-over-year decreases in foreclosure filings. For
the first 11 months of this year, all counties also showed
decreases in foreclosure auction sales when compared to the same
period last year.

The counties with the largest decreases in foreclosure auction
sales, year-over-year, were Broomfield County and Adams County,
where auction sales decreased by 40.3 percent and 27.0 percent,
respectively. Pueblo County reported the smallest decline in
auction sales with a decrease of 9.1 percent from the first
eleven months of 2010 to the same period this year. The county
with the highest rate of foreclosure sales during November was
Adams County with a rate of 681 households per foreclosure sale.
Mesa County came in second with 792 households per foreclosure
sale. The lowest rate was found in Boulder County where there
were 3,402 households per foreclosure sale.

Mr. Geithner goes to Germany

U.S. Treasury Secretary Timothy Geithner arrived in Germany on
Tuesday for a three-day blitz of euro zone officials to urge them
to take decisive action to backstop their currency union and
resolve a crushing debt crisis. Geithner will press French
President Nicolas Sarkozy, the new leaders of Spain and Italy and
Germany’s finance minister to agree at a crucial European Union
summit on Friday to take steps that will give markets confidence
that no euro zone countries will default, and that the region’s
banks will stay solvent. Geithner has made several trips to
Europe in recent months as U.S. concerns over the crisis grow
and, judging by comments from both him and President Barack
Obama, the Treasury Secretary may add to a growing chorus calling
for the European Central Bank to take more decisive action to
resolve the crisis.

The need for action was underscored by Standard & Poor’s warning
on Monday that 15 of the 17 euro zone countries now face an
unprecedented mass downgrade if they fail to reach a satisfactory
agreement at the Brussels summit—all the way up to AAA-rated
Germany and France. The Federal Reserve joined with the European
Central Bank and others in action to ease dollar funding strains
a week ago and Obama and Geithner have both pointed to the option
of the ECB backstopping European governments and the banking
system. That idea is viewed by many economists as the key to any
comprehensive solution to the crisis, but resisted by Germany.

Olick – why are cancellations even higher?

“For the past several months, Realtors across the nation have
been reporting an ever-increasing number of cancelled existing
home sale contracts. The latest Realtors Confidence Index now
puts the cancellation rate at 20 percent, way up from the
historical norm of around four to six percent. ‘On-time
settlements were reported as declining from 65 percent to 47
percent,’ according to the Realtors. It’s not why you think, or
at least not why I thought. Inability to get a mortgage was
reported by just 9 percent of respondents to the Realtor survey.
Bigger issues were failed inspections, buyers with cold feet and
adverse economic conditions. I’m sure appraisals figured in there
as well. It begs the question then, if these are just delays or
true cancellations?

Anecdotally, I was doing a report on a residential street in
Northwest DC last week, an area that is still holding its own and
didn’t lose much in the housing crash. I was standing in front of
a ‘For Sale’ sign, when the Realtor from the sign came out of the
house. She wanted to know what we were saying about the
neighborhood, concerned of course that there were any signs of
cracking. I assured her there were not, but asked about the house
she was selling. The Realtor told me it was actually under
contract, after about 35 days on the market. I asked why there
was no ‘under contract’ sign, which used to be so commonplace
before the ‘sold’ sign goes up. She said they hadn’t had the
inspection yet, although the house looked, at least from the
outside, to be in very good condition. When I asked if she
worried about that, her answer was, ‘You never know these days.’
Apparently the jitters are widespread, even in one of the
nation’s most secure housing markets.

With so much of the current housing market comprised of
distressed property sales, and with the Realtors unable to
capture so much of that share in their data, uncertainty is
certainly understandable if not mandated. I read a report today
citing Barclay’s analyst Stephen Kim of Barclays Capital, who is
upgrading builders and raising price targets on the premise that
we will see a housing ‘rebound’ in 2012. ‘In the absence of a
government homebuyer incentive, prices for non-distressed home
sales have stabilized for almost a year. In our opinion, this is
the most important trend in the housing industry right now,’
notes Kim. ‘We are amazed at how little attention it has been
getting from the media and the Street. This stability on the part
of non-distressed prices has occurred despite a very high share
of distressed activity and continued declines in overall prices.’

I’m not sure where he’s getting that stabilization. CoreLogic
reported home prices in September, excluding distressed sales,
fell 1.1 percent in September. Their chief economist Mark Fleming
cites a supply and demand imbalance and adds, ‘Distressed sales
remain a significant share of homes that do sell and are driving
home prices overall.’ We obviously have to be very careful
reading today’s housing market tea leaves. There are so many
different indicators and so many different entities reporting
these indicators, that it’s often hard to find out what’s really
going on. That’s why I always go back to the Realtors on the
front lines. They are telling us that this market, distressed or
not, is skittish and undependable. A 20 percent cancellation rate
for existing sales is shocking and does not suggest a rebound on
the horizon. At best, I’m looking for simple stabilization.”

Euro down against dollar

The euro edged lower on Tuesday, as traders reacted to news that
Standard & Poor’s (S&P) put 15 euro-zone countries on a
negative “credit watch” late in the prior session. The euro
traded at $1.3369 compared with $1.3386 in North American trade
late Monday. The dollar index, which measures the U.S. unit
against a basket of major rivals, traded at 78.702 compared with
78.654 late Monday. The move by S&P killed a risk rally that had
been fueled in part by a pledge by German Chancellor Angela
Merkel and French President Nicolas Sarkozy to quickly seek a new
treaty that would automatically impose sanctions on violators of
the euro zone’s fiscal rules. The warning applied to triple-A
Germany and France and all other euro members other than Cyprus,
which was already on negative watch, and Greece, whose CC rating
already implies a high probability of default.

Toll Brothers Q4 profits down 70%

Luxury homebuilder Toll Brothers said Tuesday its fourth-quarter
profit fell about 70% to $15 million, or 9 cents per share,
compared to $50.5 million, or 30 cents per share, a year earlier.
The homebuilder said its profit drop is attributed to inventory
and joint venture write-downs, as well as debt retirement
charges. In addition, the firm enjoyed a significant tax benefit
in the fourth-quarter of 2010, which buoyed last year’s 4Q
income. The company said without the charges, fourth-quarter
pretax income would have hit $33.9 million, up from $18.1 million
last year. On the other hand, the firm’s overall fourth-quarter
revenue grew to $427.8 million from $402.6 million last year.
For its entire 2011 fiscal year, which ended Oct. 31, the company
earned $39.8 million, or 24 cents per share, compared with a loss
of $3.4 million, or 2 cents a share, for fiscal year 2010. The
Horsham, Pa.-based homebuilder experienced another positive in
the fourth quarter with home building deliveries hitting $427.8
million and growing to 757 units, compared to $402.6 million and
700 units, a year earlier. The average fourth-quarter contract
price for a Toll Brothers home hit $606,000, up from $565,000
last year, suggesting values are going up in the high-priced home
segment. In the fourth quarter, the firm signed contracts worth
$390 million, up 24% from last year.

It’s Obama’s tone, not taxes, says tycoon

Leon Cooperman, a 68-year-old Wall Street veteran, says he is for
higher taxes on the wealthy. He would happily give up his Social
Security checks. He voted for Al Gore in 2000. He says the
special treatment of investment gains, or so-called carried
interest, for private equity and hedge fund managers is
“ridiculous.” He says he even sympathizes, at least to some
extent, with the Occupy Wall Street protesters. And yet, Mr.
Cooperman, a man with a rags-to-riches background who worked at
Goldman Sachs for more than 25 years in the 1970s and 1980s
before starting his own hedge fund, Omega Advisors, which has
minted him an estimated $1.8 billion fortune, is waging a
campaign against President Obama.

Last week, in a widely circulated “open letter” to President
Obama that whizzed around e-mail inboxes of Wall Street and
corporate America, Mr. Cooperman argued that “the divisive,
polarizing tone of your rhetoric is cleaving a widening gulf, at
this point as much visceral as philosophical, between the
downtrodden and those best positioned to help them.” He went
on to say, “To frame the debate as one of rich-and-entitled
versus poor-and-dispossessed is to both miss the point and
further inflame an already incendiary environment.” The letter
comes as President Obama is planning to give a speech on Tuesday
in Osawatomie, Kan., about the economy and the middle class,
following in the path of President Theodore Roosevelt, who
campaigned a century ago in that very city against the wealthy
and big business. Mr. Cooperman’s complaint has less to do
with the substance of taxing the wealthy than it does the
president’s choice of words in promoting it, an emphasis that
he says is “villainizing the American Dream.” While many
executives have complained about what they perceive as the
president’s antibusiness bent, Mr. Cooperman’s letter has
gained credibility and attention in political and business
circles because of his own seemingly liberal stances on taxes and
the like. He said, in an interview, that he had been deluged
with hundreds of e-mails and phone calls about the letter,
“99.9 percent of it positive.”

Mr. Cooperman, who recently signed the Giving Pledge, Bill
Gates’s and Warren Buffett’s effort to press the world’s
billionaires to give away at least half of their wealth, said he
felt he came into his money honestly and said proudly, “I spend
more than 25 times on charity what I spend on myself.” Asked
whether he had received any response from the president for his
letter, he replied with a chuckle, “I’m not optimistic I’ll
hear from him.”

New Jersey foreclosures wait for deliberations

Hundreds of New Jersey foreclosure cases are waiting in the wings
for the state’s Supreme Court to issue what will be a landmark
decision in the Garden State. Legal scholars suggest lenders are
waiting to see what the court will do with the U.S. Bank National
Association. Guillaume case before moving forward with thousands
of pending foreclosures. The issue in the case causing lenders
to pause is the question of whether a foreclosure notice is made
invalid because the lender filed a notice of intent to foreclose
with the servicer listed on the notice instead of the lender. In
the original complaint, the Guillaume’s argue the lender, U.S.
Bank NA, violated the Fair Foreclosure Act by not including the
lender’s information in a spot that ended up containing contact
information for the servicer. Linda Fisher, a professor at Seton
Hall Law School who has been following the case, said the
foreclosure process is “kicked off by filing the notice of intent
to foreclose.” Fisher filed an friend-of-the-court brief with the
New Jersey Supreme Court in support of the Gillaumes’ claim.
Fisher says the intent to foreclose form has 24 data points,
including the name of the lender and contact information for the
lender.

The Guillaumes, who challenged the foreclosure on several fronts,
initially claimed the lender “violated the FFA because although
the notice of intent to foreclose listed plaintiff as the holder
of the note, it did not list plaintiff’s address, but rather,
listed the address and telephone number” of the servicer. An
appellate court ruled for the lender and against the plaintiffs
saying “directing the Guillaumes to contact ASC (or the servicer)
fulfilled the purpose of the notice provision under the FFA —
making the debtor aware of the situation, and how and who to
contact to either cure the default or raise potential disputes.”
But the case now awaits the New Jersey Supreme Court decision,
causing some lenders to pause before launching foreclosures.

Fisher said the initial notice of intent to foreclose claimed the
servicer was the lender and the holder of the obligation. Later
in the case, the issue became the fact that the lender’s name was
listed but with the servicer’s address. “The banks are
contending it is OK to enter only the name of the servicer,”
Fisher said. “The Guillaumes are saying the servicer is not a
substitute for the lender because the statute is quite clear, and
it specifically mentions inclusion of the name of the lender.”
Banks are likely delaying some of their foreclosure actions in
the state because they want to know how the Supreme Court will
rule on this limited issue, Fisher contends. A rule against the
lender’s argument could mean banks will have to review their
intent to foreclose notices. Fisher said if it turns out that
Guillaume forces the 24 data points to be filled out perfectly,
banks will have to retrace their filing steps to ensure they
don’t end up facing sanctions.

LPS – house price declines across the board

Lender Processing Services, Inc. (LPS) today announced that its
LPS Applied Analytics division updated its home price index (LPS
HPI) with residential sales concluded during September 2011. The
LPS HPI summarizes home price trends nationwide by tracking sales
each month in more than 13,500 ZIP codes. Within each ZIP code,
the LPS HPI tracks five price levels from low to high. “Home
prices in September were consistent with the seasonal pattern
that has been occurring since 2009,” explained Kyle Lundstedt,
managing director for LPS Applied Analytics. “Each year, prices
have risen in the spring, but revert in autumn to a downward
trend that has not only erased the gains, but has led to an
average 3.7 percent annual drop in prices to date. The partial
data available for October suggests a further approximate decline
of 1.1 percent. Partial data from last month proved to be a good
indicator for September’s performance: it showed a preliminary
1.1 percent estimated decline, compared to the 1.2 percent as
shown by the full-month’s data.”

The LPS HPI national average home price for transactions during
September was $202,000 – a decline of 1.2 percent for the
month. As in previous years, this decline follows a 0.9 percent
decline during August. The September national average price is
down 1.8 percent from the average price at the beginning of the
year. LPS HPI average national home prices continue the downward
trend begun after the market peak in June 2006, when the total
value of U.S. housing inventory covered by the LPS HPI stood at
$10.6 trillion. The value has declined 30.2 percent since that
peak to $7.56 trillion. During the period of most rapid price
declines, from June 2007 through December 2008, the LPS HPI
national average home price dropped $56,000 from $282,000, which
corresponds to an average annual decline of 13.8 percent.

Since December 2008, prices have fallen more slowly, interrupted
by brief seasonal intervals of rising prices. During this period
of more slowly declining prices, the national average price has
fallen approximately $24,000 from $226,000. This corresponds to
an average annual decline of 3.7 percent. The national average
home price has declined 4.4 percent over the most recent year to
September 2011. Price changes were consistent across the country
during September, declining in all ZIP codes in the LPS HPI.
Higher-priced homes had somewhat smaller declines: -1.2% percent
for the top 20 percent of homes (prices above $317,000), compared
to -1.4 percent for the bottom 20 percent (below $102,000).

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin December 1, 2011

Foreclosure crisis only halfway over?

A new analysis suggests that the tide of home foreclosures isn’t
going to recede soon. The report from the Center for Responsible
Lending, “Lost Ground, 2011,” finds that at least 2.7 million
mortgages loaned from 2004 through 2008, or about 6%, have ended
in foreclosure and that nearly 4 million more home loans (roughly
8%) from the same period remain at serious risk. Put another
way, “The nation is not even halfway through the foreclosure
crisis,” says the report, which analyzed 27 million mortgages
made over the five years. Across the country, low- and
moderate-income neighborhoods and neighborhoods with high
concentrations of minorities have been hit especially hard, the
report found. The report also noted that certain types of loans
have much higher rates of completed foreclosures and serious
delinquencies. They include loans originated by brokers; hybrid
adjustable-rate mortgages, option ARMs, loans with prepayment
penalties and loans with high interest rates (subprime). African
Americans and Latinos were more likely to receive a high-cost
mortgage with risky features, regardless of their credit. For
example, among borrowers with good credit (a FICO score of over
660), African-Americans and Latinos received a high-interest-rate
loan more than three times as often as white borrowers.

Jobless claims jump back over 400,000

Weekly applications for unemployment benefits rose 6,000 to a
seasonally adjusted 402,000, the Labor Department said Thursday.
Applications had been below 400,000 for three straight weeks.
The four-week average, a less volatile measure, was mostly
unchanged at slightly below 400,000. The average fell to a
seven-month low two weeks ago. Weekly applications had been
declining for two months. Applications would need to stay below
375,000 consistently to push down the unemployment rate
significantly. They haven’t been at that level since February.
The report comes one day before the government reports on job
growth in November. Economists project that employers added a net
125,000 jobs, while the unemployment rate stayed at 9% for the
second straight month. While the job growth would be an
improvement from October, when the economy added just 80,000
jobs, it’s still barely enough to keep pace with population
growth. Some economists are more optimistic after payroll
provider ADP said Wednesday that companies added 206,000 workers
last month, the most this year. That survey doesn’t include
government agencies, which have been cutting jobs.

WSJ – home prices decline

Home prices declined in September and are poised for a grim
winter as banks step up their efforts to take back and sell
foreclosed properties. Prices fell 0.6% from August, according
to the widely watched Standard & Poor’s/Case-Shiller index of 20
major metropolitan areas, breaking a five-month run of increases
during the spring and summer, when higher sales volumes typically
firm up prices. For the third quarter, prices were down 3.9%
nationwide compared with a year earlier, a slight improvement
from the 5.8% annual decline recorded at the end of June,
according to the Case-Shiller National Index.

Prices remain under pressure as the housing market continues to
digest high volumes of foreclosed and other “distressed”
properties that tend to sell at a discount. Though sales picked
up at the end of the summer, analysts said buyers were only
closing deals they perceive as a bargain, which could help
explain why prices are sliding again. “Buyers don’t want to tell
their friends ‘I bought a home.’ People look at you sideways. But
if it’s a foreclosure, they pat you on the back,” said John
Burns, president of a home-building consulting firm in Irvine,
Calif. “People need to feel like they’re getting a great deal.”
Prices fell in September from the previous month in all but three
of the 20 cities, with a 1.2% gain in Washington, D.C., and 0.1%
gains reported in New York and Portland, Ore. For the year,
prices were up in just two markets: Detroit reported a 3.7% gain,
while Washington posted a 1% increase. A different home-price
index, released Tuesday by the Federal Housing Finance Agency,
found that prices in September were up 0.9% from August on a
seasonally adjusted basis but were down by 3.7% from year ago.
The FHFA index captures mortgages financed by Fannie Mae and
Freddie Mac.

Black Friday boosts retail

With a strong start to the holiday season, most retailers were
reporting better-than-expected same-stores sales in November.
According to Thomson Reuters, analysts on average are expecting
sales at stores open at least 12 months to rise 3.1% from a year
ago. But retailers are up against strong performances last year,
when they gained, on average, 5.5% during the month. Macy’s,
Costco Wholesale, Limited Brands, and teen retailer Buckle all
reported sales gains that topped Wall Street’s estimates. At
Costco, same-store sales rose 9% topping analysts’ estimates of
6.5% growth. Although the warehouse club operator was helped by
higher gasoline prices, even without that boost same-store sales
were strong. Without fuel, same-store sales rose 7%. The
Limited, the parent of Victoria’s Secret and Bath & Body Works,
said same-store sales rose 7%, comfortably outpacing analysts’
estimates, which called for a 4.4% gain. However, there were
some notable shortfalls. Discount retailer Target said its
same-store sales rose 1.8%, short of analysts’ estimates, which
called for 2.8% gain, according to Thomson Reuters.

Olick – average foreclosure time sets a record

“Foreclosures are setting new records again, this time not in
their overall numbers, but in the time it is taking for all of
these properties to be processed through the legal system. The
average loan in foreclosure has now been delinquent a record 631
days, according to a new report from Florida-based Lender
Processing Services. The after effects of the so-called
‘robo-signing’ foreclosure paperwork scandal, now more than a
year old, continue to plague states which require these cases to
go before a judge. The differences in processing times are
blatant when you compare judicial versus non-judicial states.
Non-judicial state foreclosures inventories are less than half
those of judicial states, and foreclosure sale rates in
non-judicial states are four to five times that of judicial
states. Judges are starting to ramp up the process. Bank
repossessions actually surged in October in many judicial states,
up 48% in New Jersey and up 73% in Indiana month-to-month,
according to RealtyTrac. Still the backlog is still enormous.
Overall foreclosure inventory is at an all-time high, 4.29% of
all active loans, according to LPS. ‘The discrepancy will go on
in perpetuity, as there always has been a difference between
judicial and non-judicial timelines,’ said Kyle Lundstedt,
managing director of LPS Applied Analytics. ‘Even prior to the
worst of the crisis, loans were 4-5 months more delinquent in
judicial states at time of foreclosure sale. The number today is
more like 8 months, but will return to the 4-5 month difference
depending on when and how fast foreclosure sales occur.’

A record-high inventory of foreclosures in process does not bode
well for the near future of the housing recovery. All those
distressed properties will sell at a deep discount, likely
bringing down the prices of surrounding homes. They will also
add to already historically high existing home inventories, while
demand is still weak. While there is considerable investor demand
for distressed properties, new foreclosures are still
outnumbering foreclosure sales by over 3:1. In addition to the
‘robo-signing’ delays, we are now beginning to see the effects of
ineffective loan modifications. Repeat foreclosures made up
nearly 45% of new foreclosures in October. Of the 2.1 million
modifications since the start of 2008 more than 10% were in
foreclosure with another 27.4% delinquent 30 or more days, as of
the end of the third quarter of this year, according to the
Office of the Comptroller of the Currency. Lundstedt said
foreclosure moratoria, process/documentation reviews, evaluation
for loss mitigation and bankruptcies make up the rest of the
repeat foreclosures. As the mortgage market continues to work
through the backlog of troubled loans, looking forward, loans
originated in 2010 and 2011 are now the best performers on
record, thanks to tighter credit requirements. Of course that
begs the question: Did the pendulum swing farther than necessary
to the conservative side? Is underwriting now unnecessarily
restrictive?”

Troops foreclosures investigated

The US Treasury Department is investigating whether Bank of
America, Wells Fargo and eight other major banks may have
illegally foreclosed on 4,500 active-duty servicemen and women.
Bank of America has agreed to review more than 2,400 foreclosures
of homeowners who indicated they were eligible for relief under a
federal law called the Service members Civil Relief Act,
according to the Treasury’s Office of the Comptroller of the
Currency. Wells Fargo has agreed to review 871 foreclosures of
homeowners who indicated they were eligible under the act. The
law is intended to postpone or suspend certain civil obligations
to allow active-duty service members to devote their full
attention to their military duty. The other banks being
investigated are Aurora Bank, Citibank, EverBank, HSBC, MetLife
Bank, OneWest, Sovereign and US Bank. Bank of America spokesman
Rick Simon said it’s unlikely that there will be a large number
of improper foreclosures. Wells Fargo officials say the
investigation doesn’t mean anything improper was done.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin September 27, 2011

WSJ – Home sales slow

New-home sales fell for the fourth-straight month in August to
the lowest level in a half year as the bursting of the housing
bubble continued to weigh on the US economic recovery. Sales
fell 2.3% from a month earlier to a seasonally adjusted annual
rate of 295,000, the Commerce Department said Monday. The pace
was the weakest in six months, and the month was the
seventh-worst on records dating to 1963. The results, however,
were in line with forecasts, and July’s results were revised
upward slightly to a rate of 302,000. Compared with a year
earlier, when new-home sales hit a record-low pace of 278,000,
new-home sales were up 6.1%.

Turmoil in financial markets after Standard & Poor’s
unprecedented downgrade of US debt, fears of a renewed recession
and Hurricane Irene all combined to keep buyers away in August.
Given those factors, “we are moderately relieved at this number,”
wrote Ian Shepherdson, chief US economist at High Frequency
Economics. “Still, the market is dead, and even record-low
mortgage rates are not doing anything to help.” New-home sales
are down nearly 80% from their peak in July 2005. They remain far
below healthy levels, which would be more than double August’s
rate. Consumers have slowed their spending this year, pulling
down economic growth and preventing unemployment from falling.
Many people also can’t get financing amid tight lending
standards. The Obama administration and federal regulators are
working on steps to allow more borrowers to refinance at ultralow
rates. And last week, the Federal Reserve said it would begin
putting payments from its portfolio of government-backed mortgage
bonds back into mortgages. Still, the Fed’s move isn’t expected
to do much for home purchases. Many people aren’t buying, and
sellers aren’t selling, because prices keep dropping. The median
US price in August for a new home, at $209,100, was down 7.7%
from a year earlier.

US problems more serious than Europe’s?

Renowned investor Jim Rogers says the US economy has more serious
problems than Europe. “Europe has a few bad, bankrupt states, so
does America. We’ve got Illinois which is bigger than Greece,
we’ve got California, we’ve got New York, you know those are
pretty big states that have serious economic problems. We have
pension plans in America that are terribly under water,” Rogers
said. According to Rogers, the US has deeper structural problems
than Europe as well as higher debt levels. “Europe’s got some
bad problems but the entity as a whole is not nearly as deep in
debt as the US They don’t have a huge balance of trade deficit,
like we do.” Investors have been worried about the lack of a
unified response from Europe. Leaders in the single currency
group have been accused of being behind the curve and not getting
to grips with the crisis even as stock markets have swooned. But
Rogers believes that America, despite having a single fiscal
policy, is actually worse off in terms of its debt situation.
Despite his bearishness towards the US economy, Rogers said he
continued to hold onto dollars, which he bought earlier this
year, when investors were extremely bearish on the currency. He
said he might buy more if the situation in Europe worsened,
driving more people towards the safety of the greenback.

WSJ – home prices sideways

S&P/Case-Shiller home-price data showed sideways movement in
July, as prices were boosted from a month earlier thanks to
seasonal factors but remained below year-ago levels. The
composite 20-city home price index, a key gauge of US home
prices, posted a 0.9% increase from June but fell 4.1% from a
year earlier. On a seasonally-adjusted basis, which aims to
account for stronger housing demand in the spring and summer
season, the 20-city index was flat in July from the previous
month. Eighteen of the 20 cities posted annual declines in June,
only Detroit and Washington posted year-to-year gains. Las Vegas
and Phoenix were the only cities to post monthly declines. But on
a seasonally adjusted basis just eight cities — Boston,
Chicago, Dallas, Detroit, Miami, Minneapolis, New York, and
Washington, D.C. — posted monthly increases. “It should
surprise no one that housing remains weak and today’s data does
nothing to dispel that idea,” said Dan Greenhaus of BTIG LLC.
“While the worst of housing’s collapse is most certainly
behind us, upward movement has proved fleeting. Prices are still
down by 31% from their summer 2006 high and with current
fundamentals in place, there is no reason to expect significant
price increases in coming quarters.”

USD is the only safe haven

If sentiment turns negative again, as it was at the end of the
last week, there’s only one place for foreign exchange investors
to hide, according to David Bloom, the head of foreign exchange
strategy at HSBC. “Last week’s gloomy outlook for global
growth from the (Federal Open Market Committee), the
(International Monetary Fund), and the World Bank has caused an
exodus from risk assets such as equities and commodities,” said
Bloom. “The main beneficiary of this repositioning has been the
US dollar.” This flight to the dollar comes despite the huge
structural problems facing the United States, which has the
world’s largest national debt and a huge trade deficit with
China. “The only reason that the dollar has benefited is that
no alternative safe haven exists. The other traditional safe
havens – the Japanese yen and the Swiss franc – have been
taken out of play by official Japanese and Swiss intervention to
halt their appreciation,” said Bloom. Other nations with safe
haven characteristics simply do not have sufficient liquidity to
absorb safe-haven flows, according to Bloom.

Freddie Mac deal defective

According to an oversight report prepared by the inspector
general of the Federal Housing Finance Agency and scheduled for
release today, Freddie Mac used a flawed analysis when it
accepted $1.35 billion from Bank of America to settle claims that
the bank misled it about loans purchased during the mortgage
boom. The faulty methodology significantly increased the
probable losses in Freddie Mac’s portfolio of loans. The
agency official who questioned the loan review methodology
contended that Freddie Mac’s analysis greatly underestimated
the number of dubious loans bought from the Countrywide unit of
Bank of America from 2005 to 2007. The deal between Freddie Mac
and the bank resolved claims associated with 787,000 loans, some
of which were repurchased by the bank, and cannot be rescinded.
The report also noted that the settlement with Bank of America in
December was completed over the objections of a senior examiner
at the agency. Freddie Mac officials did not want to jeopardize
the company’s relationship with Bank of America, from which it
continues to buy loans, the report concluded. The inspector
general’s report does not specify how much additional money
Freddie Mac could have received from Bank of America had it used
a more effective analysis. But the senior examiner who questioned
the deal told the inspector general’s staff that Freddie
Mac’s faulty process could cost the company “billions of
dollars of losses.”

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin October 17, 2011

Short sales spike in Los Angeles

Foreclosed homes and short sales are making up an increasingly
large chunk of the housing market in Los Angeles, moving toward
50% in Glendale, according the latest real estate figures. Sales
of distressed homes made up 47.5% of total sales in Glendale in
September. In Burbank, the ratio was almost 34%. The figures
were far higher than a year ago, when distressed homes made up
about 36% of total sales in Glendale and nearly 16% in Burbank.
The trend started in August as banks ended their self-imposed
foreclosure moratoriums. Short sales saw the most dramatic rise
in Burbank, skyrocketing from about 4% in September last year to
almost 18% last month. In Glendale, the sale of bank-owned
properties jumped from a little less than 11% in September 2010
to about 21% last month. Average home sale prices continued to
tumble in September with Burbank taking the biggest hit, dropping
$87,530 when compared to September 2010. The average price in
Burbank was $446,655, a 19.6% slide from $534,185 in September
2010. The number of new home sales also took a hit in September,
decreasing from 74 a year ago to 56 last month. There were 63 new
listings in September, dipping from 67 in September 2010.
Glendale fared better, though it was still in decline. The
average home sale price was $504,244, a 7.1% decrease from
$540,258. New home listings decreased by 15, from 102 in
September 2010 to 87 last month. New sales dropped slightly from
64 to 61. In La Cañada Flintridge, the average home sale price
was about $1 million in September, a 2.7% drop from roughly $1.1
million the same month last year. In the La Crescenta-Montrose
area, the bright spot was the number of new home sales, which
came in at 37, up from 29 last year. But the average home sale
price was $516, 621, about a 1% dip from $520,964 last year.

Real debt battle looming in 2012

Dec. 23, 2011, is the legal deadline for Congress to approve at
least $1.2 trillion in savings over 10 years to avoid an equal
amount of across-the-board spending cuts, as part of a deal
reached during debt talks in August. But a series of even more
important events will dovetail following the November 2012
presidential election to create what some are calling a “perfect
storm” for the nation’s economic affairs. “A whole lot of things
happen in late 2012 and early 2013,” said James Horney, a fiscal
policy expert with the liberal Center on Budget and Policy
Priorities. Looming at the top of the list is the scheduled
expiration of sweeping Bush-era tax cuts that in 2001 and 2003
lowered taxes across the board. President Barack Obama has called
for extending these cuts for families earning less than $250,000
while taxing everyone else. Also by the end of 2012, Congress
will have to decide on fixing a glitch in the Alternative Minimum
Tax so that middle-class Americans are not forced to pay a tax
that originally was aimed only at the upper middle class. Taken
together, the future of these two tax policies could make for a
multi-trillion-dollar swing for the Treasury, either in the way
of higher revenues or more rapidly escalating debt.

By the end of 2012, Congress and Obama likely will need to
increase the government’s borrowing authority. A battle over the
US credit limit nearly led to a government default on its debt in
August. Republicans used the debt limit increase as leverage to
win $917 billion in spending cuts over 10 years. The Nov. 6,
2012, elections, when the United States will elect a president,
all members of the House of Representatives and one-third of the
Senate, are a big wild card, with the outcome likely to influence
the outgoing Congress. It will sit until the new Congress is
sworn in the following January. “At that point,” said Horney,
the United States might “be in a better situation (than this
year) to get some kind of an agreement” on fiscal matters.

WSJ – lack of attractive inventory

The housing market, which has struggled with an oversupply of
homes for years, is facing a new problem: a lack of attractive
inventory. There were more than 2.19 million homes listed for
sale at the end of September, down 20% from a year earlier,
according to a new report from the real-estate website
Realtor.com. That is the lowest level since the company began its
count in 2007. The report is the latest sign of how the US
housing market can’t seem to catch a break. While falling
inventories are typically a sign of health, because reduced
competition can boost prices, that isn’t the case right now.
Instead, real-estate agents say, people are pulling their homes
off the market rather than try to sell them at today’s discounted
prices. At the same time, banks have been more slowly moving to
take back properties through foreclosure ever since processing
irregularities surfaced last fall, temporarily reducing the
supply of foreclosed properties. The shrinking supply isn’t
driving up prices because demand is soft.

Yet there is still a substantial “shadow” supply of foreclosures
and other distressed homes, estimated to be more than one
million, that is likely to stream onto the market in the coming
years. The pent-up supply is another constraint on any of the
price gains that might normally occur when supply falls. The
decline in inventory also suggests that there are fewer
opportunities for buyers and sellers to strike deals. That can
further chill sales, as buyers become afraid to overpay while
sellers are similarly cautious about under-pricing their homes.
In Detroit, the inventory of homes for sale was down by 28% from
a year earlier, according to Realtor.com. Listings were down by
49% in Miami, by 48% in Phoenix and by 46% in Orlando, Fla.
Housing inventory was down from one year earlier in all 146
markets tracked by Realtor.com except for Denver and El Paso,
Texas. The Realtor.com data include only single-family homes,
townhouses and condominiums listed for sale on more than 900
multiple-listing services across the country. They don’t include
unsold homes listed as “for sale by owner” or other properties
that don’t find their way onto the multiple-listing services.

Manufacturing slows

The New York Fed’s “Empire State” general business conditions
index was little changed, up a hair at minus 8.48 from minus 8.82
the month before. Economists polled by Reuters had expected a
reading of minus 4.0. The survey of manufacturing plants in the
state is one of the earliest monthly guideposts to US factory
conditions. Manufacturing has helped support the economic
recovery, though the pace of growth has slowed this year and some
regions have contracted. New orders rose to 0.16 from minus 8.0,
while inventories were up at minus 8.99 from minus 11.96. Despite
the flat reading, new orders were still at the highest level
since May, hinting some stabilization may be underway.
Employment gauges were mixed. The index for the number of
employees rose to 3.37 from minus 5.43, but the average employee
workweek index fell to minus 4.49 from minus 2.17. The outlook
for the coming months worsened, with the index of business
conditions six months ahead dropping to its lowest level since
February 2009 at 6.74 from 13.04 last month.

Soft outlook for homebuilders

Fitch Ratings believes homebuilders could face negative rating
actions in the coming months as the economy slugs through a weak
recovery. Fitch analysts issued the negative rating warning at a
time when weak employment and consumer confidence are pummeling
the housing market, keeping homebuyers on the sidelines. Robert
Curran, managing director and lead homebuilding analyst for
Fitch, said for the first time in a long time, housing “is not
fulfilling its role as a key impetus to the early stages of an
economic recovery.” Curran said the pressures have already
prompted Fitch to downgrade Beazer, KB Home and Pulte in recent
weeks. “The outlook does not look promising either with home
prices likely to remain soft over at least the next few
quarters,” said Curran. “Stagnant employment and declines in real
income may also pile on the already formidable pressure
homebuilders are feeling.” Curran said analysts will be watching
several key indicators closely—namely balance sheets, land
deals, development and liquidity. Yet, on the more positive
side, Toll Brothers posted a third-quarter profit of $42.1
million, or 25 cents a share, on revenue of $394.3 million. The
luxury homebuilder earned $27.3 million, or 16 cents a share, for
its year-ago fiscal third quarter. In the first half,
homebuilder PulteGroup spent $640 million acquiring land and
executing development activities. The company expects to spend
nearly $1.1 billion on land and development this year, up from
$980 million in 2010.

Sales up, confidence down

A strange economic trend appears to be emerging with American
consumers. Retail sales have been trending higher while consumer
confidence is at a 30-year low. Retail sales grew 1.1% in
September, the fastest pace since February, we learned on Friday.
Even excluding strong auto purchases, the figures were better
than expected. Data for earlier in the summer was also revised
for the better. All this, even in the midst of stock market
tumult and fears of another recession. Meanwhile, those same
economic concerns are still weighing on confidence. Consumer
confidence plunged more in October than expected, according to
the Thomson Reuters/University of Michigan index. It’s now at the
lowest measure since May 1980.

How is this contradiction possible? Howard Davidowitz, president
of Davidowitz & Associates says it’s simple. “We have got a
bifurcation that keeps getting bigger and bigger,” he explains to
Aaron and Henry in the accompanying clip. What accounts for the
increase in sales is the top earners in the country are doing
fine. “Ten% of the consumers account for 40% of the spending,” he
says. This group is primarily made up of college graduates who
are not suffering from massive unemployment. In fact,
unemployment for that segment of the population is under 5%. But
there’s another larger group that’s struggling to get by, which
explains the consumer worry. “Eighty% of consumers are in a
depression,” says Davidowitz. It’s this growing gap between the
haves and have-nots that is responsible for the Occupy Wall
Street movement, says Davidowitz.

CMBS market stalls

The market for bonds backed by commercial real estate recovered
over the last 18 months but growth in the third quarter has
stalled, said property market researchers Friday. “There’s been
a little bit of a stumble in the third quarter,” said Ben Thypin,
director of market analysis for Real Capital Analytics, a
commercial real estate research firm, in a presentation at the
Appraisal Institute’s annual fall conference in San Francisco.
He said he’s expecting little growth in the issuance of
commercial-mortgage-backed securities in the third quarter, and
that total volume this year will likely end up around $35
billion. New CMBS issuance will likely remain at that rate
through 2012, he said. Still, that’s a big improvement over a
couple of years ago.

The dollar volume of CMBS deals in just the first half of 2011
was more than twice what it registered in 2010, increasing to
$25.7 billion from $12.7 billion in all of 2010, according to
Matt Anderson, managing director of Trepp, a provider of
commercial mortgage information, analytics and technology.
“There were hopes that volume might reach $50 billion this year,”
he said, but those have been tempered by the shakiness of
European economies and concerns that the US could enter a
double-dip recession. Especially considering that commercial
banks, which usually lend about half their capital for commercial
real estate markets, are on the retreat, the CMBS market is a
linchpin to CRE recovery, according to Anderson. The number of
banks with a concentration of investment in commercial real
estate was more than 2,500 in the first quarter of 2007, but by
the first quarter of this year had fallen to about 900 “and
that’s probably headed lower,” he said.

Still, CRE markets are past the worst in terms of delinquencies
and distressed properties, and the volume of properties in
trouble has remained fairly steady over the last year or more, he
said. While CRE sales volume has fallen to less than half its
level in 2007, all segments of the market have clocked gains over
the past year, according to data from Real Capital Analytics.
Senior living properties saw more than a fourfold increase in
sales volume in the first half compared with the first six months
of 2010, followed by hotel and multifamily properties. About
$23.1 billion in apartment properties in changed hands in the
January-June period. Apartments exist in a “parallel universe”
from other CRE properties because of their access to Fannie Mae
and Freddie Mac financing, said Thypin. “The foreclosure crisis
in the single-family market has helped the apartment market,” he
said. Both Thypin and Anderson agreed that the state of the
economy will be crucial in determining how the market moves in
the coming months. “We’re looking at a fragile recovery in
commercial real estate markets,” said Anderson. “It’s very much
capital driven, not so much fundamentals-driven.” The market is
going to be fairly rocky in the short term, but compared to other
assets, commercial real estate is a good buy, he said.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved

Smart Real Estate News & Commentary by Chris McLaughlin October 19, 2011

Short Sale transparency Act (news release)

The Short Sale Transparency Act, introduced by Congresswoman
Susan Davis (D-San Diego), will (if enacted) require Fannie Mae
and Freddie Mac to disclose the minimum asking price they are
willing to accept for a short sale if the first offer is
rejected. “People deserve a real chance to avoid foreclosure.
It is unfair to expect someone to complete a short sale instead
of abandoning their home to foreclosure, if the banks don’t
meet them half way,” said Davis. “So many homeowners are
willing, even eager, to work with banks to get out from under the
mortgage and protect their credit rating. But far too often, they
find themselves in a guessing game as to what dollar amount will
complete the sale.” For many Americans a short sale, the sale
of a home below its value, is a last chance to avoid foreclosure.

However, when the asking price is unknown, short sales become
less viable because homeowners are essentially shooting in the
dark when submitting bids to a bank. As a result, loan servicers
can repeatedly deny short sale offers without giving homeowners
guidance on the price the bank is asking. Ultimately, this back
and forth ends in foreclosure. On the other hand, if an offer
is, for example, $2,000 short and the homeowner knows this, they
could find a way to make up the difference in order to complete
the short sale. Disclosure is essential to ensuring fair
transactions between investors and borrowers. Fairness to
consumers is critical to boosting the economy and ending the
cycle of foreclosures.

Regional bank earnings up

Regional banks reported better-than-expected third-quarter profit
Wednesday, boosted by fewer bad loans and higher fees. US
Bancorp’s third-quarter profit increased 40%, topping Wall Street
forecasts, as the regional bank made more money from its core
banking business and had fewer problem loans. Net income was
$1.27 billion, or 64 cents per share, up from $908 million, or 45
cents per share, a year ago. Analysts on average expected 62
cents per share, according to Thomson Reuters I/B/E/S. Net
revenues rose 4.5% to $4.8 billion, while noninterest expenses
increased 3.8% to $2.48 billion. Net interest income —
interest earned from loans against what is paid for deposits —
accounted for much of the revenue growth, increasing 5.9% to
$2.62 billion.

PNC Financial Services Group third-quarter profit beat analyst
estimates, despite falling as the regional bank earned less loan
interest income. Pittsburgh-based PNC Financial posted net
income of $834 million, or $1.55 per share, down from $1.1
billion, or $2.07 per share, a year earlier. Last year’s results
included a $328 million after-tax gain from the sale of PNC
Global Investment Servicing. Excluding the gain, the bank earned
$772 million in third quarter 2010. Analysts estimated the bank
would earn $1.49 per share, according to Thomson Reuters I/B/E/S.
Total revenues declined 2.7% to $3.5 billion from $3.6 billion.
Net interest income — or what the bank earns in loan interest
against what it pays for deposits — declined $40 million to
$2.2 billion from a year ago.

Bank of New York Mellon said its third-quarter net income rose 5%
on stronger investment services fees and a surge in revenue from
its controversial foreign exchange business. Net income
increased to $651 million, or 53 cents a share, from $622
million, or 51 cents a share, a year earlier. Analysts on average
had expected 52 cents a share, according to Thomson Reuters
I/B/E/S, but it was not immediately clear whether that was
comparable with the net income figure. Assets under custody and
administration rose to $25.9 trillion from $24.4 trillion a year
earlier. The company said it had won new business in the quarter,
lifting asset servicing fees nearly 7% to $928 million from
year-earlier levels.

Northern Trust’s quarterly profit rose 8%, as the US custody bank
earned more fees from its trust and investment services business.
July-September net income rose to $170 million, or 70 cents a
share, from $155.6 million, or 64 cents, a year ago. Trust,
investment, and other servicing fees rose 7% to $555.3 million in
the quarter for Northern Trust.

MBA – mortgage apps down

Mortgage applications decreased 14.9% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending October
14, 2011, which included the Columbus Day holiday. The Market
Composite Index, a measure of mortgage loan application volume,
decreased 14.9% on a seasonally adjusted basis from one week
earlier. On an unadjusted basis, the Index decreased 14.9%
compared with the previous week. The Refinance Index decreased
16.6% from the previous week. The seasonally adjusted Purchase
Index decreased 8.8% from one week earlier and is at the lowest
level in the survey since December 1996. Both conventional and
government purchase activity declined last week, with the
Conventional Purchase Index decreasing 11.0% and the Government
Purchase Index decreasing 5.9% from the previous week. The
unadjusted Purchase Index decreased 8.6% compared with the
previous week and was 5.1% lower than the same week one year
ago.

While all the other indices fell year over year, the Government
Purchase Index increased 3.3% on an unadjusted basis, the second
straight increase. The government share of purchase activity has
increased three consecutive weeks to 43.5, the highest level
since April 2011. The four week moving average for the
seasonally adjusted Market Index is down 2.36%. The four week
moving average is down 1.53% for the seasonally adjusted Purchase
Index, while this average is down 2.58% for the Refinance Index.
The refinance share of mortgage activity decreased to 77.6% of
total applications from 79.1% the previous week. The
adjustable-rate mortgage (ARM) share of activity decreased to
5.8% from 6.0% of total applications from the previous week. The
share of purchase applications in the Pacific region increased in
September to 19.6% from 18.9% in August while the share in the
New England, East North Central and South Atlantic regions fell.
The share of refinance applications in the Pacific decreased from
last month but increased in the Mid-Atlantic, East North Central
and New England regions. Wyoming had the largest increase in
purchase applications while Vermont had the largest increase in
refinance applications.

Stamps go up one cent

The cash-strapped US Postal Service announced on Tuesday a
one-cent increase in the cost of mailing a letter, starting in
January. The new prices lift the cost of a first-class stamp to
45 cents starting on Jan. 22, 2012, the first increase in more
than two years. The Postal Service said the cost to mail a
postcard will go up three cents to 32 cents, letters to Canada or
Mexico will increase five cents to 85 cents, and letters to other
international locations will increase seven cents to $1.05. The
agency, which is allowed to raise prices in line with the rate of
inflation, said it filed the new prices with the Postal
Regulatory Commission on Tuesday. The regulator has 45 days to
approve the changes. Until the price changes take effect,
consumers can still purchase 44-cent Forever stamps, which do not
require additional postage after prices go up. The Postal
Service has asked Congress for permission to drastically overhaul
its business, including cutting Saturday mail delivery and
eliminating a massive annual payment to prefund retiree health
benefits. The agency also is studying thousands of post offices
and processing facilities for possible closure.

Housing starts up 15%, inflation mixed

Another report on Wednesday showed groundbreaking on new homes
rose at the fastest rate in 1-1/2 years, though most of the gains
came from the often volatile multi-family construction. The
Labor Department said its core Consumer Price Index edged up
0.1%, also held back by flat prices for new cars and a modest
rise in rental-related costs. Economists had expected core CPI
to rise 0.2% last month. The index increased 0.2% in August.
Overall consumer prices increased 0.3% last month, as expected,
after advancing 0.4% in August. The moderate rise in consumer
prices offered assurance that inflation pressures remained in
check despite a sharp rise in wholesale prices last month. “The
housing data combined with CPI data shows that the economy, while
it still is muddling along, is showing a little forward momentum
that has not generally been anticipated by most analysts,” said
Fred Dickson, chief market strategist at D.A. Davidson & Co. in
Lake Oswego, Oregon. The reports also suggested the Federal
Reserve had some wiggle room for further monetary policy easing,
should the economic recovery falter, even though the year-on-year
change in core inflation has already reached 2%. Prices for used
cars and trucks fell 0.6% after months of gains. Apparel prices
dropped 1.1%, the largest decline since September 1998. Shelter
costs edged up 0.1%, the smallest rise since April, as owners’
equivalent rent edged up 0.1% after rising 0.2% in August. The
Bureau of Labor Statistics uses owners equivalent rent to measure
the amount homeowners would pay to rent or would earn from
renting their property. A 2.9% increase in the price of gasoline
pushed overall consumer prices last month. Gasoline had risen
1.9% in August. Food prices gained 0.4% after increasing 0.5% in
August.

Visa boosts dividend

Visa said today that it’s increasing its quarterly dividend by
47%. The payment processing network operator said Wednesday it
will pay shareholders of its Class A common stock a dividend of
22 cents, up from 15 cents. Visa has increased its dividend for
three straight years now. The dividend is payable Dec. 6 to
shareholders of record as of Nov. 18. Visa, based in San
Francisco, says it is also increasing dividends for its Class B
and Class C shareholders. Class A shares closed Tuesday trading
at $93.91, up 33% for the year. “Visa has a long-standing
commitment to deliver value to its shareholders,” said Joseph
Saunders, Chairman and Chief Executive Officer of Visa. “By
authorizing a significant dividend increase for the third
consecutive year, the board of directors is delivering on that
commitment and demonstrating their ongoing confidence in the
strength of the business.”

Housing behind the gloom?

The United States has a confidence problem: a nation long defined
by irrational exuberance has turned gloomy about tomorrow.
Consumers are holding back, businesses are suffering and the
economy is barely growing. There are good reasons for gloom —
incomes have declined, many people cannot find jobs, few trust
the government to make things better — but as Federal Reserve
chairman, Ben Bernanke, noted earlier this year, those problems
are not sufficient to explain the depth of the funk. That has
led a growing number of economists to argue that the collapse of
housing prices, a defining feature of this downturn, is also a
critical and underappreciated impediment to recovery. Americans
have lost a vast amount of wealth, and they have lost faith in
housing as an investment. They lack money, and they lack the
confidence that they will have more money tomorrow.

Economists have only recently devoted serious study to how a
decline in housing prices affects consumer spending, not least
because this is the first decline in the average price of an
American home since the Great Depression. A 2007 review of
existing research by the Congressional Budget Office reported
that people reduce spending by $20 to $70 a year for every $1,000
decline in the value of their home. This “wealth effect” is
significantly larger for changes in home equity than in the value
of other investments, such as stocks, apparently because people
regard changes in housing prices as more likely to endure. A
recent paper by Karl Case, an economics professor at Wellesley
College, and two co-authors estimated the decline in home prices
from 2005 to 2009 caused consumer spending to be $240 billion
lower in 2010 than it otherwise would have been.

That figure is equal to about 1.7% of annual economic activity,
enough to be the difference between the mediocre recent growth
and healthy growth. And it does not include all the other effects
of the housing crash, including the low level of new home
construction, that are also weighing on the economy. It remains
the prevailing view of economic policy makers that economic
activity will eventually return to the same trajectory as before
the recession. Bernanke and others have said that they see no
evidence of any permanent change in the economy. Previous bouts
of economic pessimism, as in the early 1980s and early 1990s,
went away once growth picked up.

Olick – refis not worth it

“It is now almost exactly a year since news headlines screamed of
a scandal at the big banks involving faulty foreclosure paperwork
and fraud. Stories of one lowly bank clerk sitting in a room
signing hundreds of foreclosure documents added a new word to our
daily financial nomenclature: ‘Robo-signing.’ It managed to
eclipse ‘subprime’ as the favorite villain of the housing crisis.
But despite the furor, the threats, and the big bank blame game,
there is still no settlement between the ‘robo-signers’ (i.e. the
big banks) and the fifty state attorneys general who promised
payback for borrowers. Now, as talks are allegedly in their
final phase, according to a source very close to the process, the
AG’s have thrown in another wrench, or perhaps they’re throwing a
bone.

As first reported by the Wall Street Journal, the AG’s are
proposing a refinance plan for underwater borrowers, trying to
get banks to bring down interest rates on mortgages for those who
owe far more than their homes are presently worth; that’s around
10.9 million borrowers, according to CoreLogic, but sources say
it wouldn’t be all of them. It would, ‘target a finite number of
borrowers who are current on their mortgages,’ according to my
source. My source then went on to explain that this is a plan
previously pushed by the California state attorney general, who
has dropped out of the negotiations over issues surrounding
banks’ release from future liability (the California AG did not
comment in the WSJ article but claimed they had not seen said
proposal). New York and Massachusetts have done the same.
Apparently this could, ‘bring California back to the table,’ says
my source, because the California AG finds it, ‘intriguing.’

Well I don’t find it intriguing at all. It’s the same plan the
Obama administration is ‘pursuing’ with the regulator of Fannie
Mae and Freddie Mac. They also want an underwater refi plan, but
so far the idea has been rife with difficult details that
threaten to scuttle its ultimate impact. The AG proposal would be
just for bank-owned loans not backed by Fannie or Freddie, so it
would apply to about 20% of the market. My source says the talks
are getting closer to a deal, even without some of the AG’s
signing on. It will include some principal write down on loans,
but the future legal liability language is still in play, release
from securitization issues is not clear, and the banks aren’t
exactly thrilled with any of it. So now, at the last minute, they
throw in a refi proposal, which maybe the banks will like, likely
they won’t.

While it may help some borrowers by putting a little extra cash
in their pockets, as I’ve written on this blog before, it doesn’t
change the fact that these folks still have no hope of seeing
their home equity again anytime soon, and it doesn’t address the
greater ills of today’s housing market that are keeping true
recovery at bay. It’s not the borrowers who are current on their
payments that need help, it’s the 4 million or so seriously
delinquent loans that are heading toward foreclosure, it’s the
glut of distressed properties now streaming out onto the housing
market at ever greater speed, and it’s the complete lack of
consumer confidence in housing right now that has turned home
prices down yet again and kept home sales at historically and
unsustainably low levels for recovery. What do we do about
that?”

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Dave Congdon – Islands International Realty, Inc.
Interesting Stats to following concerning Brevard County Florida real estate. AS OF 10-18 -11 …

There were 5548 Single Family Homes closed so far YTD… and of those… 46% were distressed properties … so roughly 1/2 … … with 21% of the total being Short Sales … just about 1/2 of the distressed properties were short sales … the other half were REO (bank Owned) …. Short sales numb…ers are becoming a much larger piece of the pie these days with all of the bank problems…. AND

Of those properties today listed as CONTINGENT (Have a contract on them and waiting for contingencies to clear – MANY/MOST of these are short sales) and Pendings (READY TO CLOSE) … 1778 homes listed as contingent/pendings…. with 71% of these are Financially distressed … with 63% of the total being short sales …

INTERESTING … sounds like banks are finally starting to realize that short sales are much less expensive for them to handle … and the overall results are better financially for the banks … DAHHHHHHH….

If I can help you or one of your friends in short selling their home …. JUST LET ME KNOW …

Smart Real Estate News & Commentary by Chris McLaughlin October 26, 2011

MBA – mortgage applications up

Mortgage applications increased 4.9% week from one earlier, which
included the Columbus Day holiday, according to data from the
Mortgage Bankers Association’s (MBA) Weekly Mortgage
Applications Survey for the week ending October 21, 2011. The
Market Composite Index, a measure of mortgage loan application
volume, increased 4.9% on a seasonally adjusted basis from one
week earlier. On an unadjusted basis, the Index increased 4.8%
compared with the previous week. The Refinance Index increased
4.4% from the previous week. The seasonally adjusted Purchase
Index increased 6.4% from one week earlier. The unadjusted
Purchase Index increased 6.1% compared with the previous week and
was 2.7% lower than the same week one year ago. The four week
moving average for the seasonally adjusted Market Index is down
3.61%. The four week moving average is down 0.71% for the
seasonally adjusted Purchase Index, while this average is down
4.41% for the Refinance Index. The refinance share of mortgage
activity decreased to 77.3% of total applications from 77.6% the
previous week. The adjustable-rate mortgage (ARM) share of
activity increased to 5.9% from 5.8% of total applications from
the previous week. During the month of September, the investor
share of applications for home purchase was at 6.0%, a slight
increase from 5.7% in August. This change was led by an increase
in the Mountain region. In addition, the share of purchase
mortgages for second homes decreased to 5.8% in September from
6.0% in August.

Durable goods demand higher, sort of

The Commerce Department said on Wednesday durable goods orders
excluding transportation rose 1.7% after falling 0.4% in August.
The rise beat economists expectations for a 0.4% increase. But a
drop in demand for transportation equipment as bookings for motor
vehicles and civilian aircraft declined pulled down overall
orders 0.8%. That followed a 0.1% dip in August and was in line
with economists expectations for a 0.9% fall. Transportation
orders fell 7.5%, the largest decline since April. The tenor of
the report was further strengthened by a 2.4% jump in non-defense
capital goods orders excluding aircraft, a closely watched proxy
for business spending. That was the largest increase since March.
That category increased 0.5% in August, and last months increase
was well above economists expectations for a 0.5% rise. The
report was further evidence that economic activity picked up in
the third quarter after a weak first half. Though manufacturing
has slowed in recent months, the September durable goods report
pointed to underlying resilience.

Move houses, not mortgages

Rep. Randy Neugebauer (R-Texas) said the Obama administration
should be focused on helping the private market move through the
backlog of foreclosures instead of merely shifting wealth from
investors to borrowers in the new refinancing changes announced
this week. The Federal Housing Finance Agency announced new
changes to the Home Affordable Refinance Program designed to make
it easier for some 4 million underwater borrowers, who are
current on their payments, refinance into a lower-rate loan. Most
Republicans remained silent on the changes so far as they wait
for how much the shift will cost Fannie Mae and Freddie Mac,
which already owe taxpayers $142 billion in bailouts. “This is
not a housing initiative. This is more of a stimulus plan,”
Neugebauer said. “They’re using Fannie and Freddie to stimulate
the economy and what we’ve learned is that is not working.”

House Republicans sent a letter to FHFA Acting Director Edward
DeMarco last week, asking for the taxpayer cost for HARP 2.0, but
his office is still working on that. Fannie and Freddie are
working too on the specific guidance for the revamped program,
due out by Nov. 15, but already many are doubting how effective
the stimulus – as Neugebauer calls it – will be. Neugebauer
said the foreclosure process simply takes too long. According to
Lender Processing Services, the mortgages currently entering the
foreclosure process have been delinquent an average 611 days.
“We’ve got a lot of inventory in limbo here, and it continues to
freeze the market place and compress prices,” Neugebauer said.
Outside of new government cuts and calls to repeal certain
provisions under the Dodd-Frank Act, ideas to fix the housing
market and spur on a recovery have been scarce. But Rep. Scott
Garrett (R-N.J.) will unveil a plan tomorrow to ensure a return
of private financing for future mortgages without government
support. Neugebauer held several talks with Garrett when
developing the plan. While Neugebauer wouldn’t give specifics on
the plan just yet, he promised it would provide a concrete plan,
something the markets have gone without since the crisis. “I
think a lot of the ideas are going to be common sense ideas,”
Neugebauer said. “It will give the market some certainty.”

The Obama administration is working on a plan to better liquidate
foreclosed properties held by the government through the
Department of Housing and Urban Development, Fannie Mae and
Freddie Mac. Some, the president said Monday, would be converted
into rentals. Neugebauer supported that idea so long as the
government doesn’t dictate to private investors what should be
rented, what should be sold and when.

Ex-Goldman board member arrested

Rajat K. Gupta, a former Goldman Sachs director and McKinsey &
Company chief executive, surrendered to the Federal Bureau of
Investigation this morning to face charges of insider trading,
the latest development in the government’s multiyear crackdown on
illegal activity on Wall Street. In charging Mr. Gupta, the
government will tie up one of the biggest loose ends resulting
from the investigation into the Galleon Group, which began nearly
five years ago at the Securities and Exchange Commission. Since
then, more than two dozen people have pleaded guilty or been
convicted of swapping illegal tips around company earnings and
other major corporate events. Raj Rajaratnam, the Galleon
co-founder, was sentenced to 11 years in prison this month for
making tens of millions of dollars by trading on confidential
tips. Authorities have broadly pursued insider trading on Wall
Street, exacting guilty pleas from a chemist at the Federal Drug
Administration, among others, as recently as this month. While
the majority of those charged have been traders and analysts on
Wall Street, Mr. Gupta, 62, is the first to be implicated from
the upper echelons of corporate America. The charges are a
stunning reversal of fortunes for Mr. Gupta. A native of India,
he graduated from Harvard Business School and had a global
profile as an adviser to some of the nation’s most iconic
companies. He served as a director at Goldman, Procter & Gamble
and the parent company of American Airlines. In addition to his
professional pedigree, Mr. Gupta was a noted philanthropist,
serving in coveted posts with the Bill and Melinda Gates
Foundation.

DSNews.com – FHFA says prices fell

FHFA reported yesterday that home prices in the US fell 0.1% on a
seasonally adjusted basis from July to August. In addition, the
previously reported 0.8% increase recorded for July was revised
to reflect no change. The federal agency’s index is calculated
using purchase prices of houses backing mortgages that have been
sold to or guaranteed by Fannie Mae and Freddie Mac, which in
today’s marketplace constitutes the lion’s share of new
mortgages. Data released the very same day by Standard &
Poor’s showed a 0.2% increase between July and August for the
Case-Shiller home price index, which tracks sales transactions in
20 major cities. It should be noted that FHFA’s numbers are
seasonally adjusted, while S&P’s are not. After adjusting for
seasonal factors S&P’s reading flatlines, with absolutely no
change in home prices between July and August, however, S&P
stresses that its measurements should be assessed using the
non-seasonally adjusted data given the volatility of today’s
market.

In addition, Patrick Newport, US economist for IHS Global
Insight, points out that the FHFA index incorporates the latest
month of data, while the Case-Shiller index is a three-month
moving average. According to Newport, FHFA’s single-month
analysis makes it the “better barometer.” For the 12 months
ending in August, FHFA’s index shows US prices fell 4.0%. The
Case-Shiller index recorded an annual decline of 3.8% for the
same period. Seasonal shifts are not factored into year-over-year
price changes. FHFA says home prices are at roughly the same
level seen in February 2004. S&P’s Case-Shiller index puts home
prices at circa mid-2003. Paul Ashworth, chief US economist at
Capital Economics says FHFA’s index now suggests that even if
the housing market did muster a little upward momentum in the
spring, that rally has faded quickly over the summer. “Anyone
expecting a rapid recovery in prices will be very
disappointed,” Ashworth said. “At best, house prices will be
unchanged next year and in 2013 too.”

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin October
27, 2011

New foreclosure plan

Big investors are showing interest in an evolving Obama
administration plan to sell off foreclosed homes, although the
government will have to make the offer sweet enough to coax
private funds. The White House is assessing how best to
encourage private companies and investors to snap up foreclosed
properties held by the government and convert them into rentals.
Officials want private partners to take over as much as $30
billion in single-family properties that are currently on the
books of government-run Fannie Mae, Freddie Mac and the Federal
Housing Administration. Several money managers with large fixed
income funds are interested, according to sources, and a request
for ideas on how to construct a program received nearly 4,000
responses. The foreclosure conversion program would come as the
next step to complement other government supports for housing,
including an expanded refinance program announced on Monday.

The main question for prospective investors, which include
broker-dealers and firms already overseeing similar rental
programs, is the type of financing the government will make
available—an issue officials are still struggling with. “In
order to get a better bid, there has to be some incentive
involved to get qualified investors involved,” said Ron D’Vari,
co-founder and chief executive of NewOak Capital. “The reality is
not a lack of interest, but so far it looks like a lack of
financing.” Incentives could include low interest rates, tax
benefits or some type of rental assistance, said D’Vari, a
portfolio adviser who has been involved in mini-bulk auctions of
real estate-owned properties, or REOs, in California. REO
properties are those acquired by a lender, whether a bank or the
government, after an unsuccessful auction attempt. Fannie Mae,
Freddie Mac and the FHA own about 250,000 properties, close to a
third of the country’s REO pool.

One key challenge would be finding big enough blocks of
properties in specific geographic areas that could be sold at one
time. Analysts say this is what it would take to make the program
attractive to large institutional investors. The transaction and
liability costs property managers will face as they try to bring
deserted units back up to code also pose a hurdle. The
government also needs to determine how it will protect taxpayers,
and it might explore ways to pair up with investors and allow
Fannie Mae, Freddie Mac and FHA to keep some type of an ownership
stake in the rental properties. A public-private partnership,
somewhat along the lines of a program the Treasury tried to use
to soak up toxic bank assets during the financial crisis, would
allow the government to gain from the sales. Fannie Mae, Freddie
Mac and the FHA have already undertaken some small efforts to
reduce the backlog of foreclosed homes. They have donated a few
vacant properties for demolition and have held some small
auctions. Having already received $141 billion in taxpayer
support since being seized by the government in 2008, Fannie Mae
and Freddie are under enormous pressure to make sure they
maximize the returns from the properties they hold. “This has
got to be thought out. Fannie and Freddie would need to assess if
they are getting the return they need from a rental,” said Ken H.
Johnson, a real estate professor at Florida International
University. Johnson said one way to get over the hurdle would be
for the two agencies to be given an explicit mission of market
stabilization.

2.5% growth, jobless claims hold steady

US economic growth increased at its fastest in a year in the
third quarter as consumers and businesses set aside fears about
the recovery and stepped up spending, creating momentum that
could carry into the final three months of the year. At the same
time, slightly fewer people sought unemployment benefits last
week, though level remains elevated above 400,000. Though part
of the increase came from the reversal of temporary factors that
had restrained growth, the expansion was a welcome relief for an
economy that looked on the brink of recession just weeks ago.
U.S. gross domestic product expanded at a 2.5% annual rate in the
third quarter, the Commerce Department said in its first estimate
on Thursday. That was a big acceleration from the 1.3% pace in
the April-June quarter and matched economists’ expectations.
Consumer spending in the last quarter was the strongest since the
fourth quarter of 2010, while business investment spending was
the fastest in more than a year. Even though consumer spending
was stronger, businesses were slow in stocking up their
warehouses. The peppier spending and a slower pace of inventory
accumulation by businesses will lay a base for a solid fourth
quarter, but a slowdown in Europe and the exhaustion of pent-up
U.S. demand could leave a weak spot early in 2012. And the
recovery’s pace is still too weak to lower a jobless rate that
has been stuck above 9% for five straight months.

Olick – new sales increase, prices tank

“Sales of newly built homes in September came in well over
expectations, and stocks of the big builders took a little tick
up on the news. They then dropped off pretty precipitously, as
analysts weighed in on what is behind that nice headline number.
First of all, these particular monthly numbers are based on
signed contracts to buy a home, not closings, which provide the
numbers for existing home sales. This data set is extremely
volatile due to how small the survey pool is. And then of course
you have these huge seasonal adjustments, which are important
given housing’s distinct seasonality, but they can really skew
the reality. So, the headline number is that sales (signed
contracts) rose 5.7% from a seasonally adjusted annualized rate
of 296,000 in August to 313,000 in September. Take out the
seasonal adjustment, and don’t annualize (the expectation of how
many homes will sell this year based on the monthly rate) and
according to the report, builders sold 25,000 homes in August and
25,000 homes in September. No change. The good news is that
builders usually sell fewer homes in September than August, and
they sold the same, hence the seasonal bump up, the bad news is
that 25,000 is a pitifully low number of sales, actually tying a
record low.

We can haggle over sales numbers ’til the cows come home (if
their home isn’t in foreclosure), but we really need to focus on
the pricing numbers. The price of a newly built home fell 10.4%
in September year over year to $204,400.00, which is about $200
higher than the low of 2003. Builders are being forced to compete
with existing home sale prices, one third of which are distressed
properties (foreclosures and short sales). The median existing
home sale price in September was $165,400, so that’s still a
pretty big premium. Unfortunately, given the high cost of
materials these days and difficulty in obtaining construction
loans, builders take every dollar drop pretty hard. ‘The pricing
issue would generally hit everyone and would result in lower
margins (and some additional impairments),’ notes Dan Oppenheim
at Credit Suisse. Of course the pricing numbers also have noise
in them. ‘Those particular price figures are not adjusted for
the mix of new homes being built, so the rate of decline probably
also reflects the switch to building smaller homes rather than
the so-called ‘McMansions’ that were popular during the boom
years,’ writes Paul Ashworth at Capital Economics, who says a
turnaround in the new home market may still be a couple of years
away.”

Will the super-committee slow spending this Christmas?
The Super Committee has been negotiating behind closed doors
since September, and they have until Nov. 23 — that’s the day
before Thanksgiving — to reach an agreement on at least $1.2
trillion in deficit reduction measures. Some retail experts fear
that further political gridlock in Washington will make American
consumers even more hesitant to spend during the busiest shopping
period of the year. When the Super Committee was forged out of
the debate on whether to raise the debt ceiling, consumers
reigned in spending. One of the problems plaguing retailers is a
lack of exciting new products to inspire consumers to shop, says
Marshal Cohen, chief industry analyst at NPD Group. “There is
almost nothing new…to get the consumer excited beyond just the
traditional holiday categories,” Cohen says. Against this
backdrop, the political discussions could create a big
distraction for consumers. And that’s something retailers
don’t want when most analysts, including Cohen, expect marginal
growth at best this holiday season. It also may be yet another
reason for consumers to be downbeat. Numerous consumer surveys
have shown that consumers are worried about the economy and about
their rising household expenses. One of the latest, a survey
conducted by Deloitte, showed that two-thirds of consumers expect
the economy to stay the same or weaken next year. As a result
many consumers reported that they would be trimming their gift
list and 42% said they planned to spend less this year.

Underwater mortgages in Las Vegas fall further

The September median home price in Las Vegas fell 11.5% from one
year ago and remains 63% below the peak, according to analytics
firm DataQuick. A home that sold for $312,000 during the peak of
the housing bubble in November 2006 is now worth $115,000.
September was the 12th straight month the median home price fell
from the year before. The decline has fallen to levels not seen
since the mid-1990s, DataQuick said. “This can be attributed to
several factors: home price depreciation; robust sales of
low-cost foreclosures; robust sales to investors, who mainly
target low-cost properties; extraordinarily low new-home sales
(new homes tend to sell for more than resale homes); and
higher-than-usual condo resales (condos tend to be the least
expensive homes),” DataQuick said.

President Obama gave a speech Monday in Vegas, promoting changes
to help more underwater borrowers refinance announced the same
day. The Federal Housing Finance Agency will waive some
representation and warranty risk, appraisal requirements, and
negative equity caps for the Home Affordable Refinance Program.
How effective the program is remains in question for the nearly 4
million Fannie Mae and Freddie Mac borrowers underwater. In
Vegas, 80% of the local homeowners owe more on their mortgage
than the home is worth, according to RealtyTrac. Principal
reduction remains the largest tool yet to be taken up by the
largest banks or by any government agency on a large scale to
combat the negative equity problem in the U.S.

Department of Housing and Urban Development Secretary Shaun
Donovan said principal reduction will be a major function of the
still pending attorneys general settlement with the largest
mortgage servicers. Many Republican AGs and lawmakers say such
lengths would only promote strategic default, not entice more
people to stay current on their mortgage. Meanwhile, the number
of default notices in Vegas increased 190% from July to August,
according to DataQuick. More than 4,700 default notices were
filed, led by Bank of America, the same findings states along the
West Coast found. “It is unclear whether the higher levels of
NODs seen in August and September are the beginning of a
longer-term upward trend in default filings, which could mean far
more distressed properties on the market and more downward
pressure on home prices,” DataQuick said.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin November 2, 2011

MBA – mortgage applications up

Mortgage applications increased 0.2% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending October
28, 2011. The Market Composite Index, a measure of mortgage loan
application volume, increased 0.2% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index remained
unchanged from the previous week. The Refinance Index decreased
0.2% from the previous week. The seasonally adjusted Purchase
Index increased 1.8% from one week earlier. The unadjusted
Purchase Index increased 0.8% compared with the previous week and
was 2.1% lower than the same week one year ago. The four week
moving average for the seasonally adjusted Market Index is down
2.50%. The four week moving average is down 0.06% for the
seasonally adjusted Purchase Index, while this average is down
3.19% for the Refinance Index.

The refinance share of conventional activity decreased to 83.8
from 84.1 the previous week. The refinance share of government
activity increased from 48.6 to 49.4 this week. The refinance
share of mortgage activity decreased to 77.1% of total
applications from 77.3% the previous week, the fourth straight
week of decline. The adjustable-rate mortgage (ARM) share of
activity decreased to 5.8% from 5.9% of total applications from
the previous week. By region, the number of applications in the
Pacific region increased the most, rising by 7.5% in September
while the number of purchase applications in the Mid-Atlantic
region decreased the most, falling by 1.9%. The number of
refinance applications increased the most in the East North
Central region, rising by 8.6% while the Pacific region increased
the least, rising by 0.5%. Vermont had the largest increase in
refinance applications in September but also the largest decrease
in purchase applications. Conversely, Wyoming had the largest
increase in purchase applications but the largest decrease in
refinance applications.

Private sector adds jobs, slows planned layoffs

The private sector added 110,000 jobs in October, a bit better
than expected but still indicative that the labor market is
showing little improvement. Coupled with a report showing that
planned layoffs at US firms dropped in October after hitting a
more than two-year high the month before, unemployment is showing
only grudging signs of improvement. Macroeconomic Advisors and
ADP compile the monthly report on private sector job creation
that serves as a warmup for the government’s nonfarm jobs report,
which will come on Friday. Consensus is for the government’s
report to show a net of 93,000 jobs created in October and for
the unemployment rate to remain at 9.1%. The service sector
provided 114,000 jobs for the month, a decrease from 122,000 in
September, while the goods-producing sector fell 4,000 and
manufacturing lost 8,000 positions.

Smaller firms did better at creating jobs. Companies with
between 50 and 499 workers saw the job count go up 53,000, while
those with 500 or more workers lost 1,000 jobs. Small
goods-producing companies saw no not job increase. Employers
announced 42,759 planned job cuts last month, tumbling 63.1% from
115,730 the month before, according to a report from consultants
Challenger, Gray & Christmas. It was the lowest level in four
months. Still, October’s job cuts were up 12.6% from the same
time a year ago, when 37,986 layoffs were announced. For 2011 so
far, employers have announced 521,823 cuts, outpacing the 449,258
layoffs announced during the first 10 months of 2010. The total
for the year remains well off recession levels, the report said.
In 2009, layoffs stood at 1,192,587 by October. Meanwhile,
hiring plans surged to 159,177 last month from 76,551 in
September, as companies announced seasonal positions. Retail jobs
led the way with 133,940 openings. The release comes two days
ahead of the key US jobs report from the government, which is
forecast to show the economy created 95,000 jobs last month.

Olick – challenge your foreclosure

“It’s late, and it’s limited, but for borrowers who feel their
homes were wrongly or inappropriately foreclosed upon in 2009 and
2010, there is now recourse. As part of a larger enforcement
action (so-called ‘consent orders’) taken last April against
fourteen of the nation’s largest mortgage banks/servicers
following the so-called ‘robo-signing’ scandal, the Office of the
Comptroller of the Currency is beginning a ‘multi-faceted
independent review of foreclosure actions.’ The major banks,
including Bank of America, Chase, Citibank, Wells Fargo, GMAC,
and EMC, will have to fund these independent reviews to evaluate,
‘whether borrowers suffered financial injury through errors,
misrepresentations, or other deficiencies in foreclosure
practices.’ If they did, those borrowers get some kind of
‘remediation.’ ‘The challenge is substantial, but the steps we
have required the servicers to take are vitally important to
resolving these issues in a way that respects the rights of those
who have been harmed and helps to restore confidence in the
system,’ said John Walsh, Comptroller of the Currency in a
statement.

The major mortgage servicers began sending out letters to
eligible borrowers today to explain the process. The requests for
the reviews must be received by April 30, 2012. So how many do
they expect will request these reviews, given that there are
potentially four and a quarter million eligible borrowers
according to the OCC? ‘It could be hundreds of thousands,’ Walsh
told me in an interview this morning. ‘We are certainly hopeful
they will have the capacity to handle it,’ he added with regards
to the servicers. Walsh also admitted that if the volumes are
very high, it could have an impact on the current foreclosure
process at major servicers, ‘to the extent that capacity that
servicers have that they’d otherwise devote to other parts of the
business are affected.’ But he stressed that this is a backward
looking, remedial piece and ‘shouldn’t’ affect current
foreclosure cases.

So could a borrower get his or her home back? It’s not out of the
realm of possibility, although that is pretty unlikely given the
home was probably already legally sold to someone else.
Remediation would more likely involve fees that could be paid
back or some other type of monetary compensation. No question it
will be highly case-specific. ‘The participating mortgage
servicers remain committed to helping borrowers remain in their
homes and have been working with federal banking regulators to
resolve the issues raised in the consent orders,’ explained Paul
Leonard of the Financial Services Roundtable in a release. The
reviews, he adds, could take several months to complete.”

Europe headed for recession

The downturn in euro zone manufacturing in October was even
deeper than previously thought, according to “grim” business
surveys on Wednesday that showed the currency union’s debt crisis
is dragging its economy back into recession. The final Markit
Eurozone Manufacturing Purchasing Managers Index (PMI) for
October, which gauges changes in activity levels across thousands
of euro zone manufacturers, fell to 47. 1, revised down from a
preliminary reading of 47.3 and down from 48.5 in September.
This marks the third consecutive month the manufacturing PMI has
been the 50 level that divides contraction from growth. Output
and new orders indexes plunged to levels not seen since
mid-2009.

The survey suggests the crisis is putting a chokehold on euro
area business and, along with news that German unemployment
unexpectedly rose for the first time in nearly two years to 7%,
it adds pressure on the European Central Bank to cut interest
rates. The latest Reuters ECB poll from last week showed a rate
cut was already on the cards by December and possibly as early as
Thursday. “It makes grim reading,” said Alan Clarke, economist
at Scotia Capital. “If there was any doubt that the euro zone was
headed for recession, these data should confirm it.” The
survey’s factory output measure plunged to 46.6 in October from
49.6. “Output, new orders and new export orders all suffered
their fastest declines since mid-2009, against a backdrop of weak
domestic market conditions, the ongoing debt crisis and a
darkening outlook for the global economy,” said Rob Dobson,
senior economist at Markit.

Broken down by country, in Germany, the economic engine of the
euro zone economy, manufacturing activity contracted for the
first time in just over two years. But the euro rose 15 pips to
$1.3780 after the German data were released, on slight relief the
figures weren’t worse. Spanish factory activity shrank for a
sixth straight month, while conditions in Italy, increasingly the
focal point of worry in the still-raging euro zone debt crisis,
deteriorated much more sharply than expected to a 28-month low.
The Italy manufacturing PMI fell 5 points to 43.3, the biggest
one-month fall since the survey began in 1997, suggesting an
economy deep in recession. French manufacturing was also on the
back foot in October, with new orders drying up and a fall in
output. Ireland was the only euro zone economy not to report a
fall in factory activity. For the euro zone as a whole, the new
orders index fell for the fifth month running, plummeting to
43.4, the fastest rate of decline since May 2009. As a reliable
forward-looking indicator, that bodes poorly for factory activity
in November. While firms hired more workers for the 18th
consecutive month, hiring was the weakest since June 2010. Euro
zone unemployment rose to 10.2% in September, nudged up by Spain,
where unemployment reached 22.6%.

WSJ – foreclosure price tag climbs

The price tag to settle the state and federal investigation of
bank foreclosure practices has increased by at least $5 billion
in recent weeks, people familiar with the negotiations say. The
proposal on the table now puts a $25 billion value on a
settlement by the nation’s five largest mortgage servicing
companies—Ally Financial Inc., Bank of America Corp.,Citigroup
Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. In exchange
for picking up a bigger tab, banks would be released from certain
legal claims tied to mortgage originations. Representatives of
the five banks declined to comment.

The price tag could go as high as $29 billion if the agreement
includes a longer list of servicers, sources familiar with the
discussions said. Earlier discussions had revolved around $20
billion in cash penalties and homeowner assistance programs,
sources familiar with the discussions said. There was confusion
in those talks as to whether that figure applied only to the five
big banks or to as many as 14 large mortgage servicers that
agreed with regulators this past spring to fix their foreclosure
practices. Banks and government officials have been negotiating
for months over a pact in which the banks would pay to settle
some legal claims, but it’s still not clear that a deal will be
reached. Reaching an agreement with the $25 billion price tag for
the five biggest banks depends on the participation of California
Attorney General Kamala D. Harris, who bolted from the talks in
early October. At the time, Ms. Harris called the terms on the
table “inadequate.” A spokesman for Ms. Harris declined to
comment.

Other key issues also remain in flux. Negotiators must still
finalize how the cost of the settlement will be allocated among
the banks. The two sides must also agree on the selection of a
monitor charged with overseeing the agreement. The selection of
a monitor is considered a critical part of the deal because it
provides a way to ensure that banks comply with the terms of the
settlement. The agreement would require banks to pay a
substantial financial penalty if they fall short of the
settlement’s requirements, these sources added. Administration
officials have viewed the broader foreclosure settlement as a
chance to break the foreclosure log jam, increase the number of
financially troubled borrowers who receive principal reductions
and provide other assistance to homeowners.

The deal would include $5 billion in cash penalties. In addition,
banks would be required to do refinancings worth $3 billion. The
refinance program is considered particularly costly for the banks
because they would be forced to give up expected interest income
on loans for which borrowers are current on their loan payments
and deemed unlikely to default. The rest of the settlement’s
value would come from principal reductions and other aid to
homeowners. Banks would get credit for various types of
assistance based on a set of formulas being finalized by
negotiators. After Ms. Harris left the talks, negotiators came
up with a plan to help certain “underwater” borrowers get
refinancing assistance. The plan would apply only to mortgages
owned by the banks; it would allow borrowers whose houses are
worth less than their loans but are current on their mortgage
payments to refinance into a loan with a lower interest rate,
people familiar with the discussions said. Allowing more
underwater borrowers to refinance could have an outsize impact on
California, which has more than 2 million underwater borrowers,
more than any other state, according to CoreLogic.

In exchange for the refinancing piece, banks would be released
from certain claims related to loan servicing and origination,
sources familiar with the discussions say. Banks wouldn’t be
released from claims related to the securitization of mortgage
loans, these sources add. The exact details of any release are
still under discussion. Ms. Harris has a limited ability to
bring legal claims related to originations and servicing
practices if she decides not to agree to a settlement, sources
familiar with the negotiations say. The statute for filing cases
related to loan originations is four years in her state, meaning
any legal action could only cover mortgages originated in 2007
and after. California allows foreclosures to proceed through a
non-judicial process, limiting the state’s ability to argue that
banks lied to the courts, these sources add.

Fannie Mae delinquencies down

The serious delinquency rate on mortgages backed by Fannie Mae
dropped to 4%, the lowest level since June 2009. The rate fell
every month since the 5.59% peak in February 2009 except for July
when it went unchanged. Fannie said the rate fell 3 basis points
from August. Fannie purchases from lenders and servicers totaled
$55.3 billion in September, up 24% from the previous month but
down 33% from the same month last year. It is the highest volume
since the $57 billion reported in March. Fannie’s gross mortgage
portfolio dropped to $722.1 billion in September, down 10% from
one year ago. Under the conservatorship agreements established
in September 2008, the Treasury Department capped this portfolio
at $900 billion at the end of 2009 and scheduled it to be wound
down by 10% each year, reaching $250 billion by 2018.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin November 7, 2011

Arizona banks shift to short sales

After more than 175,000 foreclosures in metro Phoenix in the past
several years, mortgage lenders in Arizona have done an
about-face, approving a record number of short sales. Rather
than taking back homes and selling them at auction, bankers say,
they are more frequently allowing distressed owners to sell the
homes for less than the borrowers owe. The trend could lead to
rising sales prices, because short sales in metro Phoenix tend to
sell for higher prices than homes taken back by lenders and
resold. The consensus among lenders and housing-market experts
at the standing-room only event Thursday was that short sales
would continue to climb in the Phoenix area and foreclosures
would continue to fall. The trend could lead to a rise in the
median home value as soon as next year, because it decreases the
number of homes sold for bargain prices at auction.

A shift to short sales is momentous for lenders, which only two
years ago handled delinquent mortgages almost exclusively by
foreclosure. After taking the homes back, banks resold so many
for such low prices that sales pushed the area’s median home
price to a 10-year low. Now, top lending executives say, they
are seeing that while short sales mean a loss for the bank, that
loss is less than they would suffer from a foreclosure auction.
At the same time, housing-market indicators are showing positive
signs. Arizona’s mortgage delinquency rate is down 32 percent
since 2009, a bigger drop than any other state, de Laveaga said.
He said the fact that the nation’s three biggest lenders sent
executives to speak to Arizona real-estate agents and mortgage
brokers in the audience is a sign they want to do more to slow
foreclosures.

G20 to meet again over Eurozone

The Group of 20 is seeking to meet again, possibly before
Christmas, with the aim of resurrecting a deal to provide an
international firewall around Greece, G20 sources have told the
Financial Times, saying negotiators at the Cannes summit had been
close to an agreement. If the German central bank—which has
independent control of the country’s foreign exchange
reserves—can be reassured, a G20 finance minister’s meeting
will be called and held in France this month or in Mexico after
December, when it assumes the chair of the G20. The idea of
holding another G20 meeting before the scheduled February
gathering was endorsed by Jim Flaherty, Canada’s finance
minister, on Saturday. Speaking in Berlin, Mr. Flaherty told a
panel discussion: “The consensus view is that we cannot wait
that long [until February]. We do need to restore market
confidence”.

G20 nations were “nowhere near a consensus” on using IMF
resources to fund the European financial stability facility, Mr.
Flaherty told the FT in an interview. “There is a view, which I
share, that the euro zone countries are relatively rich in world
terms and have the tools and resources themselves” to turn the
EFSF into a contagion-fighting “firewall”. The deal close to
agreement on Thursday night involved three elements. The first
was additional funds for the IMF. The second was for the IMF to
allocate around another $250 billion of special drawing rights,
and the third was for euro zone countries to pool their
SDRs—about $60 billion—and use them to invest in the EFSF
special purpose vehicle so that other investors could add to the
funds at EFSF disposal with little risk. It was this last
element that the Bundesbank rejected. The German central bank
told Reuters on Saturday: “We know of this plan and we reject
it”.

Olick – loan limits a constant volley

“Barely a month after loan limits at Fannie Mae, Freddie Mac and
the Federal Housing Administration were lowered to a maximum of
$625,000, there is a move to raise them yet again. The Senate
passed an amendment a few weeks ago that increases the limits
back to $729,750, and although it will face opposition in the
House, it is attached to a government spending bill that needs to
be law by November 18th. That’s how these things tend to get
pushed through. Home builders and Realtors alike have been
pushing for the reinstatement of these limits, so potential
buyers in higher priced markets can get easier, cheaper access to
credit. The median price of a newly built home is far higher than
that of an existing home. Realtors have blamed a drop in home
sales in California recently, where prices are higher than the
rest of the nation, on lower the conforming loan limit. But
even if the loan limits are raised yet again, they could go back
down yet again as well. How? Deficit reduction. In the litany of
possible cuts that involve housing, lowering and freezing the
conforming loan limit at $417,000 is on the table, proposed by
the Congressional Budget Office, which estimated that this would
raise $4 billion over ten years.

It’s possible, though unlikely, at least according to Jaret
Seiberg at MF Global: ‘It would disproportionately hurt those
that live on the east and west coasts even though this should
secure the support of Republicans who want to eventually
eliminate Fannie and Freddie.’ And there’s your conundrum. Sure,
Republicans are rallying to slaughter Fannie and Freddie, but
they’re really the only game in town for the mortgage market.
Every time I hear a candidate in one of these debates answer the,
‘How would you fix housing?’ question with a tirade against the
two mortgage giants, I wonder if they have any idea how the
housing market works today. Until there is a private market for
mortgage securities, an option to fund the market other than
Fannie, Freddie, then killing them, or even messing with their
loan limits, cannot be the means to an end of the housing
crisis.”

9% unemployment

The government reported 80,000 total jobs were added in October.
There were 104,000 private sector positions added in professional
and business services, leisure and hospitality, health care and
mining, and 24,000 government jobs were lost. The unemployment
rate fell slightly to 9 percent from 9.1 percent in September.
“We have to remind ourselves that things are so bad that this
looks good. In the context of what we’re living through, it’s not
a bad report,” said Dan Greenhaus, global market strategist at
BTIG. There were a few positives in the report, including upward
revisions to September and August payroll employment. August
non-farm payrolls nearly doubled, from 57,000 to 104,000 and
September was revised up to 158,000 from 103,000. “Rescued by
revisions,” writes Chris Rupkey, chief financial economist at
Bank of Tokyo-Mitsubishi. “It feels like there’s more small
business formation that’s going on that’s not getting reported
right away. This is the second month in a row where we had
substantial revisions,” said Moody’s Economy.com chief economist
Mark Zandi. The average work week for private sector workers was
unchanged at 34.3 hours, but the manufacturing work week rose by
0.2 hours to 40.5 hours, and production and non supervisory
employees’ work week rose by 0.1 hour to 33.7. Average hourly
earnings for all private sector employees rose by 0.2 percent.
“That’s fodder for spending,” said Zandi.

Zandi said, however, the positives have to be taken in the
context of lowered expectations. He said the report shows the
recovery has overcome obstacles and is showing resilience. “This
is still too early whether to assess whether the coast is clear.
Europe is still raging,” Zandi said. The highest monthly
employment gain in the recovery so far was February, 2011 when
235,000 jobs were added, but job growth has been stubbornly slow
and slowed to a trickle in the summer. Over the past 12 months,
payroll employment has increased by an average of 125,000 per
month. This week, the Fed revised its economic forecast to
include a high unemployment rate of through 2014, adding to
speculation the Fed will do more easing in an effort to boost
employment. Even in 2012, the Fed does not expect the
unemployment rate to fall below 8.5 percent. “We’ve been at 9
percent since 2009. This is a major problem,” said Greenhaus.

California AG pushes principle reduction

California Attorney General Kamala Harris urged Federal Housing
Finance Agency leader Ed DeMarco to grant principal reductions on
mortgages tied to Fannie Mae and Freddie Mac this week. Harris’
push for principal reductions echoes the sentiments of some
prominent housing analysts and traders. In a public statement,
Harris said she views principal reductions as the only way to
keep distressed California homeowners in their homes since the
aggressive measure would align mortgage values with actual home
values. “I call on Edward DeMarco, the regulator of Fannie Mae
and Freddie Mac, to implement this common-sense reform, which
will serve the interests of American taxpayers and California
homeowners,” Harris said in a statement. “If Mr. DeMarco is
unwilling to support principal reduction for these home loans in
crisis, he should step aside for someone who will.”

Harris and New York AG Eric Schneiderman recently broke away from
the multistate talks to pursue their own separate claims of
securities fraud as well. Her office is in search of harsher
penalties against the lenders than the latest proposal. In
October, Harris reportedly subpoenaed Bank of America to
determine whether it or Countrywide Financial lied to investors
when selling mortgage-backed securities to them. Harris is not
alone in her calls for principal reductions. Bloomberg news
obtained a letter from former Deutsche Bank trader Greg Lippman,
which shows the famed trader advocating for debt forgiveness in
certain instances. Lippman is known for betting against subprime
mortgage securities prior to the 2008 unwinding of the housing
market. Lippman’s predictions were prescient enough to catch the
attention of Senators who compiled a study on the housing market
meltdown for the U.S. Senate Permanent Subcommittee on
Investigations earlier this year. The Senate Subcommittee
uncovered information on Greg Lippman, which showed he had warned
colleagues and clients about the poor quality of RMBS securities
underlying many CDOs, even describing them as “crap” and “pigs.”
Despite calls for principal reductions, federal agencies, as
well as government-sponsored enterprises, have been somewhat cool
to the idea. Michael Williams, CEO of Fannie Mae, said that the
GSE has no plans to ask mortgage servicers for principal
reductions. In May, Freddie Mac CEO Ed Haldeman, who recently
announced his pending resignation from the GSE, said principal
write-downs do not make sense for Freddie Mac.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin November 8, 2011

Rising foreclosures impact prices

Rising foreclosure start rates will add to the distressed
property inventory and drive home prices further down, according
to a report from Fitch Ratings, reflecting the impact of last
year’s robo-signing scandal. More than 10% of severely
delinquent loans in private-label residential mortgage-backed
securities are now moving into foreclosure each month, the
ratings agency said. That’s nearly double the rate from a year
ago when the moratoria instituted by lenders and servicers in the
wake of the robo-signing debacle were in place. It’s also edging
closer to the 14% rate seen between 2000 and 2010. Fitch said
home prices will likely dip another 10% before they stabilize,
due to an increasing inventory of distressed homes. Home prices
dropped 1.1% in September from August and 4.1% from a year ago,
according to a CoreLogic report Monday. “Rising foreclosure
start rates are likely a sign that servicers are playing catch-up
on actions that have been delayed over the past year,” Fitch
Managing Director Diane Pendley said in the report. “Mortgage
servicers now generally feel they have implemented the corrective
actions that they determined were needed.” Foreclosures are
taking an average of eight months to close in nonjudicial states
and 15 months in judicial states, bogged down by loss mitigation,
a foreclosure backlog and weak housing demand. The foreclosure
rate nearly doubled on borrowers delinquent for more than six
months, while the rate increased about 25% on borrowers who have
missed between three and six payments.

Consumer credit rises

A Federal Reserve report on Monday showed US consumer credit grew
a healthy $7.39 billion in September after falling a revised
$9.68 billion in August, boosted by a category that includes
new-car loans. The report beat forecasts by economists surveyed
by Reuters for a $5 billion gain in September outstanding
consumer credit. Revolving credit, which mostly measures
credit-card use, fell $627.1 million — a third straight monthly
decline after declines of $2.26 billion in August and $3.40
billion in July. But nonrevolving credit, which includes auto
loans, rose $8.01 billion in September after a revised $7.42
billion decrease in August.

Olick – home prices still falling

“Home prices are highly seasonal, due to the different mix of
homes that sell at different times of the year, but the latest
reading for September shows home prices are under added pressure
now; this is not just due to the high concentration of distressed
properties on the market. Prices fell 1.1% month to month,
according to CoreLogic, both in seasonally adjusted and
unadjusted terms. This is the second consecutive month of monthly
drops, as we head into the slower fall season. The more
concerning aspect of the report is that while home prices
including foreclosures and short sales fell 4.1% from September
of 2010, they still fell 1.1% when you exclude distressed sales.
That has not been the case in previous months. ‘The acceleration
in the rate at which the CoreLogic house price index is falling
reflects the slowing in the pace of job creation and wider
economic growth earlier this year,’ says Paul Diggle of Capital
Economics.

While the unemployment picture has weighed heavily on home prices
all year, the new uptick in foreclosure starts will likely have a
more drastic effect. Foreclosure start rates on severely
delinquent loans have increased to over 10% a month in the
private-label RMBS (residential mortgage backed securities)
sector, according to Fitch, which is now estimating another 10%
decline in home prices before they fully stabilize. Paul Diggle
doesn’t agree with the 10% drop. ‘After all, relative to
historical norms housing is now about 25% undervalued against
incomes. And with mortgage rates lower than at any point in the
past 40 years, mortgage affordability looks favorable,’ he
argues. That may be, but he’s not taking into account consumer
confidence, or lack thereof. 36% of Americans say that mortgage
rates will go up over the next year, according to Fannie Mae’s
October housing survey. That’s up from the previous month. They
also expect rents to rise, and yet a full third still say they
would rent their next home rather than buy it. More telling is
that 77% say the economy is on the wrong track and an all-time
high expect their financial situation will stay the same over the
next year. That’s not a great atmosphere for a surge in home
buying.”

Wall street pay to fall

Wall Street bonuses are set to fall by an average of 20 to 30%
this year from a year ago, according to a closely watched
compensation survey—the weakest bonus season since the
financial crisis and a reflection of the leaner times confronting
the industry. Those who work in trading and investment
banking—usually Wall Street’s most profitable businesses,
although struggling this year—will experience the sharpest
drops in pay, said Alan Johnson, managing director of Johnson
Associates, the firm that conducted the survey. Employees in
less volatile businesses, like asset management and commercial
banking, will make about what they did in 2010. The bonus
forecast will come as no surprise to many on Wall Street. Trading
profits have slumped and new Dodd-Frank regulations have raised
the cost of doing business. Even Goldman Sachs, a firm known for
its earning power, last month reported its first quarterly loss
since the financial crisis.

Goldman, Bank of America and other Wall Street firms have been
cutting thousands of jobs. “It is disappointing,” Mr.
Johnson said in an interview. “I think we were all hoping we
were out of this morass.” This is the time of the year when
Wall Street firms start to make decisions on which bankers and
traders will be rewarded for 2011. For many of them, the
year-end bonus typically represents the bulk of their
compensation. The firms pay as much as 60% of their annual
revenue in compensation, so much is at stake in how they divvy up
their bonus pools. Wall Street is “effective at knowing what
it can get away with” and for months has been managing down
expectations of employees about pay, said Michael J. Driscoll, a
former senior trader at Bear Stearns. This year the message has
been that “star performers” will be paid and the rest of Wall
Street will feel the pain, he said.

WSJ – appraisals derail sales

In the past, appraisals rarely disrupted a home sale. But
realtors and housing experts say new requirements and a difficult
housing market are doing just that. Year-to-date through
September, one third of realtors have said appraisals resulted in
buyers and sellers delaying or canceling contracts or
renegotiating to a lower sales price, according to the National
Association of Realtors. That’s up from 29% in all of 2010 and up
from less than 10% prior to 2009. Indeed, lenders say they’re
requiring more thorough home appraisals. Appraisers determine the
value of a home largely by reviewing the prices at which similar
homes nearby sold for in recent months. During the housing boom,
appraisers could cite as few as three recently sold homes; today,
lenders are often requiring two to three times that, says David
Stevens, president and CEO of the Mortgage Bankers Association.
To meet that quota, appraisers say they sometimes have to use
homes that aren’t similar and may be foreclosures or short sales,
though they are taking into account what this property would have
sold for if it wasn’t a distressed sale, says a spokesman for the
Appraisal Institute, an association of real estate appraisers.
“Appraisers have become much more cautious,” says Jack McCabe, an
independent housing analyst in Deerfield Beach, Fla.

To be sure, a more thorough appraisal process does have its
benefits. It lets a buyer know whether they’re offering too much
to buy a particular home. It may also make houses cheaper for
buyers — though not without more hassle. If the appraisal value
comes in below the agreed buying price, the lender will typically
offer a smaller mortgage. For example, on the house that Rogers
sold, the buyer would have gotten a mortgage for $358,400, or 80%
of $448,000. But when the appraisal value came in at $430,000,
the lender adjusted the mortgage amount to 80% of the appraisal
figure, or $344,000. The contract the buyer and the seller had
signed, however, stated the higher buying price of $448,000, and
the buyer (and potentially the seller) had the option to decide
if they wanted to make up the $18,000 difference. Typical
solutions include having the buyer paying that difference out of
pocket or the seller lowering his price — or both. And sellers
often do lower their prices: For example, during the three months
ending September, 13% of realtors reported contracts were
renegotiated to a lower sales price, compared to 10% who said
contracts were canceled and the 8% who said contracts were
delayed, according to the National Association of Realtors.

Cash-out levels hit new low

About 82% of homeowners who refinanced in the third quarter
either decreased or maintained their principal balance, up from
77% in the previous quarter according to Freddie Mac. Cash-out
borrowers, those who increased their balance by at least 5%, made
up 18% of all refinancings in the third quarter, a significant
decline from the average of 46% between 1985 and 2010. Cash-out
— or home equity converted to cash — levels also hit a
16-year low at $5.3 billion, down from $6.3 billion in the second
quarter and from the peak of $83.7 billion in the second quarter
2006. “Savvy homeowners are taking advantage of some of the
lowest fixed-rates in more than 60 years to lock in interest
savings,” said Frank Nothaft, Freddie Mac vice president and
chief economist.

The median interest-rate reduction was about 1.2 percentage
points for a 30-year fixed-rate mortgage. Over the first year of
the refinance loan life, these borrowers will save about $2,500
in interest payments on a $200,000 loan, Nothaft said. Those who
refinanced in the third quarter lost less on their home value in
the past five years than the average US home. Refinancers saw
median home values dip about 7%, while the national average
declined about 25% since September 2006, according to the Freddie
Mac Home Price Index. Estimates come from a sample of properties
on which Freddie Mac has funded two successive conventional,
first-mortgage loans, and the latest loan is for a refinance. The
analysis does not track the use of funds made available from the
refinances.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin November 11, 2011

Short sales and foreclosures rolling again

The big banks are back in the foreclosure business. After a year
of fewer foreclosures, as bankers reeled from revelations that
they were falsifying documents in foreclosure cases, the latest
monthly numbers suggest banks are starting to repossess houses
again. In October, foreclosure actions rose 44 percent from the
month before in Charlotte County, 20 percent in Sarasota County,
37 percent for Florida and 7 percent for the country as a whole,
according to data from RealtyTrac, an Irvine, Calif., market
research firm. Only Manatee County bucked the state and national
trend. Its foreclosure actions fell 25 percent from September.
The overall rise in foreclosures was welcomed by real estate
agents who have been frustrated by what they view as artificial
supply shortages in the face of strong investor demand. But if
foreclosure filings keep increasing in the coming months – as
expected -it could drive home prices down again and may make it
even more difficult for non-distressed owners to sell. What
could make the situation worse before it gets better, experts
say, is an increasing number of underwater homeowners don’t see
the point of struggling any longer. “People are worn out and the
stigma tied to foreclosure is gone,” Shari Olefson, an attorney
with Fowler White and author of “Foreclosure Nation: Mortgaging
the American Dream.” “At cocktails they are no longer embarrassed
if they have stopped paying, they are embarrassed if they are
still paying. And they are being empowered by the Occupy Wall
Street movement.”

Court records show that the 10 largest lenders in Sarasota and
Manatee counties filed 591 early-stage, or lis pendens, actions
in October — a 32 percent increase from the 447 filed in
September. Bank of America — the owner of Countrywide — led
the way with 170 early-stage filings, compared with 118 the month
before. At the same time, short sales — in which banks permit
owners to sell properties for less than they owe on their
mortgages — also are on the upswing, according to Adam
Robinson, a Sarasota real estate agent who runs
Sarasota-Foreclosures.com. “Short sales in Sarasota County are
up 62 percent from October 2010 — from 108 to 174,” Robinson
wrote in an email message. “Charlotte County Short sales
increased 66 percent from 37 to 61, and even Manatee saw a 21
percent increase from 87 to 105.” Across the country, 230,678
foreclosure actions were filed in October, a 7 percent increase
from the previous month, but still down nearly 31 percent from
October 2011. Nevada, California, Arizona and Florida posted the
top state foreclosure rates. One in every 180 Nevada housing
units had a foreclosure filing during October — more than three
times the national average. California came in second with one
out of every 243 housing units. Arizona was third with one out
every 259 and Florida was fourth with one out of every 268.

Fear factor is the biggest threat

The two main threats to the US economy are government
over-regulation and plain fear that has not dissipated since the
financial crisis, former General Electric chairman and author
Jack Welch said. Welch said in a CNBC interview that the low
demand is rooted in two areas: Regulation gone wild during the
Obama administration, and worries “in the gut” that the economy
would turn back into recession or even depression. “We all lived
through three years ago, all those 401(k) collapses, all those
things. That fear is in the gut,” he said. “Then you compound
that with the uncertainty from this administration and this
incredible run on regulation, which is beyond belief…We have a
regulation runaway (like) we’ve never seen.” There are 382,000
regulators “coming to work every day” for the federal government,
which is a 20,000 increase over the past two years, according to
Welch. “That’s a high-growth business,” he said. “The big issue
in my opinion right now is the fear factor from 2008 to 2009.”

Companies also aren’t hiring because they’ve learned to do more
with less during the economic pullback, and Welch worries that
the jobs lost since the financial system imploded aren’t coming
back. He is also concerned about the country’s refusal to pursue
policies that will foster energy independence, specifically
citing natural gas drilling as an important move toward that
goal. “We can handle the environmental issues. We can do it
right,” he said. Of environmental opposition to drilling, he
said, “This is pure politics.”

Olick – shame on the GOP candidates

“Shame on the Republican candidates for president. Shame on them
for showing up at debate specifically targeting the US economy
with not one credible, rational, even reputable notion of what to
do about the nation’s housing mess. It baffles the mind that this
sector of the economy, responsible for about 18 percent of the
nation’s gross domestic product, is in freefall, and yet eight
potential new leaders of this nation not only don’t understand
the problem but don’t have a clue what to do about it. My
favorite, and I write this with as much sarcasm as a computer
keyboard will afford, is the argument that the Dodd-Frank
financial reform bill is to blame for housing’s current despair.
Foreclosures, falling home prices, negative equity, nil consumer
confidence, record low home building…yep, gotta be Dodd-Frank.
‘If the Republican House next week would repeal Dodd-Frank and
allow us to put pressure on the Senate to repeal Dodd-Frank, you
would see the housing market start to improve overnight,’ Speaker
Newt Gingrich told the crowd in Michigan last night. His
reasoning is that, ‘It kills small banks, it kills small
business.’

Increased regulation has certainly made the life of a banker
today tougher, but the fact that there was zero regulation ten
years ago allowed and encouraged reckless behavior on Wall
Street. It created the supremely negligent subprime mortgage
trading bonanza that brought down big banks, little banks and
homeowners alike…and threatened to take down the entire US
economy. Were we to do nothing to change that? And Mr.
Gingrich, if I may, how would repealing Dodd-Frank suddenly help
the 4 million borrowers behind on their mortgages today and the
2.2 million in the foreclosure process today keep their homes?
How would it put a bottom on home prices? Do you honestly believe
that it would suddenly open the mortgage markets wide, allow
banks to somehow fix all the troubled loans on their books and
fuel a gigantic lending spree that would ignite home buying and
selling again like the good old days? Is that even what we want?
Let me just finish with Mr. Gingrich’s last note, ‘The banks are
actually profiting more by foreclosing than encouraging short
sales.’ That’s just flat out wrong.

To begin with what bank has ever profited from a foreclosure OR a
short sale? Industry sources tell me that a short sale nets the
bank on average 20 percent more than a foreclosure. Short sales
speed up the time frame for disposal of the property as well, as
foreclosures can take years to process. During that time,
foreclosed borrowers can destroy the property, flushing cement
down the toilet and stealing everything in the home that is and
isn’t nailed down. In a short sale, the homeowner lives in the
home until the deal is done, and because they are not getting a
huge hit to their credit and being kicked out by a sheriff’s
deputy, they generally don’t destroy the house. In a short sale,
the bank knows exactly what it’s getting, unlike in a foreclosure
when the bank has to take back the house in some unknown
condition, market it and re-sell it at an unknown distressed
price. ‘Nuff said.

My second favorite argument is that it’s all Fannie and Freddie’s
fault, and if we take them down, housing comes back in a flash.
‘For these geniuses to give 10 of their top executives bonuses at
$12 million and then have the guts to come to the American people
and say, ‘Give us another $13 billion to bail us out just for the
quarter,’ that’s lunacy,’ Rep. Michelle Bachmann argued on CNBC
last night. ‘We need to put them back into bankruptcy and get
them out of business. They’re destroying the housing market.’ No
question, Fannie Mae and Freddie Mac are bleeding money, costing
the taxpayers billions already and potentially billions more in
the near future. Something needs to be done to change that, but
‘bankrupting’ Fannie and Freddie would take down the US economy
as we know it, and it boggles the mind that a person running for
president wouldn’t understand that. She in fact noted that Fannie
and Freddie support the bulk of the mortgage market. That’s true.
Without them there would be no lending. Does she think the
private market would just come running back in and give the
nation’s beleaguered borrowers 3.99 percent 30-year fixed across
the board? Only Herman Cain seemed to get that. He argued that
we need to fix unemployment first with his various proposals.
‘Okay. After I did those three things that I outlined, then deal
with Fannie Mae and Freddie Mac. You don’t start solving a
problem right in the middle of it. So we’ve got to do that
first,’ he reasoned.

Fixing unemployment was the only housing plan the candidates
could offer. When CNBC’s Maria Bartiromo asked Governor Mitt
Romney, ‘Not one of your 59 points in your economic plan mentions
or addresses housing. Can you tell us why?’ He responded, ‘Yes,
because it’s not a housing plan. It’s a jobs plan.’ I don’t love
that answer, but at least I can respect it. ‘Our friends in
Washington today, they say, ‘Oh, if we’ve got a problem in
housing, let’s let government play a bigger role.’ That’s the
wrong way to go. Let markets work. Help people get back to work.
Let them buy homes. You’ll see home prices come back up if we
allow this market to work,’ argued Romney. There are plenty of
analysts who agree that the market needs to work itself out, as
painful as that may be to average Americans, many of whom are in
line to lose their homes. Until the foreclosure mess runs its
course, and all those homes are filled with borrowers who can
afford them, home prices will not recover, plain and simple, goes
the argument. I’m not saying here that the Obama Administration
has done anything particular stellar to stimulate a housing
recovery. A small refinance program for underwater borrowers
isn’t the cure-all, and forcing banks to write down mortgage
principal is not politically nor technically feasible. But
without some plan, this crisis could go on for a decade, like it
did in Japan, as President Clinton noted recently in an
interview. I’m not saying I have the answer, the great plan to
fix our nation’s housing crisis. But I’m not running for
president.”

US becoming more competitive

Slowing wage growth in the United States, coupled with rising
wages in China and other emerging markets, could soon make the US
more competitive. While wage levels in China are still far below
the average wage in the US, better technology, transportation and
services in the US could help make the difference for companies,
according to Bart van Ark, Chief Economist at The Conference
Board. “There are other factors at play here, from access to
services, high technology and innovation, to transportation,” he
said today. As wages increase in the major cities in China,
companies are having to move lower-paid jobs further inside the
country, where infrastructure has not yet caught up, to get the
same benefits.

The weaker US dollar has also helped the US regain
competitiveness and increased “on-shoring”, Virginie Maisonneuve,
Head of Global and International Equities, Schroders, said today.
“During the crisis period, the US has regained tremendous
competitiveness, mostly in terms of currency but also in terms of
adjustment on wages,” she said. “It has been a painful process
for the US.” She pointed to the example of General Motors
letting go workers who cost around $70 an hour, when wages were
added to benefits such as health insurance and pensions, at the
start of the crisis. Recently, Volkswagen opened a plant in
Tennessee which costs them about $27 an hour in wages and
benefits. This came after basic starting wages for union members
in the auto sector were lowered to around $15 per hour as part of
the 2007 National Agreement. In the second quarter, US unit
labor costs grew by 2.2 percent, slower than the 4.8 percent
recorded in January-March.

The unemployment rate in the US is gradually falling, and was
narrowly lower at 9.0 percent in October – although economists
believe that it will stay around this level for months to come.
“We have seen some major adjustments in wages,” Van Ark said.
“We see evidence that companies are pulling back business into
the US. The question is how will this affect growth?” He pointed
out that the export sector in the US. is much smaller than in
Europe. “Clearly China is still very competitive, but if you
look at other costs, as wages lower in the US. they’re nearly on
a par,” Maisonneuve said. She warned that there was a danger of
“social fragmentation” in the US as unemployment is
disproportionately affecting young, uneducated workers.

WSJ – FHA running out of money?

Concerns are rising that the Federal Housing Administration (FHA)
could run out money if the economy doesn’t recover soon, raising
the risk the agency would seek a taxpayer bailout for the first
time in its 77-year history. Since the mortgage crisis erupted
five years ago, the FHA has played a critical role in housing
finance as private lenders retreated. It backs about a third of
all new mortgages originated for home purchases, up from around
5% in 2006. But, as the FHA prepares to release its annual
financial report next week, a forthcoming study by Joseph
Gyourko, a real estate and finance professor at the University of
Pennsylvania’s Wharton School, estimates that the FHA faces
around $50 billion in losses in the coming years. The study says
only a “quick and substantial economic and housing market
recovery” can avoid “substantial losses for American taxpayers.”
The paper was commissioned by the American Enterprise Institute,
a conservative think tank. The study says the losses will be
spread over a period of many years and are unlikely to bankrupt
the agency this year or next.

The study isn’t the first to predict the FHA’s insolvency. Last
year, economists from New York University and the New York
Federal Reserve issued a paper warning of the growing likelihood
the agency would need to a taxpayer bailout. FHA officials
disputed some of that report’s findings. Last month, Paul
Miller, an analyst with FBR Capital Markets, warned that the
largest US. banks could face billions in losses if the FHA tries
to push back defaulted mortgages onto the lenders that originated
them. “Unless home prices rebound, I don’t understand how they’re
able to avoid a restructuring and a Treasury infusion,” he said.
FHA officials said they couldn’t comment on Mr. Gyourko’s paper
because they hadn’t reviewed it. The FHA’s independent audit is
likely to show that while losses are rising, it will maintain
positive reserves assuming the economy doesn’t dip back into
recession, say people familiar with the matter. Still, the
Gyourko study along with the FHA’s own annual report could have
political ramifications. Some Republicans have pushed for the FHA
to begin raising its down payments. Higher forecasted losses
could also force the agency to raise its insurance premiums paid
by homeowners even higher.

The FHA, which is funded through the mortgage-insurance premiums
it collects, doesn’t make loans but instead insures lenders
against defaults. At the end of August, it guaranteed 7.2 million
mortgages worth $1 trillion, a record sum. It held nearly $31.7
billion in reserve at the end of June, of which all but $2.8
billion was set aside to cover anticipated losses. The bulk of
the FHA’s anticipated losses stem from loans made in 2007 and
2008, when the financial crisis was at its peak. More recent
loans have among the best credit characteristics the agency has
guaranteed. Still, the majority of homeowners taking out
FHA-backed mortgages have very little equity—the minimum down
payment is 3.5%. Because home prices have fallen sharply and
continue to decline in many markets, many borrowers are
underwater and at risk of default if they lose their jobs or
experience other financial shocks. Losses also can occur when
borrowers simply walk away from their homes. “I don’t think many
of the borrowers truly understand what a risky position they’re
putting themselves in,” said Mr. Gyourko. He estimated that more
than half of all homes with FHA loans are worth less than the
outstanding debt.

Mr. Gyourko says the agency is underestimating by billions of
dollars the future losses related to borrowers who used an $8,000
federal tax credit to fund their down payment. The paper also
says the FHA is underestimating default risk related to
unemployment. The study could also reignite debate over the
government’s role in stabilizing the housing market. Congress is
now considering a proposal to restore higher FHA loan limits.
“Without the FHA, the housing market would not be in a recession,
it would be in a depression,” said Kenneth Rosen, chairman of the
Fisher Center for Real Estate Research at the University of
California at Berkeley. The most certain way to increase losses
for Fannie, Freddie and the FHA would be “by making loans harder
to get.” Mr. Gyourko says he isn’t advocating an “immediate
withdrawal” by the FHA, which he said could create a “real risk”
of future price declines. But he said a gradual withdrawal is
warranted and that policy makers “should all be clear about
whether we understand the risks we’re taking on, and whether the
benefits justify the risks.”

Obama delays oil pipeline

The Obama administration said yesterday it will delay a decision
on the controversial Keystone oil sands pipeline expansion until
at least 2013. Citing concern over the proposed route through
Nebraska’s Sand Hills region and over the Ogallala Aquifer, the
State Department said it needs more time to study the issues and
look at possible alternative routes. Based on previous pipeline
permitting experience, the State Department said the review
process “could be completed as early as the first quarter of
2013.” In a separate statement, President Obama said he
supported the State Department’s move. The news set off a
firestorm of comments from the pipeline’s supporters. While the
decision has been put off until after the presidential election,
it will no doubt be seized upon by the president’s supporters and
opponents during the election season. House Speaker John Boehner
criticized the delay. “More than 20,000 new American jobs have
just been sacrificed in the name of political expediency. By
punting on this project, the president has made clear that
campaign politics are driving US. policy decisions — at the
expense of American jobs.” The intensity of the protests turned
up the heat on the Obama administration, and put it in the
uncomfortable position of having to choose between two important
constituencies. “This is a surprise to us and counter to our
existing call that the approval was still likely and only the
timing was in question,” said Kevin Book, managing director of
research at ClearView Energy Partners. “This does indeed suggest
a political, not practical, choice to ‘kick the can’ into 2013.”
Pipeline supporters, including many in the business community,
the construction trades, and nearly everyone in the oil industry,
say the United States could use the 700,000 barrels a day the
pipeline would carry.

Manhattan condo market dives

Market pandemonium and concerns about the economy alarmed
potential Manhattan condominium buyers in August, causing both
condo prices and sales in the area to drop briskly throughout the
month. Real estate data provider Radar Logic RPX Manhattan
Neighborhoods report released Thursday shows condo prices falling
5.3% from July to August, more than offsetting the gains achieved
over the preceding year. On a year-to-year basis, the condominium
prices have fallen nearly 1%. Sales of condos in Manhattan fell
a dramatic 14.6%. “A rapid decline in sales and transactions is
not unusual in the second half of the year but the declines this
August were unusually severe,” Radar Logic reported. The monthly
decline in Manhattan condo prices in August was the largest
decline for that month since the beginning of Radar Logic’s
data in 2000.

And the monthly decline in the number of sales was the largest
for the month of August since 2007, and in terms of% terms was
the largest on record. ‘Turbulence in the stock market and the
prospect of another recession likely caused many would-be condo
buyers to delay their purchases, contributing to the rapid
August-over-July decline in condominium closings,” the RPX report
states. “Stock prices fell off a cliff in the beginning of
August, as investors expressed serious concerns over the US.
economy and the European debt crises,” the report adds. “The Dow
Jones Industrial Average fell nearly 11% between July 29 and Aug.
19.” Condo prices declined on a month-to-month basis in five of
the eight Manhattan neighborhood tracked by Radar Logic, with the
largest decline in the East Village/Lower East Side (-32.4%),
followed by the Upper East Side (-19.7%), Soho/Tribeca (-6.6%),
the Financial District (-2.9%) and the Upper West Side (-0.2%).
Condo sales suffered on a month-to-month basis in six
neighborhoods in August, with the largest declines on both an
absolute and% basis occurring in the Upper East Side (-35.4%) and
Chelsea/West Village (-25.5%).

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin November 16, 2011

FHA loan limits raised

Members of U.S. Congress have reached an agreement on a measure
that would increase the maximum size of mortgage loans that can
be insured by the Federal Housing Administration (FHA). The
measure would only impact FHA’s loan limits, restoring the cap
for mortgages the government insures to as high as $729,750 in
high-cost real estate markets through 2013. The FHA’s loan limits
dropped at the end of September for mortgages insured by the FHA,
as well as the government-sponsored enterprises (GSEs), Fannie
Mae and Freddie Mac. The higher loan limit was temporarily raised
for Fannie, Freddie and the FHA during the financial crisis and
it automatically dropped back to $625,500 on Oct. 1.

The measure is part of the Fiscal Year 2012 Agriculture,
Commerce/Justice/Science (CJS), and Transportation/Housing and
Urban Development (THUD) Appropriations Bill, also known as the
“Mini-bus” (House Report 112-284). “Legislation pending in
the House and Senate will restore the higher mortgage loan limits
for the Federal Housing Administration and is essential to help
stabilize the nations housing financial markets,” said Bob
Nielsen, chairman of the National Association of Home Builders
(NAHB). “The FHA program is fully self-supporting, and a great
example of a public-private partnership with lending
institutions. Restoring the loan limits will provide millions of
potential consumers in markets throughout the nation access to
safe, affordable mortgage financing.”

Scrap nation
Scrap materials are now the nation’s largest export category by
volume, and continue to set yearly records, with nearly $30
billion in recycled commodities — notably metals and paper
fiber — moving overseas, up from $22 billion in 2009. “Scrap
exports play a vital role for the recycling industry
specifically, and also generally for the U.S. economy,” says
Bob Garino, vice president at Export Tax Advisors, a firm that
helps U.S. firms export scrap. The export boom is part of a
broader growth spurt. Industry revenue rose to $77 billion in
2010, up 43 percent from $54 billion in 2009. Canaccord
Genuity’s cleantech analyst Eric Prouty says several critical
global trends —economic growth overseas, high commodities
demand, higher energy costs and better recovery technologies —
are “creating what we call a ‘perfect storm’ scenario for
the recycling industry.” The top three markets are big
developing markets China and South Korea as well as Canada, the
U.S.’ principal trading partner. Together, these three
countries consumer nearly half of exported U.S. scrap. With a
growing recycling infrastructure diverting more U.S. waste from
landfills, as well as systems R&D investments from integrated
waste handling firms like Waste Management, the U.S. is now
recognized as the world leader in scrap. It’s not just the
amount of waste being generated in the world’s largest economy,
he says; it’s that the best technology is used to recover
various waste streams, making the U.S. scrap more “pure” than
other countries. “For scrap, the favored supply market for all
buyers is the U.S. since it can supply the quantity and quality
needed.”

MBA – mortgage applications down

Mortgage applications decreased 10.0 percent from one week
earlier, according to data from the Mortgage Bankers
Association’s (MBA) Weekly Mortgage Applications Survey for the
week ending November 11, 2011. This week’s results include an
adjustment to account for the Veterans Day holiday. The Market
Composite Index, a measure of mortgage loan application volume,
decreased 10.0 percent on a seasonally adjusted basis from one
week earlier. On an unadjusted basis, the Index decreased 19.6
percent compared with the previous week. The Refinance Index
decreased 12.2 percent from the previous week. The seasonally
adjusted Purchase Index decreased 2.3 percent from one week
earlier. The unadjusted Purchase Index decreased 14.8 percent
compared with the previous week and was 9.5 percent lower than
the same week one year ago. The four week moving average for the
seasonally adjusted Market Index is up 1.02 percent. The four
week moving average is up 2.53 percent for the seasonally
adjusted Purchase Index, while this average is up 0.61 percent
for the Refinance Index. The refinance share of mortgage
activity decreased to 77.3 percent of total applications from
78.6 percent the previous week. The adjustable-rate mortgage
(ARM) share of activity increased to 6.1 percent from 5.8 percent
of total applications from the previous week. In October 2011,
among refinance borrowers, 50.6 percent of applications were for
fixed-rate 30-year loans, 28.8 percent for 15-year fixed loans,
and 6.0 percent for ARMs. The 15-year refinance share is at its
second highest point since the survey was re-benchmarked in
January 2011. For applications for home purchase, 85.5 percent
were for fixed-rate 30-year loans, 6.9 percent for 15-year fixed
loans, and 5.9 percent for ARMs. This is the lowest ARM share for
purchases since January 2011.

Oil hits $100
Oil prices climbed to near $100 per barrel Tuesday following a
series of positive reports about the U.S. economy. In midday
trading benchmark crude rose 36 cents to $98.50 per barrel in New
York. Crude jumped as high as $99.34 at one point. Brent crude,
which is used to price many foreign oil varieties, rose 45 cents
to $112.34 per barrel in London. Prices jumped after the U.S.
said that consumer spending rose in October for the fifth
straight month. Spending increased for electronics, appliances,
hardware and building supplies. Sales also rose at grocery
stores, bars and restaurants and health care stores. Inflation
eased last month, as companies paid less for gas, new cars and
other goods. The European Union also said that the 17-nation
bloc avoided contracting in the third quarter. The eurozone
economy grew by 0.2 percent in the July-September period.
However, it’s still expected to fall into recession as countries
like Italy and Greece cut spending to reduce debt. Meanwhile,
retail gasoline prices in the U.S. slipped less than a penny to a
national average of $3.41 per gallon, according to AAA, Wright
Express and Oil Price Information Service. Gasoline prices are
about 52 cents higher than the same time last year.
NY Fed raises mortgage margin requirements

The New York Fed said it will be increasing the collateral
requirements on 21 primary-dealer banks in transactions dealing
with mortgage-backed securities, in an effort to lower the
settlement risks with its counterparties. The NY Fed’s move
follows the bankruptcy of MF Global Holdings, after the
broker-dealer’s bets on European sovereign debt unnerved
investors, credit agencies, customers and counterparties, causing
liquidity to disappear. “The Federal Reserve Bank of New York
informed its primary dealers today that it will require dealers
to margin against their outstanding agency MBS forward
transactions with the NY Fed. Dealers are required to post
collateral in a number of other types of operations with the NY
Fed,” a New York Fed spokesman told Reuters. The spokesman gave
no further information but the Wall Street Journal said the
changes would begin on Monday. Separately, the Journal said the
Federal Reserve may impose a 2.5 percent initial margin on the
dollar amount of the mortgage-backed securities transactions from
the dealers. A dealer may need to put up $25 million in cash
collateral for an MBS transaction of $1 billion, according to the
paper.

Rare earth prices falling
After nearly three years of soaring prices for rare earth metals,
with the cost per ton of some of these elements rising nearly
thirtyfold, the market is rapidly coming back down.
International prices for some light rare earths, like cerium and
lanthanum, used in industries like the polishing of flat-screen
televisions and oil refining, respectively, have fallen by
two-thirds since August and are still dropping. Prices have
declined almost as quickly for highly magnetic rare earths, like
neodymium, needed for products like smartphones, computers and
large wind turbines. Big companies in the United States, Europe
and Japan have been moving operations to China, drawing down
inventories, switching to alternative materials or even
curtailing production to avoid paying extremely high prices that
prevailed outside China over the summer, executives said at an
annual conference in Hong Kong on Wednesday. As demand for rare
earths has wilted outside China, speculators have been dumping
inventories, feeding the downward plunge. Cerium peaked at $170
per kilogram, or $77 a pound, in August but now sells for $45 to
$60 per kilogram. That is still far above its price of $6 a
pound three years ago, before China, the world’s dominant
producer, began sharply reducing exports by cutting its export
quotas.

Many Chinese companies have halted production this autumn in a
bid to stem the decline in prices this autumn, several executives
said. The Chinese Commerce Ministry has also blocked companies
from exporting at prices that it deems too low, setting a minimum
price for cerium exports, for example, of $70 per kilogram.
Chinese exporters are on track to use only 20,000 to 25,000 tons
of their quotas this year, setting the stage for lower quotas
next year. By comparison, industry estimates now put annual
demand outside China at a little under 40,000 tons, and not just
because of factories moving to China but also because of
conservation efforts regarding rare earths. Automakers are
finding ways to use less neodymium in the magnets of many cars’
small electric motors, oil companies are finding ways to use less
lanthanum in refining and industries like electronics and wind
turbine manufacturing are finding ways to use less dysprosium,
another rare earth.

WSJ – FHA running out of cash

The Federal Housing Administration’s (FHA) cash reserves have
fallen so low that there is a “close to 50%” chance the agency
could run out of money and require a taxpayer bailout in the next
year, according to the annual independent audit of the FHA’s
finances. The audit, to be released today by the FHA, estimated
that the value of the agency’s reserves stood at $2.6 billion as
of Sept. 30, down 45% from an already low $4.7 billion last year.
The drop reflects the impact of rising home-loan defaults amid
falling home prices, which together generate greater losses on
the sale of foreclosed homes. The Federal Housing
Administration’s cash reserves have fallen so low that there is a
“close to 50%” chance the agency could run out of money and
require a taxpayer bailout in the next year, according to the
annual independent audit of the FHA’s finances. The audit
estimated that the value of the agency’s reserves stood at $2.6
billion as of Sept. 30, down 45% from an already low $4.7 billion
last year. The drop reflects the impact of rising home-loan
defaults amid falling home prices, which together generate
greater losses on the sale of foreclosed homes.

The FHA’s perilous state underscores one of the hidden costs of
the U.S. government’s efforts to rescue the housing market. In
the past four years, as private lenders have pulled back from the
mortgage market, the FHA’s market share has swollen. It backed
one third of mortgages used to finance home purchases last year,
up from around 5% in 2006. The FHA doesn’t make loans but insures
lenders against defaults on mortgages that meet its standards.
The report comes even as Congress considers returning the maximum
FHA loan limits to higher levels. The limits fell modestly in
about 600 counties on Oct 1.

DSNews.com – Fannie and Freddie release HARP guidelines

Fannie Mae and Freddie Mac have released highly anticipated
guidelines for the revised Home Affordable Refinance Program
(HARP). Both GSEs have posted details of the program
modifications and procedural changes on their respective business
sites for mortgage servicers to follow. Among the key program
revisions, the GSEs have eliminated or raised the loan-to-value
(LTV) cap, and relaxed representation and warranty stipulations
– changes that officials expect to at least double the number
of homeowners with a HARP-refinanced mortgage. Since the program
was launched in 2009, just under 900,000 borrowers have
participated. Negative equity typically excludes a homeowner
from refinancing through traditional channels. Removing previous
LTV ceilings will allow homeowners who are severely underwater
due to plummeting property values to take out new loans at
today’s lower interest rates. There are, however, some LTV
conditions depending on loan type. There are no LTV restrictions
for fixed-rate mortgages with terms up to 30 years, including
those with terms of 15 years. For fixed-rate loans with terms
between 30 and 40 years, LTV is limited to 105 percent. Likewise,
a 105 percent LTV cap has been placed on adjustable-rate
mortgages (ARMs) with initial fixed periods of five years or more
and terms up to 40 years. Any borrower with an LTV ratio below
80 percent is not eligible for HARP.

In today’s guidance, the GSEs provided specifics on which
liabilities would be lifted and noted that the rep and warranty
adjustment is one of the most important components of the new
program. The lender will not be responsible for any of the
representations and warranties associated with the original loan.
The lender is also relieved of the standard underwriting
representations and warranties with respect to the new mortgage
loan as long as the data in the case file is complete and program
instructions are followed for collecting information on income,
employment, assets, and fieldwork. The lender is not required to
make any representation or warranty as to value, marketability,
or condition of the subject property unless they obtain a new
appraisal. Lenders will, however, be held accountable for any
fraudulent activities. The GSEs are modifying their policies to
allow lenders to solicit borrowers with Fannie- and Freddie-owned
mortgages for a refinance. The only condition is that the lender
“simultaneously applies the same advertising and solicitation
activities” to borrowers of both GSEs, and for loans both owned
or securitized by the GSEs. In the new guidelines, the GSEs
detail specific language that must be included in any borrower
solicitation material.

Regarding program eligibility as it relates to delinquencies, the
borrower must not have been behind on their payments at all
within the most recent six-month period, and had no more than one
30-day delinquency within the last year. The GSEs are also
removing the requirement that the borrower (on the new loan) meet
the standard waiting period following a bankruptcy or
foreclosure. The requirement that the original loan must have met
the bankruptcy and foreclosure policies in effect at the time the
loan was originated is also being removed. The new HARP program
has been extended through December 31, 2013.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin November 18, 2011

MBA – delinquencies down, foreclosures up

The seasonally adjusted delinquency rate for mortgage loans on
one-to-four-unit residential properties fell to 7.99% in the
third quarter of 2011, according to data from the Mortgage
Bankers Association’s (MBA) National Delinquency Survey. This
is the lowest level recorded since the fourth quarter of 2008.
The third quarter seasonally adjusted rate of 7.99% is a decrease
of 45 basis points from the second quarter of 2011, and a
decrease of 114 basis points from one year ago. The
non-seasonally adjusted delinquency rate increased nine basis
points to 8.20% this quarter from 8.11% last quarter. The
percentage of loans on which foreclosure actions were started
during the third quarter was 1.08%, up 12 basis points from last
quarter and down 26 basis points from one year ago. The
percentage of loans in the foreclosure process at the end of the
third quarter was 4.43%, unchanged from the second quarter and
four basis points higher than one year ago. The serious
delinquency rate, the percentage of loans that are 90 days or
more past due or in the process of foreclosure, was 7.89%, an
increase of four basis points from last quarter, and a decrease
of 81 basis points from the third quarter of last year. The
delinquency rate includes loans that are at least one payment
past due but does not include loans in the process of
foreclosure. The combined percentage of loans at least one
payment past due or in foreclosure was 12.63% on a non-seasonally
adjusted basis, a nine basis point increase from last quarter,
but was 115 basis points lower than a year ago.

On a seasonally adjusted basis, the overall delinquency rate
decreased for all loan types. The seasonally adjusted delinquency
rate decreased 42 basis points to 4.32% for prime fixed loans and
decreased 103 basis points to 10.73% for prime ARM loans. For
subprime loans, the delinquency rate decreased 138 basis points
to 21.24% for subprime fixed loans and decreased 211 basis points
to 25.07% for subprime ARM loans. FHA and VA loans also saw
declines, with the delinquency rate decreasing 53 basis points to
12.09% for FHA loans and decreasing 47 basis points to 6.58% for
VA loans. The% of loans in foreclosure, also known as the
foreclosure inventory rate, remained unchanged from last quarter
at 4.43%. The foreclosure inventory rate for prime fixed loans
remained unchanged at 2.56%. The rate for prime ARM loans
decreased 11 basis points from last quarter to 9.05%. The rate
for subprime ARM loans increased 50 basis points to 22.73% and
the rate for FHA loans increased three basis points to 3.27%. The
rate for VA loans decreased five basis points to 2.25%. Subprime
fixed loans saw a decrease of 19 basis points to 10.82%. The
non-seasonally adjusted foreclosure starts rate increased seven
basis points for prime fixed loans to 0.69%, 34 basis points for
prime ARM loans to 2.16%, six basis points for subprime fixed to
2.50% and 103 basis points for subprime ARMs to 4.65%. The
foreclosure starts rate increased five basis points for FHA loans
to 0.78% and one basis point for VA loans to 0.56%.

Given the challenges in interpreting the true seasonal effects in
these data when comparing quarter to quarter changes, it is
important to highlight the year over year changes of the
non-seasonally adjusted results. Compared with the third quarter
of 2010, the foreclosure inventory rate decreased 100 basis
points for prime ARM loans, while the foreclosure inventory rate
increased 11 basis points for prime fixed loans, 194 basis points
for subprime fixed, 95 basis points for subprime ARM loans, five
basis points for FHA loans and 11 basis points for VA loans.
Over the past year, the non-seasonally adjusted foreclosure
starts rate decreased 24 basis points for prime fixed loans, 20
basis points for prime ARM loans, 28 basis points for subprime
fixed, 46 basis points for FHA loans and 30 basis points for VA
loans. The foreclosure starts rate increased 56 basis points for
subprime ARM loans.

What’s up at MF Global?
Nearly three weeks after $600 million in customer money went
missing from MF Global, the search for the cash has been hampered
by the bankrupt brokerage firm’s sloppy record-keeping, an
increasingly worrisome situation that has left regulators
frustrated and customers in the lurch. The round-the-clock
effort has consumed an alphabet soup of federal regulators and
criminal investigators, with lawyers sleeping at open desks and
each agency commandeering a different conference room at the
firm’s offices. But as authorities comb through some 38,000
customer accounts, they are growing more suspicious about what
went wrong at MF Global, the commodities powerhouse once run by
Jon S. Corzine, the former Democratic governor of New Jersey.
“The lost money is sort of like a lost child,” said Bart
Chilton, a Democratic member of the Commodity Futures Trading
Commission. “Every day that passes is more and more concerning,
and there’s less and less hope.”

The futures commission is heading the search in the futures
business for the missing $600 million, armed with at least 15
accounting and enforcement staff members on site in New York. The
Securities and Exchange Commission is focusing on a separate MF
Global unit, as workers report back to bosses in Washington in
twice-daily conference calls. Federal prosecutors in New York and
Chicago have issued subpoenas, according to one person with
knowledge of the matter who spoke on the condition of anonymity.
As part of the effort, the Federal Bureau of Investigation has
taken the lead in the interviews of former employees who can
explain MF Global’s inner workings. The federal authorities
have also taken control of an off-site emergency recovery system,
where e-mail and phone records from MF Global were stored, said
two people who also spoke on condition of anonymity. Authorities
are particularly focused on the final days of MF Global. In the
run-up to the bankruptcy filing, clients withdrew their assets,
trading partners closed out trades and others demanded more
collateral.

Many customers are still in the dark about their money. Since the
firm’s collapse, customers like farmers and small-business
owners are struggling to meet their financial obligations.
“The inability of MF Global customers as a whole to access
their funds has affected trading in futures markets, and has
shaken public confidence in our customer protection regime,”
Scott D. O’Malia, a Republican member of the futures
commission, said in a statement on Wednesday. “To assure the
public that MF Global is an isolated incident, the commission
should immediately take action.” He said the agency should
enact new transparency measures and keep a closer eye on futures
firms. At the bankruptcy hearing on Wednesday at a federal court
in Lower Manhattan, there were more questions than answers. Judge
Martin Glenn asked a lawyer for the trustee if he knew whether
customer money had been mingled with company cash, a major
violation of Wall Street rules and a potential explanation for
the shortfall. The trustee’s lawyer, James Kobak of Hughes
Hubbard & Reed, replied: “I don’t think anybody knows the
answer.”

LPS – “first look” mortgage report
Lender Processing Services, Inc. (LPS) reports the following
“first look” at October 2011 month-end mortgage performance
statistics derived from its loan-level database of nearly 40
million mortgage loans.
- Total US loan delinquency rate (loans 30 or more days past
due, but not in foreclosure): 7.93%
- Month-over-month change in delinquency rate: -2.0%
- Year-over-year change in delinquency rate: -14.6%
- Total U.S foreclosure pre-sale inventory rate: 4.29%
- Month-over-month change in foreclosure presale inventory rate:
2.5%
- Year-over-year change in foreclosure presale inventory rate:
9.4%
- Number of properties that are 30 or more days past due, but
not in foreclosure: (A) 4,088,000
- Number of properties that are 90 or more days delinquent, but
not in foreclosure: 1,759,000
- Number of properties in foreclosure pre-sale inventory: (B)
2,210,000
- Number of properties that are 30 or more days delinquent or in
foreclosure: (A+B) 6,298,000
- States with highest percentage of non-current* loans: FL, MS,
NV, NJ, IL
- States with the lowest percentage of non-current* loans: MT,
WY, SD, AK, ND

S&P to revise ratings
Standard & Poor’s (S&P) plans to update its credit ratings for
the world’s 30 biggest banks within three weeks and may well mete
out a few downgrades in the process, possibly surprising battered
global bond markets. Among the institutions that could be
downgraded are Bank of America, Citigroup and Morgan Stanley,
said Baylor Lancaster, an analyst at CreditSights. Spokesmen for
the three banks declined to comment. The updates are part of a
broad push by S&P to improve its products and repair its
reputation as its parent, McGraw-Hill, divides itself into two
publicly traded companies. S&P has taken pains to prepare the
markets for the changes, but when it actually releases results
for individual banks some downgrades could surprise, analysts
say.

Congress passes law to increase mortgage loan guarantees
US lawmakers moved Thursday to increase the maximum size of loans
that can be guaranteed by the Federal Housing Administration
(FHA). Congress passed a broad spending bill that included a
provision to restore to $729,750 the maximum size of mortgage
that can be backed by the FHA, giving some borrowers the option
of putting less money down to obtain a mortgage in expensive
cities. FHA-backed loans currently account for a third of new
mortgages for home purchases and can be made with down payments
of as little as 3.5%, compared with the 20% industry standard.
The bill goes next to President Barack Obama to be signed into
law.

The loan limits fell to $625,500 on Oct. 1 in expensive markets
like New York, San Francisco and Washington. They declined in
around 250 counties for loans guaranteed by mortgage-finance
companies Fannie Mae and Freddie Mac, and in around 600 counties
for FHA-backed loans. In some cases, the FHA loan limits fell
below those of Fannie Mae and Freddie Mac. The housing lobby
pushed for Congress to reinstate loan limits for Fannie, Freddie
and FHA, citing concerns that any steps to raise borrowing costs
might be too much for fragile housing markets to bear. Limits for
Fannie and Freddie loans were not restored. Sen. Robert Menendez
(D., N.J.) said that restoring the loan limits will benefit the
housing market at a time when it is weak. Doing so, he said,
“won’t cost taxpayers a dime” and will benefit the housing market
in many other parts of the country besides those cities.

Occupy Wall Street falls flat
Hundreds of Occupy Wall Street protesters took to the streets in
rainy New York and elsewhere in the United States for a day of
action seen as a test of the momentum of the two-month-old
grassroots movement against whatever it is they are protesting.
In the biggest New York protest since a police raid broke up the
protesters’ encampment in a park near Wall Street on Tuesday,
organizers and city officials had expected tens of thousands to
turn out. New York City Mayor Michael Bloomberg put the figure
at fewer than 1,000. Police and protesters scuffled and some 177
people were arrested. Protesters banged drums and yelled “We are
the 99%” — referring to their contention that the US political
system benefits only the richest 1%. Police reported seven
officers were injured, including one whose hand was cut by a
flying piece of glass and five who were hit in the face by a
liquid believed to be vinegar.

Olick – lawmakers contradict on speeding up foreclosures

“Wednesday morning House Committee on Oversight and Government
Reform Ranking Member Elijah Cummings (D-MD) issued a press
release detailing a letter he sent to the conservator of Fannie
Mae and Freddie Mac, FHFA Acting Director Ed DeMarco. The letter
requested information on $150 million in penalties that the two
mortgage giants levied on mortgage servicers for ‘failing to
conduct foreclosures fast enough.’ ‘I am concerned that these
penalties, at least some of which were ordered by the Federal
Housing Finance Agency (FHFA), may have contributed to widespread
abuses by mortgage servicing companies and law firms attempting
to meet arbitrary deadlines to expedite foreclosures,’ Cummings
wrote, according to the release. The letter also cites an FHFA
Inspector General report that found, ‘servicers, attorneys, and
other supporting personnel were overloaded with the volume of
foreclosures.’ The letter goes on to allege that, ‘the size and
timing of these penalties raise serious questions about whether
FHFA may be more interested in expediting foreclosures to clear
its books than protecting the rights of homeowners.’

Fast-forward about four hours to a hearing of the very same
committee, and its star witness, FHFA Acting Director Ed DeMarco.
The hearing was billed as a berating over executive bonuses at
Fannie Mae and Freddie Mac, but toward the end of the seemingly
endless questioning, DeMarco bemoaned the fact that foreclosures
are still taking too long. ‘We are foreclosing on properties
that have had no payments for two, three years or more. It’s
damaging the taxpayer because we have to maintain these
properties for so long and it’s damaging to our communities,’ he
told the committee. To wit, Rep. Darrell Issa (R-CA), the
chairman of the committee, who has the power to direct money
between states and the federal government, asked DeMarco for a
list of states that were particularly slow in churning out
foreclosures and thereby affecting Fannie and Freddie’s bottom
lines. ‘We’re open to making the changes necessary to help,’
Issa told DeMarco.

Okay, so he could ostensibly withhold funding from states over
foreclosure delays. I’m guessing that would be in an effort to
push judges to stop delaying foreclosures, because it’s judicial
states where the biggest lag times are. A state can’t force a
loan servicer to do anything. So according to one committee
member, it’s bad to push the servicers to ramp up foreclosures,
but another thinks it’s good to push the judges to rubber stamp
them faster? I realize these are two different lawmakers from two
different sides of the aisle, but seriously folks, are
fines/funding threats really the answer?”

Housing inventory down slightly
The recent uptick in foreclosures is not yet translating to more
houses on the market. The number dropped for 16 straight months.
Six months on market denotes more balance between supply and
demand. The months supply peaked a nearly 11 months in December
2010, by way of comparison. On an annual basis, national sales
prices are down 5.4%, but transactions are up 9%.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

Smart Real Estate News & Commentary by Chris McLaughlin November 29, 2011

Home prices fall

The S&P/Case-Shiller index of property values in 20 cities
dropped 3.6% in September from the same month in 2010 after
decreasing 3.8% in the year ended August, the group said today in
New York. The median forecast of 32 economists in a Bloomberg
News survey projected a 3% decrease. “We continue to expect
home prices to fall through mid- 2012,” said Anika Khan, an
economist at Wells Fargo Securities LLC in Charlotte, North
Carolina. “We still have an oversupply of existing homes, and
distressed transactions continue to drive down home prices.”
Estimates in the Bloomberg survey for the price change ranged
from declines of 2.7% to 3.9%. The Case- Shiller index is based
on a three-month average, which means the September data were
influenced by transactions in July and August. The
year-over-year decline in September was the smallest in seven
months. Home prices adjusted for seasonal variations fell 0.6%
in September from the prior month, the biggest decrease since
March, after falling 0.3% in August. Unadjusted prices also
decreased 0.6% from August as 17 of 20 cities showed declines.

Only Washington, New York and Portland, Oregon, showed gains.
Atlanta, Las Vegas and Phoenix posted new post peak lows in
September, the report showed. The year-over-year gauge provides
better indications of trends in prices, according to the
S&P/Case-Shiller group. The panel includes Karl Case and Robert
Shiller, the economists who created the index. Eighteen of the
20 cities in the index showed a year-over- year decline, led by a
9.8% drop in Atlanta. Detroit showed the biggest year-over-year
increase, with prices rising 3.7% in the 12 months to September.
Property values in Washington were up 1%. Nationally, prices
decreased 3.9% in the third quarter from the same time in 2010.
They increased 0.1% from the previous three months before
seasonal adjustment and dropped 1.2% after taking those changes
into account.

MF Global money pops up in Britain

About $200 million in customer money that vanished from MF Global
is believed to have surfaced at JPMorgan Chase in Britain,
according to people briefed on the matter. The discovery could be
the most significant breakthrough in a month long hunt for the
missing funds. During MF Global’s last chaotic days, the
brokerage firm overdrew an account at JPMorgan, according to
another person who is close to the matter. Some investigators now
believe the firm used customer funds to patch at least some of
the hole, which would have been a significant breach of federal
law. MF Global transferred the roughly $200 million in the days
before the firm filed for bankruptcy, said the people, who
requested anonymity because the investigation was incomplete.
Some investigators suspect that the transfer to JPMorgan was the
first major misuse of customer money at MF Global, the commodity
brokerage powerhouse once run by Jon S. Corzine, the former
Democratic governor of New Jersey. Authorities are also looking
into whether JPMorgan initially questioned the source of the cash
and sought proof from MF Global that it was complying with
regulations, one of the people said. The authorities believe MF
Global failed to give JPMorgan full documentation for the cash,
the people briefed on the matter said. But the bank’s concerns
hardly mattered because the money had already been transferred to
the account in Britain. It is unclear whether investigators can
recover the $200 million.

New home sales up, prices down

New home sales rose in October, but are still trending to a low
annual rate, according to data released Monday by the US Commerce
Department. Sales of new single-family homes last month were at
a seasonally adjusted annual rate of 307,000. That’s up slightly
more than 1% from the revised September rate and nearly 9% above
the October 2010 rate. The median sales price of new homes sold
in October was $212,300, below the $213,300 price in September
but up from $204,200 in October 2010. The average sales price of
$242,300 in October was down from $248,400 in September and from
$254,400 in October 2010. But, as IHS economist Patrick Newport
noted, the market conditions for single-family home sales are
bad.

Tight credit for builders, falling home prices and high
foreclosures and delinquencies continue to hold the new-home
market back. “This is shaping up to be the worst year on record
for the single-family housing market,” Newport said in a note. He
cited that data for new home sales, single-family housing starts
and single-family permits will set record lows this year.
Builders say there has been marginal improvement in some markets
with better economies. “While this trend is encouraging, overall
sales activity is still well below normal due to the effects of
overly tight credit conditions for builders and buyers, the
continued flow of distressed properties on the market and
inaccurate appraisal values on new homes,” said Bob Nielsen,
chairman of the National Association of Home Builders. There was
a 6.3-month supply of new homes at the current sales pace in
October.

US deficit deadlock similar to Europe, Barney Frank blames you

Europe’s deepening debt crisis is echoed in the United States by
the inability of President Barack Obama and Congress to strike a
bipartisan deficit deal. On both sides of the Atlantic, leaders
are having a hard time making tough, unpopular decisions. And
things come together only at the very last minute, if at all,
while the global economy hangs in the balance. What happens in
Europe is important to Americans. It has already taken an
economic toll on US exporters — from reduced consumer demand in
Europe for their products and from a rising dollar against the
euro. The worse things get in Europe, the more likely the
contagion could spread to the US Right now, the situation looks
much graver overseas, with Europe teetering on the brink of a new
recession. With their backs against the wall, and with some
economists warning of an imminent collapse of the euro, European
leaders are racing to find a grand bargain to keep their monetary
union from fracturing. But time is running out.

The United States isn’t quite that close to the edge of the
cliff. Last week’s failure of the so-called congressional
supercommittee to strike a deficit-cutting deal to lower future
government borrowing underscored that Congress is bogged down in
inter-party strife, likely meaning that no deal on jobs, spending
and taxes is likely until after next November’s presidential
election. The two parties were blaming each other for the
deadlock. Republicans slammed Democrat Obama for not doing more
to prod an agreement. And one top Democratic lawmaker even
suggested that “the public cannot be totally absolved of
responsibility.” “They elected us,” Rep. Barney Frank, D-Mass.,
senior Democrat on the House Financial Services Committee said at
a news conference Monday called to announce his retirement after
more than three decades. “Congress is not some autonomous entity
that parachuted through the dome,” Frank said. “We were
elected.”

Olick – new homes face pressure

“Sales of newly built homes are bouncing around a bottom, but
prices are now at the lowest level of the year. The median price
of a new home came in at $212,300 for October, which is up from a
year ago, but October of 2010 represented the big fall after the
end of the home buyer tax credit. The fact that October of this
year saw the lowest price of the year so far is not good news
going forward. What this means for the nation’s big builders have
the analysts split. ‘While we continue to believe prices may
fall slightly from current levels, we believe pricing is
essentially near its trough, and therefore should result in
minimal impairment charges for the builders in 2012,’ writes
Michael Rehaut at JP Morgan. ‘New home prices are still at a 31%
premium to existing home prices (vs. 14% historically), and given
the high level of existing home inventory, we expect pricing
pressure to remain,’ notes Dan Oppenheim at Credit Suisse. New
home sales are still at half the normal historical levels, and
they are in for more fierce competition in 2012, specifically,
foreclosures.

Banks are ramping up the repossessions again after year-long
delays in the process, and that will mean inventories of
distressed properties will rise. These rock-bottom priced
properties may or may not compete with new construction,
depending on geographical area, but they will bring overall
existing home prices down, and that will do nothing good for
consumer confidence. Inventories of new construction are
approaching healthy, at just a 6.3 month supply (far better than
that of existing homes at an 8 month supply). In raw numbers,
they are actually at a record low of 162,000 (or at least since
the data tracking began in 1963). Unfortunately, that’s not
helping prices in and of itself. ‘The bigger picture is that
house prices are still being weighed down by the huge number of
discounted existing homes coming onto the market,’ writes Paul
Diggle at Capital Economics. ‘New home sales will also be held
back by the weaker pace of economic growth that we are expecting
next year. Admittedly, at some point activity in the new homes
market will have to rebound to reflect underlying population
growth. But that is still a few years away yet.’

So will the big builders continue to slash prices in order to
compete? Can they? ‘Commodity prices remain elevated, and that
doesn’t give builders much room to cut prices too much without
really sacrificing profit margins again,’ says Peter Boockvar at
Miller Tabak. That’s why analysts are being very selective in
their approach to the home builders and are ‘muting’ their
outlooks for 2012. ‘This is shaping out to be the worst year on
record for the single-family housing market,’ says Patrick
Newport at IHS Global Insight. ‘New home sales (data start in
1963), single-family housing starts (data start in 1959) and
single-family permits (data starts in 1960) will all set record
lows in 2011. Existing home sales may avoid the cellar, but only
because a third of them are selling at ‘distressed’ prices.’ So
what will get housing back on a strong foundation for growth? All
the analysts agree: Job growth.”

US credit outlook downgraded

In the wake of the Congressional debt committee’s failure to find
agreement, Fitch Ratings affirmed the United States’ top-notch
credit rating on Monday but revised its rating outlook to
“negative,” down from “stable.” That change indicates that the
agency sees a slightly greater than 50% chance that it will
downgrade the country’s AAA rating within two years. In
affirming the rating, Fitch said the US economy is still the most
productive in the world and the government has “unparalleled
financing flexibility.”

The US bond market is the largest and most liquid in the world
and the dollar is the global reserve currency — held by banks
worldwide and a staple in international transactions. But the
agency cited its “declining confidence” that Congress would enact
“timely fiscal measures” to put the country’s public finances on
a sustainable path. It also noted that a worsening in the
economic outlook would further mar the fiscal picture. As it is,
Fitch estimates that US debt held by the public will hit 90% of
GDP by the end of the decade, up from about 70% today. And
interest payments on the debt would likely consume more than 20%
of tax revenues. “Failure to reach agreement in 2013 on a
credible deficit reduction plan and a worsening of the economic
and fiscal outlook would likely result in a downgrade of the US
sovereign rating,” the agency said in a written statement. Last
week, the two other major ratings agencies — Moody’s and
Standard & Poor’s — said the so-called super committee’s failure
did not in itself affect their credit ratings for the country.
Moody’s affirmed its AAA rating. And S&P, which downgraded its US
credit rating this summer because of the “political
brinksmanship” in the debt ceiling debate, said it would keep its
rating for US bonds at AA-plus for now. Both agencies had
previously assigned a negative outlook on their US rating.

NAR – growth in commercial markets next year?

Commercial real estate markets have been relatively flat this
year, but improving fundamentals mean a more positive trend is
expected in 2012, according to the National Association of
Realtors (NAR). NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK
offers projections for four major commercial sectors and analyzes
quarterly data in the office, industrial, retail and multifamily
markets. Historic data for metro areas were provided by REIS,
Inc., a source of commercial real estate performance
information.

- Office Markets
Vacancy rates in the office sector are expected to fall from
16.7% in the current quarter to 16.1% in the fourth quarter of
2012. The markets with the lowest office vacancy rates presently
are Washington, D.C., with a vacancy rate of 9.3%; New York City,
at 10.3%; and New Orleans, 12.8%. After rising 1.4% in 2011,
office rents are forecast to increase another 1.7% next year. Net
absorption of office space in the US, which includes the leasing
of new space coming on the market as well as space in existing
properties, is projected to be 20.2 million square feet this year
and 31.7 million in 2012.

- Industrial Markets
Industrial vacancy rates are projected to decline from 12.3% in
the fourth quarter of this year to 11.7% in the fourth quarter of
2012. The areas with the lowest industrial vacancy rates
currently are Los Angeles, with a vacancy rate of 5.2%; Orange
County, Calif., 5.7%; and Miami at 8.4%. Annual industrial rent
should decline 0.5% this year before rising 1.8% in 2012. Net
absorption of industrial space nationally should be 62.0 million
square feet this year and 41.2 million in 2012.

- Retail Markets
Retail vacancy rates are likely to decline from 12.6% in the
current quarter to 11.8% in the fourth quarter of 2012.
Presently, markets with the lowest retail vacancy rates include
San Francisco, 3.7%; Long Island, N.Y., and Northern New Jersey,
each at 5.7%; and San Jose, Calif., at 6.0%. Average retail rent
is seen to decline 0.2% this year, and then rise 0.7% in 2012.
Net absorption of retail space is seen at 1.2 million square feet
this year and 13.5 million in 2012.

- Multifamily Markets
The apartment rental market – multifamily housing – is
expected to see vacancy rates drop from 5.0% in the fourth
quarter to 4.3% in the fourth quarter of 2012; multifamily
vacancy rates below 5% generally are considered a landlord’s
market with demand justifying higher rents. Areas with the
lowest multifamily vacancy rates currently are Minneapolis, 2.4%;
New York City, 2.7%; and Portland, Ore., at 2.8%.

Average apartment rent is projected to rise 2.5% this year and
another 3.5% in 2012. Multifamily net absorption is likely to be
238,400 units this year and 126,600 in 2012.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved

Q&A: Step-by-step guide to foreclosure
WEST PALM BEACH, Fla. – Nov. 29, 2011 – Question: I read in the paper that the banks are starting the foreclosures again. I just got served with a foreclosure lawsuit. Can you explain the process in layman’s terms?

Tony

Answer: Each state has different versions of the foreclosure process. In Florida and some other states, a lender must get permission from a judge before it can repossess your home.

When you are served with a foreclosure lawsuit, your lender files a “complaint” against you, laying out the facts as it sees it. It’s basically telling a story as to why it thinks that it should get your house as payment toward the debt that you owe.

Along with the complaint, it serves several other documents, such as the “summons,” which gives the court power over you, and the “lis pendens,” which is a document filed in the public records to let everyone know that the property is the subject of a lawsuit.

When you are served with a lawsuit, you typically have 20 days to respond or you will be in “default,” which means that you have waived all of your defenses to the lawsuit, allowing the bank to proceed with the foreclosure. This is not a good idea. At this point, your attorney will respond to the suit with a “motion to dismiss” or an “answer.” If your attorney feels that the bank has no chance to win based on everything that it alleged in the complaint, he or she will file a motion to dismiss the suit.

If, however, the suit is not defective as filed, your attorney will file an answer, in which he or she admits or denies each of the bank’s statements from the complaint. The answer also will also set forth your “affirmative defenses.”

An affirmative defense explains why the bank should not get your home even though you may not be making your mortgage payments.

At this point in the lawsuit, several months or more will have gone by and the attorneys will begin “discovery.” That’s the process of getting to the truth by asking each other questions and getting documents from the other side for review.

During the discovery phase, you and your lender will probably go to a “mediation.” In a mediation, both you and your lender will lay out your side of the story before an unbiased third party, the mediator, who will encourage you both to voluntarily settle the case. At a mediation, no one is forced to settle the case. Both sides need to agree.

The discovery process can take six months or more. Once it is complete, you or your lender may make a “motion for summary judgment,” which is basically saying to the court that your side of the case is so strong that there is no possible way for you to lose. Most foreclosure cases end at the summary judgment hearing because the judge rules for the lender. But if the judge thinks there are still some questions to be answered, there will be a trial. At trial, the judge (or jury) will determine the truth and decide who wins the case.

If you win, the lender has failed and you keep your house. If the lender wins, which is much more likely, the judge will set a date for your home to be sold, with the proceeds from the sale going toward paying your lender back for the money that you borrowed.

If the fair market value of your home is not enough to pay your loan back in full, your lender may ask for a “deficiency judgment.” That gives the lender the right to come after you for the difference between the market value of your home and the amount that you owe your lender.

If the sale brings more money than you owe your bank, you get back what’s left over. (Check with an attorney about the process for receiving any refund.)

If you hire an attorney, the entire process typically will take about two years, during which time you can be working with your lender toward a loan modification, short sale or deed in lieu of foreclosure. Of course, if all else fails, there is always bankruptcy, but that’s a different topic for another column.

About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

© 2011 the Sun Sentinel (Fort Lauderdale, Fla.), Gary M. Singer. Distributed by McClatchy-Tribune News Service.

Smart Real Estate News & Commentary by Chris McLaughlin November 30, 2011

Mortgage applications down

Mortgage applications decreased 11.7% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending November
25, 2011. This week’s results include an adjustment to account
for the Thanksgiving holiday. The Market Composite Index, a
measure of mortgage loan application volume, decreased 11.7% on a
seasonally adjusted basis from one week earlier. On an unadjusted
basis, the Index decreased 39.0% compared with the previous week.
The Refinance Index decreased 15.3% from the previous week. The
seasonally adjusted Purchase Index decreased 0.8% from one week
earlier. The unadjusted Purchase Index decreased 33.7% compared
with the previous week and was 18.2% lower than the same week one
year ago. The four week moving average for the seasonally
adjusted Market Index is down 3.29%. The four week moving average
is up 2.37% for the seasonally adjusted Purchase Index, while
this average is down 4.92% for the Refinance Index. The
refinance share of mortgage activity decreased to 73.9% of total
applications from 75.9% the previous week.

The refinance share of mortgage activity is at the lowest level
since July 2011. The adjustable-rate mortgage (ARM) share of
activity increased to 5.8% from 5.7% of total applications from
the previous week. During the month of October, the investor
share of applications for home purchase was at 6.1%, a slight
increase from 6.0% in September. This change was led by an
increase in the New England region. In addition, the share of
purchase mortgages for second homes decreased to 5.6% in October
from 5.8% in September.

Jobs up, service sector leads

ADP and Macroeconomic Advisors reported that service providers
added 178,000 positions. The goods-producing sector saw a
28,000-job rise, while manufacturing employment increased by
7,000 and construction added 16,000. The report also said the
estimated gain in employment from September to October was
revised up to 130,000 from the initially reported 110,000. At
the same time, the number of planned layoffs at US firms edged
down marginally in November, though job cuts for the year have
surpassed 2010′s total, a report on Wednesday showed. Employers
announced 42,474 planned job cuts this month, down 0.7% from
42,759 in October, according to the report from consultants
Challenger, Gray & Christmas Inc. November’s job cuts were down
12.8% from the same time a year ago when 48,711 layoffs were
announced. But with just one month left in the year, employers
have announced 564,297 cuts for 2011, exceeding 2010′s total of
529,973. Cuts in the government sector accounted for 44% of
November’s layoffs, the eighth time this year the sector has led
all others in monthly job cuts. Of the 18,508 government job
cuts announced this month, 13,500 were the result of civilian
workforce cuts made by the United States Air Force. Hiring plans
fell sharply to 63,527 from 159,177 the month before. Most of
November’s gains were from seasonal workers being hired by UPS.
The report comes two days ahead of the key US jobs report, which
is forecast to show the economy added 122,000 in November.

NAR – pending sales up

Pending home sales rose strongly in October and remain above
year-ago levels, according to the National Association of
Realtors (NAR). The Pending Home Sales Index (PHSI), a
forward-looking indicator based on contract signings, surged
10.4% to 93.3 in October from 84.5 in September and is 9.2% above
October 2010 when it stood at 85.5. The data reflects contracts
but not closings. The PHSI in the Northeast surged 17.7% to 71.3
in October and is 3.4% above October 2010. In the Midwest the
index jumped 24.1% to 88.7 in October and remains 13.2% above a
year ago. Pending home sales in the South rose 8.6% in October to
an index of 99.5 and are 9.7% higher than October 2010. In the
West the index slipped 0.3% to 105.5 in October but is 8.1% above
a year ago.

S&P cuts ratings for several banks

Standard & Poor’s reduced its credit ratings on 15 big banking
companies, mostly in the Europe and United States, on Tuesday as
the result of a sweeping overhaul of its ratings criteria.
JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman
Sachs Group, Morgan Stanley, Barclays, HSBC Holdings and UBS were
among the banks that had their ratings reduced by one notch each.
A notch is one third of a letter rating. S&P also left the
ratings of 20 banks as they were and raised the ratings of two in
announcing results from its new ratings criteria to 37 of the
world’s biggest banking companies. The agency also updated
ratings for dozens of bank subsidiaries of the companies.
Although S&P began warning the markets more than a year ago that
it was revising its ratings, the announcement comes at a time
when the markets for bank debts are fragile.

S&P’s overhaul is part of a broad, multi-year drive by the agency
to improve its products and repair its reputation, which was
badly tarnished by having wrongly put triple-A ratings on
securities backed by subprime mortgages. The agency is owned by
by McGraw-Hill Companies. In response to growing pressure on
their credit ratings, some banks have updated contingency plans
for a downgrade. They have also refreshed disclosures on the
potential impact they may suffer through ratings triggers built
into obligations under existing derivatives contracts, funding
commitments and borrowing arrangements. Spokespersons for Bank
of America, JPMorgan, Goldman Sachs, Morgan Stanley declined to
comment.

Olick – prices, ownership down

“Home prices across the nation are now right back where they were
at the beginning of 2003. All that was gained is largely now
lost, and the effect on home ownership could continue for
decades. ‘Consumer attitudes have gotten a lot more negative
about long-term commitment,’ said Standard and Poors’ David
Blitzer, after reporting home prices through September had fallen
a deeper-than-expected 3.9% compared to the third quarter of
2010. ‘They dropped to new lows. This takes them below the point
we saw in 2009, where briefly we all thought this thing was about
to turn around.’ And that’s the problem. Every time we think
things are turning around in the housing market, we get hit with
some new problem, like last year’s so-called ‘robo-signing’
foreclosure paperwork scandal, which managed to stall the
cleansing of distress in the market for over a year. Now that
foreclosures are ramping up again, prices are coming down again.

All this could push home ownership down to levels not seen at
least since before the Census began tracking this data in 1963.
Home ownership soared to 70% in 2005, but it could fall to 62% by
2015, according to the number crunchers at John Burns Real Estate
Consulting. They suggest that the effect of foreclosures drops
home ownership 5.6%, and cyclical trends, like poor consumer
confidence, tightening mortgage credit and the weak economy drop
it 3%. Positive demographic trends would only offset that by
0.7%. ‘People’s memories take a while to fade,’ says John Burns.
‘It [also] takes a while to rebuild your balance sheet after a
recession, and that’s what many people need to do before they buy
homes again. Homeowners need to build back up to have a down
payment for their next house, and renters will need to save more
than before to become homeowners.’

Burns believes home ownership will return by 2025 to around 67%,
as previously foreclosed borrowers return to the housing market,
cyclical trends improve and positive demographics start to carry
more weight. One thing Burns doesn’t mention, though, is
negative equity, or borrowers who owe more on their mortgages
than their homes are worth. ‘It’s not just negative equity that
we often focus on, but it’s also insufficient equity. All the
people who have those primary loans that are somewhere between 80
and 100% LTV (loan-to-value) also basically don’t have don’t have
access to the credit markets,’ notes Mark Flemming of CoreLogic,
which today reported negative equity at 22.1% of all homes with a
mortgage at the end of the third quarter. As home prices refuse
to stabilize, and in fact continue to fall, negative equity will
only increase. The vast majority of the ten plus million people
who are underwater are still paying their mortgages, but they are
deeply underwater, 30% and higher. That will take a long time to
correct, and will stagnate much of the market for years to come,
as these owners are unable to sell. Which leaves us to ask, is a
62% home ownership rate so bad? It’s still far higher than in
most European countries. Why is home ownership so intrinsic to
the ‘American Dream?’ I’ll leave that to you faithful readers to
discuss.”

Central banks boost liquidity

Major central banks around the globe took coordinated action
Wednesday to ease the strains on the world’s financial system,
saying they would make it easier for banks to get dollars if they
need them. The European Central Bank, US Federal Reserve, the
Bank of England and the central banks of Canada, Japan and
Switzerland are all taking part. As Europe’s sovereign debt
crisis has spread, the global financial system is showing signs
of entering another credit crunch like the one that followed the
2008 collapse of US investment bank Lehman Brothers. The
possibility that one or more European governments might default
have raised fears of a shock to the global financial system that
would lead to severe losses for banks, recessions in the US and
Europe, and a stranglehold on lending. “The purpose of these
actions is to ease strains in financial markets and thereby
mitigate the effects of such strains on the supply of credit to
households and businesses and so help foster economic activity,”
the banks said in a joint statement. The central banks agreed to
reduce the cost of temporary dollar loans they offer to banks —
called liquidity swaps — by a half percentage point. The new,
lower rate will be applied to all central bank operations
starting on Monday.

Whistle blower found dead

A notary public who signed tens of thousands of false documents
in a massive foreclosure scam before blowing the whistle on the
scandal has been found dead in her Las Vegas home. NBC station
KSNV of Las Vegas reported that the woman, Tracy Lawrence, 43,
was scheduled to be sentenced Monday morning after she pleaded
guilty this month to notarizing the signature of an individual
not in her presence. She failed to show up for her hearing, and
police found her body at her home later in the day. It could not
immediately be determined whether Lawrence, who faced up to one
year in jail and a fine of up to $2,000, died of suicide or of
natural causes, KSNV reported. Detectives said they had ruled out
homicide. Lawrence came forward earlier this month and blew the
whistle on the operation, in which title officers Gary Trafford,
49, of Irvine, Calif., and Geraldine Sheppard, 62, of Santa Ana,
Calif. — who worked for a Florida processing company used by
most major banks to process repossessions — allegedly forged
signatures on tens of thousands of default notices from 2005 to
2008.

Trafford and Sheppard were charged two weeks ago with 606 counts
of offering false instruments for recording, false certification
on certain instruments and notarization of the signature of a
person not in the presence of a notary public. Police said at
the time that the alleged scam had thrown into question the
legality of most Las Vegas home foreclosures in the past few
years, leaving many people living in foreclosed-upon homes that
they unknowingly don’t actually own. “I would suggest you review
your documents and bring them to an expert and an attorney,” said
John Kelleher, chief deputy attorney general for Nevada’s fraud
unit.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.