Real Estate News

First American Title Unveils New Solution in Support of HARP 2.0

2012-01-04T07:55:00.001-08:00

First American Title Insurance Company announced Tuesday the availability of Quick Start HARP – a title, signing, and settlement program that features proprietary technology to facilitate the processing of refinance closings under the newly revamped Home Affordable Refinance Program, more commonly known as HARP 2.0.

HARP 2.0 differs significantly from the previous version of HARP in that there is no limitation on loan-to-value (LTV) ratios, credit score requirements are lower, and mortgage lenders can be proactive in approaching borrowers, First American explained.The California-based company says these program changes are expected to help lenders reach a previously untapped population of American homeowners, allowing qualified borrowers to refinance into loans with lower interest rates and, in some cases, shorter terms. First American’s Quick Start HARP solution supports the revised program by helping mortgage lenders develop their own “push” or “pull” approach to soliciting homeowners. In a “push” version, the lender utilizes internal loan data and First American’s proprietary title automation to proactively solicit homeowners who might benefit from HARP 2.0. The “pull” version is used when homeowners contact the lender to inquire about HARP 2.0. In both cases, First American says its automated technology delivers a title commitment, rather than a non-binding title decision, to the lender within seconds.First American developed its original solution in early 2010 for use with the first version of HARP. In doing so, the company worked closely with mortgage lenders to design specialized workflows that improve pull-through and closing times. Quick Start HARP adds to these features with reduced title premium rates and settlement costs for qualified refinances. This allows lenders to further assist homeowners by offering “no closing cost” loans that roll fees into the mortgage principal or into the new mortgage rate, First American explained.“Successful ‘push’ programs have the dual advantages of cost and time reduction for lenders and borrowers,” said Patrick E. McLaughlin, president of First American Mortgage Services, a division of First American Title Insurance Company and the exclusive provider of Quick Start HARP. HARP 2.0 transactions are prioritized for special handling within First American’s settlement centers and follow streamlined curative guidelines. The company says this approach results in closings that can be completed in as few as 14 business days. In addition, the program can be customized to include mobile notary signings or the use of First American’s eSignSmart, a technology that allows homeowners to sign loan documents electronically on a mobile tablet or digital signing pad. “Through advanced, accurate title automation and prioritized processes, we were able to achieve above-average results in speed to loan closings for the first version of HARP,” said Robert Camerota, COO of the First American Mortgage Services division. “Our Quick Start HARP solution can be rapidly adapted to a lender’s current or proposed workflow and supports a variety of refinance strategies, including lower interest rates, shorter-term mortgages, earlier rate locks, and no closing cost loans,” Camerota added.

Fannie Mae Removes 'Ability to Repay' from HARP 2.0 Guidelines

2012-01-04T07:54:00.002-08:00

Fannie Mae has updated its Selling Guide to reflect the recently announced changes to the Home Affordable Refinance Program (HARP).
Most of the revisions had been previously announced in November, but there’s one nuance that stands out, and until this week, had been absent the HARP 2.0 discussion. Fannie Mae has removed the “reasonable ability to repay” clause from the criteria for vetting borrowers for a new HARP 2.0 refinance.The D.C.-based GSE says the terminology was scratched because the underwriting requirements specific to its refinance channels – Refi Plus and DU Refi Plus – are already clearly outlined within the Selling Guide. Fannie states in its latest update, “For Refi Plus, the lender is no longer required to determine the borrower has a reasonable ability to repay the mortgage based on a review of the information provided on the new loan application.”The previous guidelines for HARP loans processed through the manual underwriting channel (Refi Plus) put the onus on lenders to determine that the borrower had a reasonable ability to repay the mortgage based on information provided by the borrower and payment history. It also required that lenders verify and ensure the borrower had a source of income.Barclays Capital explains that ability to pay has traditionally been measured using DTI (debt-to-incomeratio) but pursuant to HARP guidelines, no DTI calculation or evaluation is required if the borrower’s payment does not increase by more than 20 percent. A 45 DTI cap applies otherwise.Under the revised guidelines, the ‘borrower ability to pay’ clause is no longer an underwriting requirement. Barclays says it appears Fannie Mae has taken subsequent feedback from lenders into account since the November 15th announcement of the HARP 2.0 framework and incorporated this change into its guidelines.The analysts at Barclays say the removal of the ability to pay clause is a “significant and unanticipated change that could have ramifications for the HARP program.”The GSEs promised to relax representation and warranty requirements under the new HARP program and in doing so, have reduced or waived most of the underwriting requirements on traditional loans.The ability to pay guideline, however, has continued to burden lenders with a subjective underwriting evaluation process that contains rep and warranty risk, according to Barclays. “In our conversation with lenders, this has been often highlighted as one of the significant hurdles to HARP refinancing,” the investment banking firm said. “Lenders argue that lack of clarity on what ‘reasonable ability’ precisely means could expose lenders to indemnification liability in the event that the loan defaults.”Barclays went on to explain, “Though the GSEs have indicated that this clause exists to ensure prudent underwriting judgment and efficient choice between HARP and HAMP, lenders view this as a significant risk.”Removal of the clause alleviates many of the remaining concerns about rep and warranty indemnification with respect to HARP refis, according to Barclays.The firm says lenders can now underwrite HARP loans assessing borrower credit based on a straightforward metric – number of payments made – which reduces a significant layer of complexity with respect to rep and warranties liabilities for HARP loans.

Serious Delinquencies Decline, Foreclosure Rates Steady

2012-01-04T07:54:00.001-08:00

Serious delinquencies are on the decline, while foreclosures have steadied at 5.5 percent, according to recent data from Foreclosure-Response.org, a joint venture of the Local Initiatives Support Corporation, the Urban Institute, and the Center for Housing Policy.
Among the 100 largest metropolitan areas, serious delinquencies – those 90 days or more past due or in foreclosure – declined from 10.4 percent to 9.3 percent from its December 2009 peak to June 2011. The decline in serious delinquencies can be attributed to a decline in delinquent loans, according to Foreclosure-Response.org, which states delinquencies fell from 5.5 percent at the end of 2009 to 3.7 percent in mid-2011. Areas experiencing higher rates of serious delinquencies include Florida, California and some areas of New Jersey, the Great Lakes region, and the South. Areas with lower rates of serious delinquencies include Texas, the Central and Mountain Time zone regions, and some areas of the Pacific Northwest. Seventeen of the top 25 metros ranked for serious delinquencies and four of the top five are located in Florida. While serious delinquencies decline, foreclosures have “flat-lined,” according to Foreclosure-Response.org. The foreclosure rate has stayed at about 5.5 percent over the three quarters ending in June. The two metros experiencing the greatest decline in foreclosures are in California – Riverside (1.9 percent) and Stockton (1.7 percent).In contrast, metros in Florida, New York, and Illinois are seeing rising foreclosure rates. Tampa saw a 2.8 percent increase from December 2009 to June 2011, while Chicago saw a 2.3 percent increase, and New York saw a 2.1 percent increase. Foreclosure-Response.org notes that these three states are judicial states, which “can create a significant backlog of foreclosures.”“The foreclosure inventory that is building up is going to take an incredibly long time for lenders to clear,” said Urban Institute research associate Leah Hendey. “At the current pace of foreclosure sales, we are looking at a process that could take decades to complete.”“It is critical that the status of these properties be resolved quickly if we want to stabilize communities and housing markets,” Hendey continued.

FHA Waives Anti-Flipping Rule Through Year-End to Speed REO Sales

2012-01-04T07:53:00.004-08:00

The Federal Housing Administration (FHA) is extending the temporary waiver of its property anti-flipping rule through the end of 2012.

FHA rules typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, however, the agency waived this regulation, and later extended the waiver through 2011. The new extension announced late last week 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. “FHA remains a critical source of mortgage financing andstability and we must make every effort that to promote recovery in every responsible way we can.”According to 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 percent 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.

Housing Market Strengthening But Long Road to Recovery Lies Ahead

2012-01-04T07:53:00.003-08:00

The year 2011 is ending on a high note as economists anticipate some signs of recovery ahead. Prices appear to be reaching their trough, visible supply is on the decline, and banks are beginning – just slightly – to loosen lending standards, according to a fourth-quarter report from Capital Economics.
However, Capital Economics warns these positive signs do not point to an immediate recovery. Taking into account the historic ratio between disposable income and housing prices, homes were undervalued by 23 percent in the third quarter. Homes have not been this undervalued since at least 1975. Since 2006, prices have declined 33 percent, countering the sharp increases of the boom years. Therefore, “[i]t is clear that prices don’t need to fall further,” Capital Economics says. Nondistressed home prices in particular seem to have bottomed out. While home prices declined 4 percent this year, prices of nondistressed homes fell only 0.5 percent. Having reached the bottom, however, prices will not jump far in the new year. Capital Economics predicts national home prices will remain unchanged over the next two years before seeing positive movement – a 2.5 percent increase – in 2014. This past year has seen some positive movement in housing inventory with a 20 percent decrease in the number of homes listed for sale over the year. However, supply will remain an obstacle moving forward as the current shadow inventory is estimated at 4 million. Demand will also continue to be an issue. However, the report notes the market has seen a slight increase in home sales, which it attributes to first-time buyers. Banks are contributing to rising demand and supply absorption by allowing loans with loan to value ratios of 80 percent or even slightly higher, something that has not occurred since mid-2008, according to Capital Economics. The overall economy will not help boost the housing market in the coming year as the U.S. will continue to be affected by the euro-zone crisis. The rental market will continue to be the best-performing segment of the market.

Strategic Defaulters Influenced by Social Persuasion: Study

2012-01-04T07:53:00.001-08:00

Unemployment and other economic difficulties have caused millions of homeowners to involuntarily default on their mortgages, but there are some borrowers who are induced to simply stop making their mortgage payments because their property value has fallen and they owe more than their home is worth
rding to a study commissioned by the Mortgage Bankers Association (MBA), oftentimes strategic defaulters are encouraged to walk away at the behest of so-called mavens, or prominent influencers within a borrower’s social network whose persuasive arguments convince the borrower that strategic default is the way to go. The study, conducted by Michael J. Seiler of Old Dominion University; Andrew J. Collins of the Virginia Modeling, Analysis and Simulation Center; and Nina H. Fefferman of Rutgers University, examines the role that influential members of society play in people’s decision to stop paying their mortgage and the impact of strategic default on the broader housing market. “Recently, the overwhelming media coverage of the current financial crisis has made homeowners aware – or at least alerted them to become aware – of their equity position in their home,” Seiler commented. “[T]he possibility to strategically default has certainly been brought to the attention of current homeowners like never before, with potentially negative consequences for housing markets.”Through simulation modeling, Seiler and his co-authors demonstrate that because defaults and foreclosures lead to lower home prices, an epidemic of strategic defaults initiated by advice from those who might be considered experts could potentially spell detriment for the already ailing housing market.“As social animals, humans knowingly or otherwise look to their peers before reaching financially life-altering choices,” the authors write in the report outlining their findings. Seiler stresses that ideas can easily be transmitted through the population. He notes that housing pundits share their expert opinion with a large audience on a frequent basis through the media. “These social networks create the potential for much faster spread [of strategic default] than in the past,” Seiler said, adding that those pundits with a far-reaching sounding board can greatly impact mortgage markets through behavioral advocacy. “In fragile markets, advice by those considered to be experts can result in a flood of strategic defaults, causing a contagious downward spiral of home prices and potentially a market collapse,” according to Seiler.The study notes that whether by choice or necessity, as foreclosures increase, they have an increasingly negative impact on the price of the healthy homes around them. “One default does little to negatively impact the price of surrounding homes,” Seiler said. “However, as more and more mortgages in the neighborhood go into default, the negative impact is felt at an increasing rate. Much the same way as a disease spreads throughout a population, so, too, do decisions to ‘strategically’ default.”Michael Fratantoni, MBA’s VP of research and economics, says research has clearly shown that a borrower’s inability to continue making mortgage payments is the most predictive of a mortgage default. However, it is much more difficult to predict or even detect a strategic default – a borrower who has the ability to pay, but simply stops in expectation of a financial gain, Fratantoni explained. He says the consequences of strategic defaults can be destabilizing, particularly in markets that are already on the edge. “From a policy standpoint, the research supports the contention that opinion and information (or disinformation) can move markets,” Fratantoni said. “More specifically, that policymakers and mavens have the ability to stabilize or de-stabilize markets.”The study, entitled, “Strategic Default in the Context of a Social Network: An Epidemiological Approach,” received the Governor’s Technology Award for 2011 in Virginia in the category of “Cross-Boundary Collaboration in Modeling & Simulation.”

California Attorney General Sues Fannie and Freddie

2012-01-04T07:52:00.000-08:00

California Attorney General Kamala Harris is asking the court to force Fannie Mae and Freddie Mac to turn over information about their servicing, foreclosure, property leasing, and mortgage securitization activities in the stateHarris issued subpoenas to each of the GSEs last month, which according to the Los Angeles Times, outlined 51 questions the attorney general wanted answered – just one facet of Harris’ investigation to ascertain the extent to which mortgage lenders and servicers contributed to the state’s foreclosure and housing crisis.According to multiple media reports, Harris’ lawsuits against the two GSEs, filed Tuesday in California Superior Court in San Francisco, claim Fannie and Freddie have refused to comply with the subpoenas.Bloomberg Businessweek says in the complaints, Harris maintains the GSEs are “frustrating the Attorney General’s efforts to investigate and combat crime, blight and other threats to the health and safety of Californians.”Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), had reportedly instructed the two mortgage financiers not to respond to Harris’ initial subpoenas on the grounds that states do not have the authority to take such action against the federally controlled GSEs.Attorneys for FHFA described Harris’ request for information as “frequently vague and ambiguous” and one that would place a burden “nothing short of staggering” on the GSEs in order to gather the details she’s demanding, according to the Associated Press.Harris wants Fannie and Freddie to identify all the California homes on which they foreclosed, as well as whether or not any were used for drug dealing or prostitution and the impact such activity had on the property’s value. The attorney general’s office also plans to look into the history of tax payment on the properties, evictions involving military families, and the GSEs’ actions related to the purchasing, packaging, and re-selling of so-called toxic mortgages.Harris announced an official alliance with Nevada Attorney General Catherine Cortez Masto earlier this month for the purpose of coordinating efforts between their offices in order to speed up investigations of misconduct and fraud within the mortgage industry. Harris said at the time that she is making “mortgage-related law enforcement action a top priority.”The two AGs joined forces after both dropped out of the multi-state effort to negotiate a settlement with the nation’s top five mortgage servicers over the robo-signing abuses that were disclosed last fall.

OCC: 88% of First-lien Mortgages at Large Banks are Performing

2012-01-04T07:51:00.002-08:00

First-lien mortgage performance among large national banks’ servicing portfolios is stabilizing, with 88 percent current after decreasing by 0.1 percent over the third quarter of this year, according to the Office of the Comptroller of the Currency (OCC).Delinquencies – both early stage and serious delinquencies – remained unchanged over the quarter. The percentage of loans 30 days to 59 days delinquent stood at 3 percent, while those 60 or more days delinquent stood at 4.9 percent for the quarter. However, new foreclosures rose 21.1 percent bringing the total number of loans in foreclosure to about 1.3 million – 4.1 percent of the total loans observed by the OCC. Performing loans made up 93.1 percent of the GSEs’ portfolio, unchanged from the previous quarter. The number of home retention actions – modifications, trial period plans, and payment plans – completed by the industry in the third quarter was 0.6 percent higher than the previous quarter but 2.4 percent lower than last year. On average, mortgage modifications included 24.4 percent reductions in monthly principal and interest payments, lowering monthly payments by about $383. HAMP modifications included greater reductions – 35.1 percent decreases, saving borrowers $567 per month. In total, 90 percent of all modifications completed during the third quarter included reduced monthly payments. The OCC reported 77.5 percent of all modifications came with reduced interest rates; 20.5 percent included principal deferrals; and 7.8 percent included principal reductions. Of modifications through HAMP, 86.8 percent included reduced interest rates; 34.9 percent included principal deferrals; and 10.2 percent included principal reductions. The OCC also evaluated modification performance. From the beginning of 2008 through the second quarter of 2011, servicers modified more than 2.2 million loans. About half – 50.8 – are current or have been paid off. Of the remainder, 17.8 percent are seriously delinquent, and 8.8 percent are 30-59 days delinquent. The OCC’s report included 32.4 million loans, making up 62 percent of all mortgages in the U.S.

For Every Two Homes for Sale, There's One in the Shadows

2012-01-04T07:51:00.001-08:00

The number of distressed properties not currently listed for sale on multiple listing services (MLSs) stood at 1.6 million as of October 2011, according to CoreLogic.This shadow inventory is approximately half of the industry’s visible inventory of homes available for sale, CoreLogic says. Thus, for every two homes available for sale, there is one home in the “shadows.”CoreLogic’s latest shadow inventory assessment represents a supply of five months and is down from October 2010, when shadow inventory stood at 1.9 million units, or 7-months’ supply. CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on MLSs that are seriously delinquent (90 days or more), in foreclosure, and real estate owned (REO) by lenders.Of the 1.6 million properties currently in the shadow inventory, 770,000 units are seriously delinquent, 430,000 are in foreclosure, and 370,000 are REO, according to CoreLogic’s report.Despite 3 million distressed sales since January 2009, a period when home prices were declining at their fastest rate, the shadow inventory in October 2011 is at the same level as January 2009, CoreLogic notes. Growth in the shadow supply, though, has been reined in by the fact that the flow of new seriously delinquent loans into the shadow inventory has been offset by a roughly equal flow of distressed REO and short sale transactions, the company explained.Still, the shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006, CoreLogic says. The company contends that a healthy housing market should have less than one-month’s supply of shadow inventory, which would be an easily absorbed stock of distressed assets with little or no discernable impact on house prices, unless the inventory was geographically concentrated.Currently, Florida, California, and Illinois account for more than a third of the shadow inventory, CoreLogic reports. The top six states, which would also include New York, Texas, and New Jersey, are home to half of the shadow inventory.

REO Properties Are Moving Faster: Survey

2012-01-04T07:50:00.000-08:00

Homebuyer demand appears to be intensifying, especially among lower-priced REO properties, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey released Tuesday.Time-on-market for move-in ready REO was just 10.1 weeks in November, the lowest in 15 months, according to the HousingPulse study. Time-on-market for damaged REO was even lower at 9.0 weeks, also the lowest in 15 months.Distressed properties accounted for a sizeable 46.1 percent of home purchase transactions last month, based on data compiled for the HousingPulse distressed property index which uses a three-month rolling average. November marked the 23rd month in a row that the study’s distress index has come in above 40 percent.Short sales were the largest segment of the distressed property market during the month of November, accounting for 17.6 percent of total home purchase transactions tracked in the HousingPulse survey. Move-in ready REO was the next largest group of distressed properties with a 15.2 percent share, followed by damaged REO which made up 13.3 percent of total transactions. Non-distressed properties accounted for the remaining 53.9 percent of home purchases in November, according to the survey results.Despite the uptick in demand, the glut of distressed properties continues to put downward pressure on home prices. According to HousingPulse, the average short sale sold for $209,200 in November, while the average move-in ready REO sold for $189,700. Damaged REO sold for far lower at $98,600. At the same time, non-distressed properties sold for an average of $258,900.The authors of the survey noted in their report that the appraisal system for mortgage originations uses comparative values from both distressed and non-distressed properties, and they say appraisers are often unaware of the interior condition of foreclosed homes or the special circumstances of short sales. Prices agreed-to in purchase and sales contracts are sometimes not being supported by appraisals for mortgage financing that use disparate comparables, according to the report. These properties then sell to cash buyers for less, causing declines in average home prices, the authors explained.Real estate agents responding to this month’s HousingPulse survey commented on the appraisal system and how the low prices for distressed properties impact overall home prices. “The foreclosure/short sale markets are making it difficult to get non-distressed homes to appraise. This is holding off a market comeback in my area,” reported an agent in Maryland.“We could sell the homes for more but the appraisals are an issue since they are using short sales and foreclosures as comps,” explained an agent in Florida. Another agent based out of Michigan added, “Given the multiple offers and the short time on the market, one would expect that prices would be on the increase; however, appraisal guidelines are holding it back.”The HousingPulse Tracking Survey from Campbell Surveys and Inside Mortgage Finance polls approximately 2,500 real estate agents nationwide each month to assess market trends surrounding homes sales and mortgage lending.

Delinquencies on the Rise as Loans Languish in Pipeline

2012-01-04T07:42:00.002-08:00

Lender Processing Services (LPS) has released new data detailing mortgage performance at November month-end. The most troubling statistic shows a nearly 3 percent month-over-month increase in the number of loans 30 or more days past due but not yet in foreclosure.LPS says 8.15 percent of the nation’s mortgages fell into this category as of the end of November. That’s up from 7.93 percent at the end of October – a 2.7 percent increase – and is the first time in four months the company has reported a rise in the national delinquency rate. On an annual basis, the stats pan out better, with November’s delinquency rate down 9.6 percent from a year earlier.The monthly increase in the delinquency rate can be attributed to a buildup of seriously delinquent mortgages. LPS says as of November, there were 1,809,000 properties on which mortgage payments were 90 or more days past due but the case had not yet been referred to foreclosure. The number of properties in this bucket stood at 1,759,000 in October. In contrast, borrowers who were behind on their payments by 30-89 days declined to 2,279,000 in November, down from 2,329,000 in October.According to LPS’ analysis, 4.16 percent of the nation’s mortgages were part of the foreclosure pre-sale inventory in November. That ratio is down 3.0 percent from October but up 2.0 percent from November 2010, and equates to 2,116,000 homes. All in all, LPS says 6,260,000 borrowers were behind on their payments or in foreclosure as of the end of November, representing one in eight residential mortgages. States with highest percentage of non-current loans – which combines foreclosures and delinquencies – include: Florida, Mississippi, Nevada, New Jersey, and Illinois. Montana, South Dakota, Wyoming, Alaska, and North Dakota have the lowest percentage of non-current loans.

Valuations and Sales Discounts Eat Away at Foreclosure Proceeds

2012-01-04T07:42:00.001-08:00

Low property valuations and steep sales discounts reduce the proceeds from liquidated loans by almost a third, according to Moody’s Investors ServiceAs home prices drop, equity erosion drives most of the losses incurred on defaulted mortgage loans, but the analysts at Moody’s say in today’s environment that’s not the whole story.They maintain that loss projections based solely on average home prices substantially underestimate a foreclosed property’s actual loss severity.“Our analysis shows that liquidated properties are subject to discounts on their valuation and price that, on average, lead to selling prices that are about 30 percent lower than average home values,” Moody’s said.The agency’s analysts examined 46,000 loans liquidated since 2007 in order to measure the effect of foreclosure on a property’s value. They found that on average, a foreclosed property will be valued about 18 percent lower than average home prices,and will be subject to an additional sales discount of about 15 percent.Liquidated properties drop in value more than home price depreciation would imply primarily because they are likely to be in worse condition than a similar property without a distressed loan, Moody’s explained. The extent of valuation and sales markdowns vary widely, however, and depend on loan characteristics such as the product type, loan purpose, property type, and balance size.In general, properties located in judicial states lose more value than those in non-judicial states. Moody’s attributes this finding to the fact that loans in judicial jurisdictions face longer foreclosure timelines that allow the property to deteriorate more severely.Loans for investment properties and second homes fared worse than loans for primary residences in terms of value reductions. Moody’s points out that owner-occupants are generally more involved in property upkeep than tenants.Lower-balance loans generally are subject to higher valuation discounts. Moody’s says fixed maintenance costs and the financial means of the owner may explain why the values of properties with smaller balance loans deteriorate more than those of higher balance loans.Alt-A and option adjustable-rate mortgages (ARMs) lose more value than subprime loans, and they all see significantly larger discounts than jumbo loans. According to Moody’s inflated appraisals at origination are likely the culprit of the more sizeable value reductions down the road, especially for Alt-A and subprime loans originated in 2006 and 2007.

Fannie Mae: Three Servicers Improve Foreclosure Prevention Efforts

2012-01-04T07:41:00.002-08:00

Foreclosure activity slipped 3 percent in November when compared to the previous month, but filings at various stages of the process showed starkly different movements, according to RealtyTrac’s latest market report. Fannie Mae released the results of the Servicer Total Achievement Rewards (STAR) Program Thursday, announcing improvements by JPMorgan Chase, PHH Mortgage, and U.S. Bank. All three banks improved their foreclosure alternative practices. “The STAR program evaluates servicers’ capabilities and results and holds them accountable for preventing foreclosures and protecting the interests of American taxpayers,” said Tara Clayton, VP of servicer review and measurement at Fannie Mae.“STAR is making a difference when it comes to increasing servicers’ focus on areas of critical importance to homeowners, Fannie Mae, and the market,” Clayton stated. STAR breaks servicers into three categories based on the number of Fannie Mae loans they service. In the first peer group of 11 servicers, four are expected to receive a three STAR rating – meaning they are at or above median performance – in 2011. Those four include CitiMortgage, Everbank, GMAC Mortgage, and Wells Fargo. In Peer Group Two, six of nine servicers are expected to receive a three STAR rating at the end of the year, including Aurora Bank, FSB, Central Mortgage Company, Fifth Third Bank, The Huntington National Bank, and Regions Bank. In Peer Group Three, nine of 13 servicers are expected to be at or above median performance level. The nine banks include American Home Mortgage Servicing, Arvest Mortgage Company, Associated Bank, Capital One, Colonial Savings, Doral Bank, Manufacturers and Traders Trust, Nationwide Advantage Mortgage, and Navy Federal Credit Union.

Foreclosure Filings Down 3%, RealtyTrac Reports

2012-01-04T07:41:00.001-08:00

Scheduled auctions hit a nine-month high following the default surge that began in August. At the same time, RealtyTrac says REO activity is at a 44-month low.Total foreclosure filings – reported on 224,394 U.S. properties in November – are down by double-digits from a year ago, but RealtyTrac doesn’t view the numbers as the making of a trend.James Saccacio, co-founder of RealtyTrac, says the 14 percent year-over-year decline in filings last month is the smallest annual decrease recorded over the past year, and he points out that some bellwether states such as California, Arizona, and Massachusetts actually posted increases in foreclosure activity from November 2010.“Despite a seasonal slowdown similar to what we’ve seen in each of the past four years, November’s numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as REOs or short sales sometime early next year,” Saccacio said. Default notices (NOD, LIS) were filed for the first time on a total of 71,730 U.S. properties in November. Foreclosure auctions (NTS, NFS) were scheduled on 96,540 properties during the month, and lenders repossessed (REO) a total of 56,124 homes.Nevada posted the nation’s highest foreclosure rate for the 59th straight month. Filings rebounded 3 percent in November from a 45-month low in October, when a new law was passed altering the foreclosure process in the state. One in every 175 Nevada housing units had a foreclosure filing last month, more than three times the national average.Scheduled trustee’s sales in California hit a 10-month high in November, helping the state maintain the nation’s second highest foreclosure rate. A total of 26,509 trustee’s sales were scheduled in California last month, up 14 percent from November 2010 – the first year-over-year increase in scheduled foreclosure auctions in the Golden State since March 2010. Arizona foreclosure activity increased on a year-over-year basis in November for the first time since October 2010. With filings up 4 percent from a year earlier, Arizona posted the nation’s third highest foreclosure rate for the fifth month in a row. Substantial monthly increases in foreclosure activity in Utah and Georgia lifted those states’ foreclosure rates into the nation’s top five in November. Utah’s foreclosure rate ranked No. 4 thanks to a 74 percent monthly increase in foreclosure activity. Georgia saw a 23 percent increase in filings, giving it the No. 5 spot.Other states with foreclosure rates ranking among the top 10 were Michigan, Florida, Illinois, Ohio, and South Carolina. South Carolina cracked the top 10 for the first time since RealtyTrac began issuing its report in 2005.

Fitch: Timing and Method of REO Disposition Matters

2012-01-04T07:40:00.002-08:00

Citing data from Lender Processing Services estimating more than 2 million properties in some state of foreclosure, Fitch Ratings stated in a press release Tuesday that REO sales – both single-property and bulk sales – will be an integral component of the housing market over the next two yearsHowever, “[t]he timing and method of their disposition has significant implications for home prices,” according to Fitch, because distressed properties generally sell at a substantial discount, further exacerbated by the presence of excess inventory.While the government has been considering a range of disposition strategies to diminish some of the inventory on Fannie Mae, Freddie Mac, and the Federal Housing Authority’s books, Fitch offered its take in Tuesday’s press release. According to Fitch, allowing foreclosed homeowners to stay in their homes as rental tenants “would help reduce the inventory of distressed properties for sale and also allow the borrowers to avoid the disruption of moving.” This method would be most beneficial in areas with high concentrations of distressed properties, such as Florida, Michigan, and Ohio. Fitch estimates 10 percent of homes in these three states are in foreclosure or REO.

Congress Questions Impartiality of Independent Foreclosure Reviews

2012-01-04T07:40:00.001-08:00

At a Senate subcommittee hearing held this week to examine the progress of the foreclosure review process ordered earlier this year by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, lawmakers questioned the impartiality of the “independent reviews.”The consent orders designed in April call for the independent review of about 4.5 million foreclosure actions by 10 servicers to determine instances in which borrowers were financially harmed and compensate those borrowers. Julie Williams, first senior deputy comptroller and chief counsel for the OCC, attempted to assure the senators posing questions that the reviews would be unbiased. Williams explained that the banks proposed the independent consultants, and the OCC and Federal Reserve reviewed the proposals and rejected those in which they found a conflict of interest. When asked if many of the approved consultants have worked with the servicers previously, Williams admitted that some had. “There are a number of situations where they have done previous work for the servicers in different areas, generally, but they have had previous business engagements with those servicers.” “This raises questions about the true independence of these organizations,” Sen. Jack Reed (D-Rhode Island) stated. In her testimony, Williams stated that the OCC is requiring the independent reviewers to “ensure its work under the foreclosure review would not be subject to direction, control, supervision, oversight, or influence by the servicer, its contractors, or agents.” In its written testimony, the Federal Reserve corroborated Williams’s claim. “In determining the acceptability of consultants, the Federal Reserve closely scrutinized their independence,” stated Scott G. Alvarez, general counsel for the Federal Reserve. “Everyone involved in this process – the residential mortgage loan servicers, consultants and the regulators – has the desire to get it right,” stated Paul Leonard, vice president of the Housing Policy Council/The Financial Services Roundtable. Another witness at the hearing expressed an entirely different set of concerns. “My concern is not with the selection of independent consultants, but with the time and costs involved in such a laborious review process relative to the expected economic assessment of harm,” stated Anthony B. Sanders, professor of real estate finance at George Mason University. Sanders suggests out of the 4.5 million loans, there may be 100 instances of “egregious errors.” “Once the review is completed and the remediation for financial harm is concluded, I urge everyone to put the foreclosure issue aside and allow the market to heal itself,” Sanders stated. Meanwhile, servicers will have sent more than 4 million letters by the end of this year and will begin an advertising campaign beginning early 2012 to inform borrowers that they can request an independent review of their foreclosure action. In addition to a sample set of foreclosure actions, independent reviewers will examine all foreclosure actions on military members covered by the Servicemembers Civil Relief Act, borrowers who previously filed a complaint regarding their foreclosure, and “high risk” cases involving bankruptcy.

Prices Decline Slightly But Show Signs of Stabilizing

2012-01-04T07:39:00.002-08:00

While home values are continuing to decline, they are beginning to stabilize as the market nears the bottom, according to the Zillow Real Estate Market Report released Tuesday. Since their peak in May 2007, prices have fallen 23.7 percent, according to Zillow’s data. On a yearly basis, prices fell 5.1 percent in October, arriving at $147,000. However, on a monthly basis, prices fell just 0.3 percent, demonstrating a deceleration in decline. “As expected, home values continue to fall in the back half of this year due to an abundance of housing supply relative to demand,” said Dr. Stan Humphries, Zillow’s chief economist. “Potential buyers remain on the sidelines or doubled up in other households, despite record high housing affordability and historically low mortgage rates.”Zillow, based in Washington, measures 156 metropolitan statistical areas (MSAs) each month. In October, prices declined in 95 MSAs and rose in 39. Prices in the remaining 22 MSAs remained relatively unchanged over the month. Some of the harder hit areas are starting to see a reprieve from their sharp declines in home values. Miami’s prices remained essentially unchanged for the month, and hard-hit areas of Phoenix and Detroit saw slight gains – 0.2 percent in Phoenix and 1 percent in Detroit. On a yearly basis, 10 of the 156 MSAs experienced rising prices. In addition to stabilizing prices, Zillow reported another positive sign for the market in its most recent report. The foreclosure liquidation rate fell for in October to 8.1 out of every 10,000 homes. This contrasts the record high reached one year ago – 10.7 of every 10,000 homes. While Zillow reports some slight positive signs for the market, Humphries says the “crisis of consumer confidence along with high rates of negative equity, are the biggest factors hindering a housing recover.” “However, I’m encouraged by the positive, albeit slow, progress in working down the unemployment rate, which should help to improve consumers’ appetites for buying homes,” he continues.

Foreclosure Sales Slow on West Coast

2012-01-04T07:39:00.001-08:00

With the holiday season approaching, the research and tracking firm ForeclosureRadar is seeing declines in the number of completed foreclosures in four of the five states it monitors along the country’s West Coast. ForeclosureRadar’s coverage area includes Arizona, California, Nevada, Oregon, and Washington. Only Arizona saw foreclosure sales rise in November, up 25 percent from October. The company notes, however, that Arizona’s increase last month simply offset the 20 percent drop seen in October and is still well below the state’s average monthly sales for the year.“It’s great to see the banks slow down foreclosures and evictions for the holidays,” said Sean O’Toole, CEO and founder of ForeclosureRadar. “We expect that the numbers will drop even further in December.”ForeclosureRadar says it’s not unusual to see foreclosures slow for the holidays. Come January though, O’Toole says it will be back to business as usual with at least a small surge as banks play catch up after the delays.Foreclosure starts were up slightly in Nevada (+6.4 percent) and Washington (+5.0 percent), but ForeclosureRadar described the increases as “insignificant” given the recent declines in those states due to legislative changes and legal challenges. Notice of trustee sale filings rose 34.7 percent from October to November in California. ForeclosureRadar’s data show the increase came primarily from filings by Bank of America, up 52 percent, and Wells Fargo, up 23 percent. The company points out that it is not unusual to see an increase in foreclosure sales each January. These rise in trustee sale filings would be necessary in preparation for that, ForeclosureRadar explained. Sales to third parties, typically investors, have increased significantly year-over-year across most of ForeclosureRadar’s coverage area. The largest increases in third-party foreclosure sales were seen in Arizona and Nevada at 101.6 percent and 79.9 percent, respectively. Other states saw higher numbers as well – California, up 29.4 percent, and Washington, with a 6.7 percent annual increase.

Attorneys General Expect to Reach Settlement Before Christmas

2012-01-04T07:38:00.002-08:00

The state attorneys general and the nation’s five largest mortgage servicers have been supposedly close to a settlement for quite some time. The latest estimate, according to the Des Moines Register is that they are likely to reach a settlement before Christmas. The Des Moines Register attributes this information to Iowa Attorney General Tom Miller, head of the committee negotiating a settlement with the banks, who said thesettlement would release the banks from legal claims on past servicing and foreclosure practices but would not provide any release on claims regarding securitizations. Miller reportedly said the deal would be complete by Christmas regardless of whether or not California participates. California Attorney General Kamala Harris withdrew from settlement negotiations in October but can still rejoin. Though the exact amount of the settlement is unknown, Bloomberg reported it will likely be in the range of $25 billion. In addition, Miller told the Des Moines Register the settlement requires “substantial principal reductions” for underwater homeowners as well as a new set of servicing standards. In other developments, Bloomberg reported Monday that former chairman of the FDIC, Sheila Bair, is being considered as a monitor for the settlement. As such, she would be charged with making sure banks comply with all aspects of the agreed upon settlement.

Fed: House Flipping Led to Deeper Housing Collapse

2012-01-04T07:38:00.001-08:00

There’s been much debate over the root causes of the housing meltdown that catapulted the nation into the worst financial crisis in 80 years – from lax lending and subprime loans to over-leveraging in the secondary market. A new report from researchers at the Federal Reserve Bank of New York focuses on the sharp run-up and subsequent collapse in housing prices during the 2000s.It concludes that real estate investors who used mortgage credit to purchase multiple residential properties with the intent of flipping, or reselling them within a short period of time, played a larger role in fueling the housing bubble than previously recognized.These investors, the Fed researchers say, helped push prices up during 2004-2006, but when prices began to head south, they defaulted in large numbers, which served to intensify the housing cycle’s downward leg.Fed officials point out in their report that investors are more likely than owner-occupants to walk away from an underwater property. As such, lenders typically factor in that higher default risk by requiring larger down payments from buyers who acknowledge that they won’t be living in the house.The expansion of the nonprime mortgage market during the 2000s, however, provided the perfect opportunity for optimistic investors to get low-down-payment credit, according to the report. “Buy-and-flip” investors, in particular, were able to make higher bids on houses, even if they had relatively little cash.At the peak of the boom in 2006, the New York Fed’s researchers found that over a third of all U.S. home purchase lending was made to people who already owned at least one house. In the four states with the most pronounced boom-and-bust cycles – Arizona, California, Florida, and Nevada – the investor share was as high as 45 percent. Overall, the investor share of mortgage-financed home purchases roughly doubled between 2000 and 2006, with the largest increases seen among those owning three or more properties, according to Fed data. In 2006, Arizona, California, Florida, and Nevada investors owning three or more properties were responsible for nearly 20 percent of originations, almost triple their share in 2000, Fed officials report.“Longstanding tradition in the mortgage lending business and the predictions of economic models hold that investors will quickly default if prices begin a persistent fall. This is what happened starting in 2006,” according to the Fed researchers.From 2007 to 2009, they found that investors were responsible for more than a quarter of seriously delinquent mortgage balances nationwide, and more than a third in Arizona, California, Florida, and Nevada.“We conclude that investors were much more important in the housing boom and bust during the 2000s than previously thought,” the researchers wrote in a blog post explaining their findings. They stress that the availability of low- and no-down-payment mortgages in the nonprime sector enabled investors to make highly leveraged bets on house prices, which likely allowed the bubble to inflate further and caused millions of owner-occupants to pay more for their homes. “In the end, even the value of the 20 percent down-payments made by responsible, prime borrowers was wiped out — leaving the housing market, and the economy, in the vulnerable state we find them in today,” according to the researchers at the New York Federal Reserve.

Mortgage Default Risk Edging Toward 'Normalcy'

2012-01-04T07:37:00.001-08:00

Lenders and investors should expect defaults on mortgage loans currently being originated to be 31 percent higher than the average of loans originated in the 1990s, according to a new report from University Financial Associates (UFA).The UFA Default Risk Index for the fourth quarter of 2011 edged lower to 131 from last quarter’s revised 133. The index’s baseline of 100 correlates to the default risk of loans made during the 1990s.As a point of comparison, UFA’s index reading measuring the risk associated with mortgage default was 141 as recently as the first quarter of this year. For what UFA says were the worst vintages of this cycle (2006-2008), the default index soared above 225. UFA says its Default Risk Index finds that residential mortgage default and prepayment risks are continuing their return to normalcy.“Despite continuing high unemployment and the threat of contagion from Europe, our Default Risk Index has improved,” said Dennis Capozza, who is the Dale Dykema professor of business administration in the Ross School of Business at the University of Michigan, and a founding principal of Ann Arbor, Michigan-based UFA. “With consumer balance sheets improving and mortgage rates at record lows, the stage is set for a recovery in the housing market, for which lenders and investors may do well to prepare. We await the catalyst,” Capozza said.The UFA Default Risk Index measures the risk of default on newly originated prime and nonprime mortgages. UFA’s analysis is based on a “constant-quality” loan, that is, a loan with the same borrower, loan, and collateral characteristics. Each quarter, UFA evaluates economic conditions in the United States and assesses how these conditions will impact future mortgage defaults, prepayments, loss recoveries, and loan values.The index reflects only the changes in current and expected future economic conditions, which the company says “are much less favorable currently than in prior years.” UFA’s current assessment has GDP growing just above trend for the next two years and at trend thereafter, but does not envision another recession.

GSE Execs Say Defined Foreclosure Timelines Are Necessary

2012-01-04T07:36:00.000-08:00

Representatives from both Fannie Mae and Freddie Mac upheld the companies’ practice of assessing penalties against servicers who fail to meet defined timelines for processing foreclosures. Speaking to mortgage professionals at the Five Star MPact Conference in Dallas, Steve Clinton, Freddie Mac’s SVP of single-family operations, said “clearly the better outcome for both Fannie and Freddie is to keep the borrower in the home” with a loan modification offered early in the default process.But as Edward Seiler, a director in Fannie Mae’s National Servicing Organization, acknowledged, sometimes servicers are faced with a difficult decision – sometimes “a borrower just shouldn’t be in that home,” Seiler said. In such a situation, it’s critical that servicers complete the foreclosure process in a timely manner to clear bad loans from the pipeline and limit losses for the GSEs and taxpayers, according to the companies’ execs. Rep. Elijah Cummings (D-Maryland) recently began inquiring about policies in place at Fannie and Freddie that fine servicers when they don’t complete a foreclosure action within the window of time established by the GSEs’ servicing guidelines. Cummings says internal records show the GSEs assessed $150 million in fines against servicers last year for not processing 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 said in a letter sent last month to Edward DeMarco, acting director of FHFA. Cummings cites a June 2010 report from FHFA’s Office of Conservatorship Operations which concluded that “servicers, attorneys, and other supporting personnel were overloaded with the volume of foreclosures … documentation problems were evident, and law firms … were not devoting the time necessary to their cases.”Clinton and Seiler stress that the foreclosure timeline mandates come into play only after all loss mitigation options are exhausted.“Our biggest problem was loans from a year and two years ago were just sitting there,” stagnant in the foreclosure pipeline, Clinton said. Fannie Mae and Freddie Mac have synchronized their individual foreclosure timeline requirements with the coordinated Servicing Alignment Initiative that went into effect October 1. Clinton notes that the timelines and penalties have been in place for some time, but with the newly enacted guidelines, the GSE have aligned their parameters in order to help simplify and standardize procedures for their servicers. “We don’t want the money” from penalties, Clinton said, “we want the behavior,” in terms of servicer compliance with both foreclosure prevention and foreclosure processing procedures.In today’s environment of mass default, Clinton says the industry needs mass loss mitigation – effective procedures, standardized evaluations, and timely resolutions.

Bill Proposes Limitations on Deficiency Judgments

2012-01-04T07:35:00.002-08:00

Rep. Ed Towns (D-New York) has introduced a new bill to limit the period of time during which a bank can bring deficiency judgments against foreclosed borrowers. Currently, the window during which a lender may pursue a deficiency judgment varies by state and can be anywhere from six months to six years. The Fairness in Foreclosure Act (H.R. 3566) would prohibit lenders from pursuing deficiency judgments more than 12 months after foreclosure, except in states with shorter windows for deficiency judgments. The act also aims to restrict deficiency judgments against all low-income families. Additionally, if the amount secured through foreclosure sale does not recover the full amount owed to the lender, the bank would not be allowed to report the deficiency to consumer reporting agencies as an unpaid debt from the borrower. “A deficiency judgment after foreclosure seems to be one of the greatest injustices that occur to homeowners after they have gone through the arduous foreclosure process,” Towns stated in a press release announcing the Fairness in Foreclosure Act. “Not only are they behind by thousands of dollars on their mortgage payments and facing public auction of their houses, the ordeal may continue indefinitely,” Towns continued.

National 'Occupy Our Homes' Day Kicks Off New Occupy Initiative

2012-01-04T07:35:00.001-08:00

Last month the Occupy Oakland movement announced its intention to occupy vacant properties. On Tuesday, Occupy Oakland was one of 25 local Occupy groups to observe a national “Occupy Our Homes” day. “This Tuesday, thousands will be standing up for their neighbors in a struggle against a system that places financial gain above the human need for shelter,” said a statement on the Occupytogether.org website prior to the event.The statement referred to the trillions of dollars in loans the banks received from the Fed and the billions borrowed from taxpayers through TARP, and went on to say, “Homeowners take risks when buying homes; however, when they lose their jobs or are unable to afford their medical attention, they don’t get bailouts, they lose everything.” Several Occupy movements made the first steps to occupy foreclosed homes or homes in the process of foreclosure. Occupy Atlanta members started their day on courthouse steps in Fulton, Gwinnett, and DeKalb Counties. “Over 200 Occupy Atlanta protesters descended on the Fulton County courthouse steps with whistles, sirens, drums, and blow-horns and made it as difficult as possible for the auction to continue,” according to the Occupy Atlanta website. Protesters then visited the homes of two homeowners facing foreclosure to demonstrate their support and their intention to continue to occupy the homes despite foreclosure actions. “This is only the beginning of the fight against Foreclosure and lack of housing in America,” states the Occupy Atlanta website. Occupy Brooklyn members marched through a Brooklyn neighborhood “to liberate a foreclosed home,” according to their website. Like the Occupy Atlanta movement, Occupy Brooklyn made it clear that this is just the beginning of a new initiative for the movement. “This action is part of a national kick-off for a new frontier for the occupy movement: the liberation of vacant bank-owned homes for those in need,” stated a post on the Occupy Brooklyn website.

Industry Approaches 1M Loan Modifications This Year

2012-01-04T07:34:00.002-08:00

About 885,000 borrowers have received permanent loan modifications this year, according to October data from HOPE NOW. The voluntary alliance of mortgage industry participants announced last month that the industry had completed 5 million modifications since 2007. “With almost a million loan mods completed this year, it is clear that the industry and its partners continue to invest a tremendous amount of resources into assisting homeowners across the country,” said HOPE NOW executive director Faith Schwartz Wednesday with the release of the October data. The industry completed almost 80,000 modifications in October after completing a little more than 90,000 in September. Of the 80,000 modifications completed in October, more than 53,000 were proprietary modifications, while 26,102 were completed through HAMP. Of the year-to-date modification total of 885,000, about 582,000 are proprietary, while 303,426 were completed through HAMP. About 79 percent of all proprietary loan modifications completed in October included principal and interest payment reductions. On about 74 percent of the loans, the reductions in principal and interest were at least 10 percent. Additionally, about 86 percent of proprietary modifications completed in October were fixed-rate modifications. HOPE NOW also reported that foreclosure starts rose during the month of October, while foreclosure sales fell. Foreclosure starts increased 7 percent, rising from 196,000 in September to 209,000 in October. Foreclosure sales fell 5 percent over the month from 68,000 to 64,000. Delinquencies of 60 days or more fell along with foreclosure sales, dropping 6 percent from 2.81 million in September to 2.65 million in October. While Schwartz credited the industry for its efforts in accomplishing more than 5 million loan modifications since 2007 and its evolving efforts in borrower outreach, she stated, “The work is not done.” However, HOPE NOW continues to conduct borrower outreach events throughout the nation to assist struggling homeowners. “HOPE NOW recently wrapped up its 2011 homeowner outreach schedule – including 15 separate events with close to 12,000 attendees. Events are being planned for the first quarter of 2012 in Charlotte, Miami and Tampa, plus several cities to be determined,” Schwartz said.

LPS Technology Safeguards Against Foreclosing on Military Personnel

2012-01-04T07:34:00.001-08:00

Florida-based Lender Processing Services (LPS) has added additional functionality to its MSP loan servicing platform that the company says will help servicers better track and manage loans belonging to military service members.LPS’ Military Service Relief (MSR) workstation adds 30 fields to MSP to allow servicers to identify and process loans protected under the Servicemembers Civil Relief Act (SCRA), while providing stop-gap measures to guard against foreclosing on military personnel. SCRA prohibits mortgage servicers from foreclosing or seizing property from active-duty military personnel unable to meet their mortgage obligations. The protection from foreclosure lasts up to nine months after active duty has ended, and service members also qualify for interest rate limits and other shields under the law.“Due to the current mortgage environment, LPS saw a widespread need to add additional holds and stop-gap measures to help servicers identify loans belonging to our nation’s military personnel,” said Joseph Nackashi LPS’ chief information officer.“The expanded functionality can capture and store information about a borrower’s active duty status, while other unique identifiers detect SCRA-eligibility to ensure fees are not assessed or collected in error and that payoff interest is calculated using the correct SCRA rate limits,” Nackashi explained.LPS says future MSR enhancements will deliver additional functionality related to default and credit bureau reporting, as well as reconciliation of advances.The company’s MSP is used to service approximately half of the nation’s mortgage loans by dollar volume.

GSEs Total 2 Million Foreclosure Prevention Actions

2012-01-04T07:33:00.000-08:00

Servicers for Fannie Mae and Freddie Mac have completed almost 2 million foreclosure prevention actions for the two companies since they went into conservatorship in 2008, according to the Federal Housing Finance Agency’s (FHFA) third-quarter report.More than half of these actions have been loan modifications, and of the remainder, about 676,500 have kept homeowners in their homes. About 269,700 were short sales or deeds in lieu. The number of loans modified by the GSEs in the third quarter was 3 percent higher than that of the second quarter. The GSEs modified 83,600 loans during the third quarter. About two-thirds of loan modifications completed during the third quarter included repayment reductions of more than 20 percent.Fannie and Freddie also completed 48,900 repayment plans and 7,000 forbearance plans in the third quarter. The number of borrowers in HAMP trial periods declined from 51,000 at the end of the second quarter to 42,300 at the end of the third quarter. The FHFA says this decline occurred as borrowers completed their trial modifications and received permanent modifications. About 22,600 trial modifications graduated into permanent modifications in the third quarter. The total number of loans modified under HAMP since its inception falls just short of 400,000 at 380,300. The GSEs also increased the number of loans refinanced under the Home Affordable Refinance Program (HARP) in the third quarter.HARP refinancings increased 11 percent over the quarter, bringing the total to 928,600. Additionally, over the third quarter, the GSEs saw serious delinquency rates decline from 3.85 percent to 3.81 percent. However, the percentage of homeowners between 30 and 59 days delinquent increased from 2.04 percent in the second quarter to 2.07 percent in the third quarter. REO inventory decreased from 196,000 to 182,000 over the quarter.inance Agency’s (FHFA) third-quarter report

Treasury to Withhold Foreclosure Prevention Incentives from Two

2012-01-04T07:32:00.002-08:00

The U.S. Treasury said Wednesday that it will continue to withhold incentives from JPMorgan Chase and Bank of America for modifications, short sales, and deeds-in-lieu completed through government programs.JPMorgan is the only servicer participating in Treasury’s Making Home Affordable program that was determined to need “substantial improvement” in complying with program guidelines during the third quarter. The company – now said to be the largest U.S. bank by assets – was also in need of “substantial improvement” during the first and second quarters of this year. JPMorgan’s servicer incentives have been withheld since the first assessment was made at the conclusion of Q1.Treasury called out JPMorgan in its report for the servicer’s “lack of progress in implementing previously identified improvements.”Bank of America was given a grade of needing “substantial improvement” during the first and second quarters, but moved up a notch on the assessment scorecard to needing only “moderate improvement” for the third quarter. Still, Treasury says it “will continue to withhold servicer incentives from Bank of America, NA, until it makes additional improvements.”Treasury’s quarterly compliance assessments cover the 10 largest servicers participating in the Making Home Affordable program.Six other servicers were also found to need “moderate improvement” during the third quarter: American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, Ocwen, and Wells Fargo. Incentives are not being withheld from any of these program participants.Two servicers met the established benchmarks for program compliance, indicating that they require just “minor improvement” on the areas reviewed for the third quarter: OneWest Bank and Select Portfolio Servicing.Treasury says when Making Home Affordable began, “most servicers did not have the staff, procedures, or systems in place to respond to the volume of homeowners struggling to pay their mortgages, or to respond to the housing crisis generally.” Officials note that participating companies have taken specific actions to better their servicing processes. “While the servicers have improved their performance, they still have more progress to make,” according to Treasury. Treasury says its decision to make individual servicer assessments public is intended to push servicers to correct identified shortfalls. Treasury notes that participation in Making Home Affordable – including the Home Affordable Modification Program (HAMP) and the Home Affordable Foreclosure Alternative (HAFA) program– is voluntary. As such, Treasury does not have the authority to impose fines or penalties, but can take certain remedial actions for non-compliance such as withholding incentive payments.

Mortgage Delinquencies to Decline in 2012: Study

2012-01-04T07:32:00.001-08:00

The current year will close with a 7 percent yearly decline in mortgage delinquencies, matching last year’s decline, according to predictions released Wednesday by TransUnion. The percent of borrowers 60 days or more delinquent will fall to 5.95 percent by the end of the year, and will fall to 5 percent by the end of 2012, according to TransUnion. However, despite yearly declines, the forecasters expect a slight rise in delinquencies through the first quarter of 2012.After reaching 6.02 percent in the first quarter, delinquencies will decline for the following three quarters, the forecasters predict. Tim Martin, group VP of U.S. housing in TransUnion’s financial services business unit, believes house prices and unemployment will continue to pose problems for the market in the coming year, but the market will see some positive movement due to “improving credit quality of new originations, consumer confidence, and GDP.” “If things go as expected, there are no additional negative shocks to the U.S. economy and the average borrower’s situation, mortgage delinquencies could fall as much as 16% in 2012 compared to 2011,” Martin said. While the nation is expected to experience overall declines in mortgage delinquencies in the coming year, 12 states and the District of Columbia will likely see increases. Thirty-eight states will experience declines. TransUnion expects Florida, Nevada, and the District of Columbia to close the fourth quarter of 2012 with the highest delinquency rates. Florida and Nevada will be seeing double-digit delinquency rates at 13.20 percent and 11.09 percent respectively. The District of Columbia will follow with a rate of 7.91 percent. At the other end of the spectrum, North Dakota will see the lowest delinquency rate in the nation at the end of 2012 at 1.3 percent. South Dakota and Wisconsin will follow with rates of 1.96 percent and 2.11 percent respectively.

Experts Advocate Stabilizing Neighborhoods with Short Sales

2012-01-04T07:31:00.002-08:00

Foreclosures are going to go up before they go down,” according to Craig Nickerson, president of the National Community Stabilization Trust.Nickerson says estimates put foreclosure tallies at 850,000 this year, as high as 1.5 million in 2013, and then back to the levels we’re at today by 2015. With all these distressed properties potentially making their way to an already stressed marketplace, Nickerson, along with a panel of industry professionals at the inaugural MPact Conference advocated for bulk short sales.The panel discussion centered around neighborhood stabilization initiatives and HUD’s $7 billion program created to facilitate the rehabilitation of properties in communities challenged with high levels of foreclosures and property vacancies – aptly named the Neighborhood Stabilization Program (NSP). “Foreclosure prevention by itself is not going to [be the] cure” for the housing crisis, Hala Farid, deputy director of Citigroup’s Office of Homeownership Preservation, told those attending the standing-room-only session. Farid says Citi is devising a procedure where NSP program participants will have access to escalated points of contact to expedite the short sale process in support of neighborhood stabilization efforts.Francis Martinez Myers, president of Employee Transfer Corporation (ETC) and ETCREO Management, said the industry is “on the cusp” of utilizing short sales as a viable means of stabilization, “but it’s not without its challenges,” she added.“Lenders have to be aggressive about offering pre-approved listing prices for short sale properties,” according to Myers. She says having pre-approvals in hand would help facilitate transactions for bulk short sales.Myers described the size and magnitude of this crisis as unprecedented. “I feel like we are in a five-alarm fire and we are still negotiating over which kind of garden hose we’re going to use … If we’re not careful and not aggressive, it’s going to be very difficult to get through this,” she said.“Holistically we’re not doing enough fast enough,” according to Myers. Just “selling one house at a time, means 10 years from now we’ll still be here having this conversation,” Myers said. She spoke of the advantages of tailoring services that are geared toward investors and nonprofit groups to facilitate bulk purchases of short sale properties. Myers says her organization is working on a pilot initiative which aggregates available short sales in the market, pools together properties meeting investors’ and nonprofits’ qualifications, and lines them up for inspection. Tyler Smith, VP of Wells Fargo’s REO disposition team, noted that managing investor participation with communities’ neighborhood stabilization efforts “can sometimes be a conflict of interest.”According to Jerome Devadoss, manager of alternative dispositions for Fannie Mae’s REO sales operation, it’s important to engage community-minded investors to work alongside local nonprofits toward neighborhood stabilization, whether it’s through short sales or any other loss mitigation strategy.Jim O’Donnell, manager of the West Coast REO Revitalization Program at Chase, says his company is exploring ways to facilitate short sales to nonprofit organizations. Chase is looking to make short sales and distressed portfolios part of its “First Look” program.Short sales are increasingly making their way into the conversation as a practicable solution to support neighborhood stabilization. Eric Will, senior REO sales director for Freddie Mac’s HomeSteps division, said “knowledge around this [short sale] space is growing. We know it needs to be done.”

Analysts: Market Recovery On the Horizon But Will Vary by Location

2012-01-04T07:31:00.001-08:00

With about 800,000 REOs and about 1 million properties in some stage of default, according to Rick Sharga, EVP of Carrington Mortgage Holdings, it is difficult to see the light at the end of the tunnel. However, that is just what a group of four analysts – including Sharga – tried to do at a panel Monday at the Five Star MPact Mortgage Banking Conference and Expo. “In every previous recession, housing has brought us out of the recession,” Sharga said, but in this recession, “it dragged us in.” As a result, he says, recovery this time will be a bit different. “Inventory continues to outpace sales,” Sharga said, and as long as this is the case, the market cannot recover. However, Eugenio Aleman, director and senior economist at Wells Fargo, pointed out that the economy is growing – though the pace remains slow. Unemployment remains high, but the economy is adding jobs – slowly. “In 10 years, we’ll be saying, ‘Why didn’t we buy a house today?’” said Aleman. “This is the best time to buy.” While Aleman does not know for sure when interest rates and prices will rise, he is certain they will. According to Sharga, foreclosures should have peaked this year, and recovery should have started in the coming year. However, foreclosure delays due to robo-signing have hindered this process. Ultimately, market recovery will depend on a number of variables and differ greatly by locale, according to Eric Fox, VP of statistical and economic modeling for Veros Real Estate Solutions. For example, in the New York metropolitan area, a projection about 12 months ago saw the market falling 3 percent, but this rate came with a 13 percent spread, depending on the type of property and neighborhood, Fox said. Local variables contributing to and detracting from market recovery include price-to-rent ratio, population trends, affordability, school districts, and more. Another factor contributing to market recovery is whether a state is a judicial or non-judicial state. Kostya Gradushy cites data predicting it will take eight years to clear the foreclosure inventory in judicial states and three years in non-judicial states.

Foreclosure Crisis Isn't Even Halfway Over: Study

2012-01-04T07:29:00.000-08:00

The foreclosure crisis has had a long and destructive run – five years and counting, with millions put out of their homes. According to the Center for Responsible Lending (CRL), we’re not even halfway through the devastation.The organization’s analysis of 27 million mortgage loans originated over a five-year period found that 6.4 percent of mortgages made between 2004 and 2008 have ended in foreclosure, and an additional 8.3 percent are at immediate, serious risk.The study also offers up evidence that foreclosure patterns are strongly linked with patterns of risky lending. According to CRL, foreclosure rates are consistently worse for borrowers who received high-risk loan products that were aggressively marketed before the housing crash, such as loans with prepayment penalties, hybrid adjustable-rate mortgages (ARMs), and option ARMs.Looking at the demographics of foreclosure casualties, CRL found that the majority of people affected by foreclosureshave been white families. However, borrowers of color are more than twice as likely to lose their home, the organization says.According to CRL, these higher rates reflect the fact that African Americans and Latinos were consistently more likely to receive high-risk loan products, even after accounting for income and credit status.African Americans and Latinos were much more likely to receive subprime loans with high interest rates and loans with features that are associated with higher foreclosures, CRL explained. The nonprofit group found that these disparities were evident even when comparing borrowers within the same credit score ranges, with the gap especially pronounced for borrowers with higher credit scores. “Our study provides further support for the key role played by loan products in driving foreclosures,” CRL said. “Specific populations that received higher-risk products-regardless of income and credit status-were more likely to lose their homes.”While some blame the subprime disaster on policies designed to expand access to mortgage credit, CRL says the facts undercut these claims.Instead, the group argues that dangerous products, aggressive marketing, and poor loan underwriting were major drivers of foreclosures in the subprime market. CRL credits the Dodd-Frank Act as the first vital step taken to strengthen mortgage protections by restricting the use of risky products and requiring lenders to consider each borrower’s ability to repay a loan. “These new rules will certainly have a positive effect on the success of future mortgages,” CRL said.

Thirty-Year Fixed Mortgage Rate Drops to 4%

2011-11-08T08:27:00.001-08:00

Novemner 2011

Mortgage interest rates dropped sharply this week as investors rushed to U.S. Treasury bonds amid concerns over the European debt crisis.

Data released by Freddie Mac Thursday puts the average rate for a 30-year fixed mortgage at 4.00 percent (0.7 point) for the week ending November 3rd. That marks its second lowest reading since hitting an all-time low of 3.94 percent in early October.The 30-year rate fell 10 basis points from 4.10 percent last week. Last year at this time, it was averaging 4.24 percent. The GSE’s regular weekly survey averages rate data from 125 lenders across the country. This week, the 15-year fixed-rate mortgage came in at 3.31 percent (0.7 point). It fell almost as much, down from 3.38 percent last week. A year ago at this time, the 15-year fixed rate was 3.63 percent. Adjustable-rate mortgages (ARMs) declined as well this week. The 5-year ARM dropped from 3.08 percent last week to 2.96 percent (0.6 point). The 1-year ARM slipped from 2.90 percent to 2.88 percent (0.6 point).“Market concerns over the European debt market drew investors to U.S. Treasury securities, lowering bond yields and mortgage rates,” explained Frank Nothaft, Freddie Mac’s chief economist. “Meanwhile, on the home front, the U.S. economy continued its gradual recovery.”Nothaft pointed to stats from the Bureau of Economic Analysis, which showed the economy grew 2.5 percent in the third quarter, the strongest pace in a year, as consumers stepped up spending. Consumer sentiment, as measured by the Thomson Reuters/University of Michigan index, rose for the second month in a row in October. Nothaft notes that last month’s reading was the highest since July.

CoreLogic Records Second Consecutive Decline in Home Prices

2011-11-08T08:25:00.001-08:00

November 2011

CoreLogic released its latest market analysis of residential property values Monday. The company’s index shows U.S. home prices fell another 1.1 percent between August and September.

It marks the second consecutive monthly decline recorded by CoreLogic and signals price depreciation is deepening. The company’s previous report documented a 0.4 percent drop in national home prices between July and August.Paul Diggle, property economist with the research firm Capital Economics, says 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.”Diggle adds that “prices may well fall further in the closing months of the year and, despite housing appearing very undervalued, prices probably won’t rise for several years.”CoreLogic’s September reading puts home prices 4.1 percent below their year-ago level. That follows a decline of 4.4 percent in August 2011 compared to August 2010. Those figures include distressed sales – REO and short sale transactions. If you take the distress factor out of the equation, home prices are still on a downward trajectory, but not as far off the mark. Excluding distressed sales, year-over-year prices declined by 1.1 percent in September when compared to a year earlier, according to CoreLogic.“Even with low interest rates, demand for houses remains muted. Home sales are down in September and the inventory of homes for sale remains elevated,” commented Mark Fleming, chief economist for CoreLogic. Fleming says home prices are adjusting to correct for the supply-demand imbalance, and as a result, he expects declines to continue through the winter. “Distressed sales remain a significant share of homes that do sell and are driving home prices overall,” Fleming added.According to CoreLogic’s latest report, the five states with the highest home price appreciation in September included: West Virginia (+7.0 percent), Wyoming (+3.8 percent), South Dakota (+3.6 percent), Maine (+3.5 percent), and North Dakota (+3.1 percent).The five states with the greatest depreciation were: Nevada (-12.4 percent), Illinois (-9.2 percent), Arizona (-9.0 percent), Minnesota (-8.3 percent), and Georgia (-7.2 percent).

Ten Field Service Approaches to Protect the Value of REO Properties

2011-11-08T08:24:00.002-08:00

November 2011

Everything feels “stuck.” The unemployment rate hovers above 9 percent. The stock market languishes. Consumer confidence remains low. Businesses remain cautious about investing. And government at every level seems to be in gridlock.

Similarly, the inertia in the housing market continues. The National Association of Realtors reported that nearly 4 million homes were for sale nationally at the end of July, more than a nine-month supply at the current rate of sales. According to RealtyTrac, an additional 800,000 bank-owned REO properties are on the market, and another 800,000 properties are in some stage of foreclosure.When you add estimates that the loans on 3.5 million more homes are seriously delinquent and up to one-third of all homeowners owe more on their homes than they are valued at, we shouldn’t expect a housing recovery any time soon.Certainly, efforts are underway to help stabilize the market, and that is positive news. Federal housing agencies recently solicited ideas from the private sector to dispose of nearly a quarter-million properties in U.S. government possession as a result of foreclosures on government-backed mortgages. Servicers remain vigilant in efforts to help keep distressed homeowners in their homes. When that is not possible, they are working with municipalities and land banks to restore surplus properties to homeownership or repurpose them for community use. Effective solutions to revive the market will take time. Meanwhile, upholding the condition, value, and ultimately the marketability of REO properties; protecting surrounding properties; and minimizing REO portfolio losses will continue to pose a significant challenge for servicers and investors. Field service companies are critical partners in helping the mortgage industry address this challenge. Here are 10 ways to do that:1. Break through silosProtecting the condition and value of REO properties actually begins in pre-sale. However, the organizational structure of many servicing shops separates the pre-sale and REO functions. As a result, the communications gap between the two can create delays in the foreclosure process. Field service companies can align their internal processes to break through these silos. By coordinating pre-sale and REO activities on behalf of their servicing clients, field service companies can help facilitate faster and higher value sales and reduce maintenance costs.2. Focus on qualityHigh property volumes are no excuse to skimp on quality. In fact, it is the reason why focusing on quality is more important than ever. Mistakes waste time and money, and they ruin property values. Field servicers have a responsibility to support their services with a comprehensive and continuous quality assurance program that touches every department, function, and service line across the field servicing spectrum. Investing in an independent, cross-functional quality program allows a field service company to collect, track, and evaluate data, and take actions to improve outcomes and address problems before they impact customers.3. Build strong vendor networksVendors are the lifeblood of the field service industry to inspect, maintain, and repair properties on behalf of servicers and investors. As the field service industry has grown more specialized, vendor certification has become essential to assure that vendors are properly trained and qualified for the services they perform. Providing vendors with access to the latest technologies to utilize in the field is critical to help them work more safely and efficiently. Providing contractors with secure, remote access to current property information allows them to verify a property’s status and access other information to help minimize field errors. 4. Connect servicers and municipalitiesHelping servicers to minimize code violations is crucial to protect their reputations, protect properties, and avoid costly fines. By offering a centralized portal that allows servicers and municipalities to connect directly with one another to post, manage, and monitor all code issues, field servicers provide an invaluable service. Additionally, field service companies play a key role in building relationships with code enforcement departments on behalf of mortgage servicers by providing education, assistance, and resources to help code officials do their jobs more effectively. 5. Optimize rehab investmentsServicers must strike a delicate balance to improve and repair REO properties to maximize both marketability and return on investment. Field service companies can take the headache out of this process by delivering a comprehensive, streamlined approach to help servicers evaluate the REO properties in their portfolios and make informed decisions utilizing information collected in the system, and without the need to make extra trips to the property. Other important components include flat-rate pricing that locks in costs and eliminates the need for a competitive bidding process, and quality guarantees to assure that work is performed correctly and to the highest standards. 6. Manage and reduce utility costsManaging payments, transfers, and other aspects of utilities at REO properties is one of the biggest challenges for portfolio managers. A comprehensive utility management solution saves time and money and reduces the administrative burden for servicers and investors. A centralized system offers a one-stop source to manage the transfer of all utilities, negotiate lower rates and weed out hidden costs, perform utility invoice audits, process payments, and provide advanced utility reporting to project and manage future utility expenditures. Additionally, negotiated utility discounts may be passed along to new home buyers, enhancing the marketability of REO properties. 7. Manage tenant occupancyTitle VII of the federal government’s Helping Families Save Their Homes Act allows tenants in foreclosed homes secured by government-backed mortgages to maintain possession for the duration of any legal, written lease agreement. In cases where no lease exists or the tenant’s occupancy is month-to-month, the tenant is entitled to 90 days’ notice of eviction. During this tenancy period, the servicer or investor must act as the property landlord to maintain the property to code, perform services required under the lease, and address property emergencies. Field service companies play an important role in maintaining tenant-occupied properties for their clients and responding to the urgent needs of tenants. By offering a 24-hour phone number and utilizing their extensive vendor networks to perform routine maintenance services and respond to emergencies, field service companies reduce the risks and management burdens of servicers and investors who suddenly find themselves serving as landlords. 8. Address HOA challengesIncreasing numbers of REO properties are within condominium or homeowners associations (HOAs). The challenges facing these properties are significant. Associations are unsure of where to send demands for payments of fees or threats of liens. Neighboring homeowners are burdened with the maintenance costs until the property moves through foreclosure and either the lender or a new owner assumes responsibility. Remaining homeowners often are forced to pay higher dues to compensate for uncollected dues. If the HOA fails to maintain a vacant property, it can negatively affect the value of surrounding properties and turn off prospective buyers. Field service companies can effectively address these challenges on behalf of servicers and investors. They can initiate contact with HOAs to assure that dues are paid, the property does not incur liens, and that maintenance issues are addressed. Field servicers also can monitor dues and fees to assure that servicers and investors do not incur “junk” fees and other inappropriate charges.9. Identify alternative disposition strategiesIn today’s overstocked housing market, the reality is that not all REO properties will sell through traditional channels. Especially with low-value, high-risk properties, servicers need alternative strategies to remove these properties from their balance sheets in a responsible way. Field service companies can be partners in helping to identify these opportunities in communities across the country and reduce the financial burden and reputational risk for servicers. Whether the opportunities are large-scale bulk transactions or transfers to land banks, land trusts, or neighborhood development agencies, responsible disposition strategies can relieve servicers of carrying costs, liabilities, and liens, and provide a reasonable alternative to charge-offs. From a community perspective, such strategies can reduce blight and protect the integrity and value of surrounding properties and neighborhoods. 10. Utilize more effective productsTwo of the most challenging and dangerous issues with vacant properties are break-ins and unsecured pools. Several new products have been introduced to keep properties more secure, in most cases costing little more than their traditional counterparts, and paying for themselves in effectiveness. Three examples that field service companies should consider include: 1) A new heat-treated lock that inserts into a door’s deadbolt hole and fastens to the door jam with heavy-duty screws. This lock replaces a hasp-and-padlock system and costs only slightly more, yet it vastly improves security because it can’t be easily kicked or broken to give intruders quick access to a vacant property; 2) A new polycarbonate window covering that replaces plywood boards and looks like a normal window. It is secured in a similar fashion as bolt-boarded plywood covering and vastly improves the appearance of vacant properties, making them less likely targets for vandalism and more aesthetically appealing to surrounding neighbors;3) A new mesh pool cover that keeps pools safer, costs about the same and installs more quickly than traditional boards and covers. With a break-strength of 4,000 pounds, the mesh material keeps debris from falling into the pool, prevents water from collecting on the surface of the covering, and minimizes mosquito infestations.No one knows for sure when our nation’s stalled economy will pick up, or when prospective buyers will regain their confidence in homeownership. We only know that a recovery will come eventually, as it always does. Until the housing market recovers, field service companies are vital partners with servicers and investors to uphold the condition, value, and marketability of REO properties and reduce the risk of portfolio losses. Ultimately, our collective goal is to protect the nation’s housing stock – on behalf of our clients, in the interests of communities across the country, and for the benefit of prospective buyers and their families who aspire to homeownership. Alan Jaffa is CEO of Safeguard Properties, the largest privately held mortgage field service company in the United States. Kathy Cogan serves as the company’s assistant VP of account management in the REO service line.

Hudson & Marshall to Auction Over 100 HUD REOs This Saturday

2011-11-08T08:24:00.001-08:00

November 2011

Hudson & Marshall has once again been selected to partner with HUD to auction over 100 foreclosed homes located in Nevada and Arizona. The auction will take place this Saturday, November 5th at the JW Marriott in Las Vegas

With interest rates at historic lows and a surplus of inventory, Hudson & Marshall says there has never been a better time for owner occupants or investors to buy.“We are excited to be able to once again work with HUD to assist the agency in its efforts to provide quality affordable homes to all,” said Dave Webb, principal for Hudson & Marshall. There will be two separate buying opportunities November 5th. The first auction scheduled at 11:00 a.m. is for owner occupants only and will feature approximately 70 properties in the Las Vegas area. Buyers must certify that they have not purchased a HUD-owned property within the past two years as an owner occupant, and acknowledge they will occupy theproperty as a primary residence for at least 12 months. Qualified buyers may receive special Federal Housing Administration (FHA) $100 down homebuyer financing and up to 3 percent in closing costs paid by HUD. The second auction at 3:00 p.m. is open to all bidders and will feature approximately 40 properties in Arizona and Nevada. There will be no limitation on the number of homes a buyer can purchase and the buyer is not required to occupy the property. “Purchasing homes through the auction process often allows buyers to grab properties at discounted prices compared to homes purchased through the traditional method,” Webb noted.All properties auctioned by Hudson & Marshall are sold “as-is” and buyers should inspect properties before placing any bids. These are reserve auctions where the seller has the right to accept, reject, or counter any bid. However, Hudson & Marshall says in past auctions it’s conducted, the majority of offers have been accepted.HUD will pay a 3 percent ($1,250 minimum) selling agent commission to qualified brokers who are registered with HUD. Hudson & Marshall has sold over 80,000 REO homes for sellers in the past 10 years. The company says its accelerated sales process enables the company to swiftly and efficiently sell large volumes of property in a way that minimizes expenses for sellers and maximizes return. Over the past five years alone, Hudson & Marshall’s total sales have topped $3.5 billion and the company anticipates selling another 15,000 homes in 2011.

Home Price Growth Has Dissipated With the Summer Heat: Clear Capital

2011-11-08T08:23:00.001-08:00

November 2011

Temperatures are falling, and so are home prices in most local markets. Clear Capital says it’s expecting another long winter as the housing industry tries to cope with the downward forces of weak demand, record-low consumer confidence, and distressed inventory.

Quarterly home price gains through October retreated to near-flat levels with only 0.6 percent growth at the national level, compared to the 3.5 percent quarterly increase reported by Clear Capital in September.The California-based valuation company says the seasonal gains seen during the stronger spring and summer months have not been enough to push year-over-year home prices into the black. Clear Capital’s October index reading puts national home prices 2.8 percent below a year ago. It marks the 13th consecutive month that annual price changes have fallen on the minus side of the data chart. “October home price gains have leveled out, confirming what our data has pointed to over the last several months,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “Short term gains have been nearly eliminated while longer term performancemeasures point to mostly negative territory through the turn of the year.”Across the nation, local markets experienced a general downward trend in October as the highest performing markets posted softer gains and the lowest performing markets experienced stronger declines.The West is showing continued weakness and Clear Capital says it is the first region to dip into negative territory coming off the summer months, posting a loss of 1.0 percent quarter-over-quarter in October, compared to a 0.3 percent quarterly increase the month before. On an annual basis, the West is also posting the largest decline, with home prices down 5.5 percent. The Midwest checked in with solid quarterly growth of 2.6 percent last month, but when compared to the previous month’s growth of 7.2 percent, Clear Capital says it’s clear the strong Midwestern markets are also starting to feel that oncoming winter chill. Looking at individual metro areas, Clear Capital’s data show Cleveland, Ohio, was the highest quarter-over-quarter performer last month with a 6.2 percent price increase, while Las Vegas, Nevada, was the lowest performing market with a 3.4 percent decrease.Price differentials between high-performing and low-performing markets can largely be attributed to the number of distressed properties changing hands. As a whole, the REO saturation rate – calculated as the percentage of bank-owned homes sold as compared to all properties sold – for the highest performing markets is less than 23 percent, according to Clear Capital. It averages 30 percent for the lowest performing counterparts.Some lowest performing markets are dealing with REO saturation rates close to the 50 percent mark, including Las Vegas (49%) and Detroit (47%).

Foreclosure Starts Rise as Servicers Process Backlog of Delinquent Loans

2011-11-08T08:21:00.001-08:00

November 2011

Foreclosure starts among private-label residential mortgage-backed securities (RMBS) have been rising toward historic averages over the past six months, which will lead to an influx of distressed properties bringing downward pressure to the housing market, according to recent RMBS Performance Metrics from Fitch Ratings.

According to Fitch, foreclosure start rates for severely delinquent RMBS loans have stayed above 10 percent since September — a rate they have not reached since November 2009 — and have been working their way toward their 14 percent average between 2000 and 2010. “Rising foreclosure start rates are likely a sign that servicers are playing catch-up on actions that have been delayed over the past year,” states Diane Pendley, managing director of Fitch Ratings.In fact, the rise in foreclosure starts has occurred most heavily among severely delinquent loans. Foreclosure starts among loans that have been delinquent for six months or more have almost doubled in the past five months. In contrast, foreclosure starts among loans three months to six months delinquent have increased by 25 percent over the past five months. The foreclosure process is averaging about eight months in non-judicial states and 15 months in judicial states, according to Fitch.Despite foreclosure starts being on the rise, foreclosure completions in judicial states hover near their historic lows. Fitch attributes this to “servicers’ continued loss mitigation efforts, a backlog in court foreclosure filings, and weak demand in the housing market.” About a year after deficiencies in the foreclosure process were brought to light, Pendley says, “Mortgage servicers now generally feel they have implemented the corrective actions that they determined were needed.” “With corrective actions now in place, servicers now need to process a significant backlog of problem loans as well as implement other process changes in parallel,” she continues. The effects of rising foreclosure starts as servicers work their way through the backlog of distressed loans may not be evident for more than a year, according to Fitch.

Default Risk Growing Among Jumbo Borrowers, Stabilizing for Subprime

2011-11-08T08:20:00.003-08:00

November 2011

Private investors in residential mortgage-backed securities (RMBS) comprised of jumbo mortgage loans are dealing with a greater risk of strategic defaults, according to Moody’s Investors Service.

The company’s analysts base this assumption on the fact that jumbo RMBS have large populations of current borrowers with high loan-to-value (LTV) ratios.Moody’s took a closer look at outstanding mortgage loans backing 2005-2008 vintage transactions across the subprime and jumbo sectors. Analysts stratified the loans based on their delinquency status, and for current loans, their LTV, in order to gauge the extent to which loans that are now current may eventually default.Although it has by far the fewest delinquencies among outstanding loans, the jumbo sector has the potential for the highest volatility in losses going forward, Moody’s concluded. “This is because it features a high number of current borrowers that are underwater on their mortgages and aremore susceptible to default if the housing market does not turn around,” the agency explained.According to Moody’s the subprime sector faces the lowest potential for future performance deterioration because more of its weaker borrowers are already delinquent or have defaulted, leaving less room for losses to increase substantially.The company’s RMBS data show that defaults among always-current subprime borrowers have declined substantially since the beginning of 2010, indicating that the remaining borrowers are getting progressively stronger.The jumbo sector, on the other hand, still faces the potential for a large increase in defaults. Unlike in the subprime sector, the stronger borrowers are the ones that have already left the jumbo pools rather than the ones that remain, Moody’s explained. Over 80 percent of jumbo loans are still current, but more than half of those borrowers are underwater on their mortgages and that proportion has risen significantly over the past few years, according to Moody’s report. Since home prices have been fairly stable in 2011, Moody’s says the increasing proportion of underwater jumbo borrowers likely reflects the ability of the stronger borrowers to refinance and exit the mortgage pools. Moody’s notes that default rates among always-current borrowers have not come down in the jumbo sector as much as in the subprime sector, meaning the pool of current borrowers has not strengthened as much over time.

Trepp: Slow Decline in Delinquencies Suggests Prolonged Recovery

2011-11-08T08:20:00.001-08:00

November 2011

Recording a slight decrease in delinquencies in its preliminary third quarter estimate, Trepp predicts full market recovery will not occur for years. Residential mortgage delinquencies fell 0.3 percent in the third quarter to 12 percent, according to Trepp’s preliminary data. This is down 1.1 percent from last year. Serious delinquencies in residential mortgages also declined in the third quarter to 5 percent.

“The slow rate of improvement reflects the high volume of foreclosures and weak price trends that still plague the market,” Trepp states in its preliminary report. Commercial delinquencies also fell by 0.3 percent in the third quarter – falling from 4.9 percent to 4.6 percent. “The improvement during the third quarter is more modest than in the second quarter, suggesting that lenders’ efforts to shed nonperforming assets slowed in response to the weaker economy in the third quarter,” Trepp states. Construction loan and commercial and industrial loan delinquencies fell during the third quarter. Construction loan delinquencies, as estimated by Trepp’s preliminary data, stood at 15.6 percent for the quarter. Commercial and industrial loan delinquencies fell from 2.2 percent to 1.9 percent in the third quarter. This is the first time the rate has fallen below 2 percent since the end of 2008. Final third-quarter data will be available toward the end of the month. Trepp’s early estimates are based on earnings reports and call reports from several smaller banks.

Occupied Oakland Promotes Occupying Vacant Properties

2011-11-08T08:19:00.001-08:00

November 2011

The Occupy Oakland group is starting a new wave of occupations. They intend to occupy vacant properties.

The Occupy Oakland group announced on Twitter earlier this week that its general assembly “just passed a proposal to encourage the occupation of bank-owned/foreclosed and abandoned properties across #Oakland.” On Wednesday, a group of Occupy Oakland members took a first step in this direction by entering a vacant building formerly used by the Traveler’s Aid Society. The group “hoped to use the national spotlight on Oakland to encourage other occupations in colder, more northern climates to consider claiming spaces and moving indoors in order to resist the repressive force of the weather,” states a blog post on the Occupy Everything! Blog. “None of this should be that surprising, in any case, as talk of such an action has percolated through the movement for months now, and the GA [General Assembly] recently voted to support such occupations materially and otherwise,” states the blog post. This is not the first time the idea of occupying or squatting in foreclosed and vacant properties has been endorsed. In fact, the group, Homes Not Jails of San Francisco, has promoted the use of vacant properties by the homeless since 1992. The group recently partnered with Occupy San Francisco to convert several vacant properties into homeless shelters, according to the Huffington Post.Rep. Marcy Kaptur (D-Ohio) has been telling homeowners facing foreclosure not to leave their homes since 2009. “I say to the American people, you be squatters in your homes. Don’t you leave,” she said in a February 2009 press release.If squatting in foreclosed and vacant properties becomes a widespread trend, “it would definitely slow down the market,” says Melva Wagner, owner of Sellstate Island Properties in Florida, and government relations representative for the National Association of Women REO Brokerages (NAWRB). “The recovery market is already slowed down because of tenants in properties,” she adds. “Each state has their own guidelines for squatters,” she says, so the process of evicting squatters and preparing homes for sale would vary throughout the country. As for the Occupy Oakland action Wednesday – the evening ended in violence and about 100 arrests. Protestors broke windows and set fires, according to the Wall Street Journal.On Thursday, Occupy Oakland said in a public statement they do support the occupation of vacant buildings but “Occupy Oakland does not advocate violence and has no interest in supporting actions that endanger the community and possibilities that it has worked to build,” according to the Journal.

CredAbility Announces National Hispanic Outreach Initiative for 2012

2011-11-08T08:18:00.002-08:00

November 2011

CredAbility has announced the launch of its 2012 “Reconstruye tu Futuro” campaign, which will leverage grassroots efforts, social media networks, and traditional media communication to reach those in the Hispanic community who are at risk of foreclosure.

CredAbility is a nonprofit credit counseling agency headquartered in Atlanta, Georgia, serving clients in all 50 states plus the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.With more than 50 million Hispanics in the United States and a downturn economy, CredAbility says Latino individuals and families have been more deeply impacted than other minority populations. By leveraging key financial tools, CredAbility aims to help Latino individuals, families, and communities recapture their American Dream. “When reports show that 1 million Latinos have already lost their homes or are in danger of losing their homes, it is our responsibility to ensure that we reach this community in need,” said Phil Baldwin, CredAbility’s president and CEO. “Because we offer a bilingual website and bilingual counselors available 24/7, we can serve those looking for financial experts who can speak the same language and can empathize with their experiences,” Baldwin added.CredAbility counseled nearly 73,000 Hispanics in 2010. The agency’s national initiative aims to extend that reach by creating connections utilizing such vehicles as a new Spanish-language CredAbility Facebook page, as well as educational events and online courses, live chats, and podcasts in Spanish.“Our 2012 focus will be to assist those in financial crisis help renew and rebuild their financial dreams, cultivate savvy Hispanic consumers, and educate today’s youth who will be instrumental in the stability of this country’s future,” said Marisa Salcines, CredAbility’s director of Hispanic external affairs. In the last four years, CredAbility has helped over 1.4 million individuals facing such financial crises as bankruptcy, foreclosure, and mounting credit card debt. Of these, more than 250,000 were Hispanics located all over the country.

Government Issues Housing Data, Says There's 'Much More Work to Do'

2011-11-08T08:18:00.001-08:00

November 2011

Treasury has released a new progress report on its Making Home Affordable initiative, covering all the “H” acronyms – HAMP, HARP, and HAFA.

Since the program started in April 2009, 857,000 homeowners have received permanent loan restructurings under the Home Affordable Modification Program (HAMP), and 894,000 have refinanced their mortgages through the Home Affordable Refinance Program (HARP). Home Affordable Foreclosure Alternatives (HAFA) transactions tally just under 19,000. The grand total of homeowners who’ve received assistance through the government’s “H” programs: 1,777,000.HUD Assistant Secretary Raphael Bostic says “we saw a continued fall in mortgage defaults” last month due in part to foreclosure prevention programs reaching more borrowers upstream in the process. But Bostic is quick to add, “We have much more work to do.” Treasury’s latest report shows HAMP trials started during the month of September held steady from the previous month at 26,000, while permanent mods increased by nearly 50 percent to 40,100. Treasury says HAMP continues to exhibit lower delinquency and redefault rates than other modifications, with just 10 percent behind on their payments by 60 days or more after six months in the program.Homeowners in active permanent HAMP modifications save a median of $526 per month –more than one-third of the median before-modification payment, according to Treasury. To data, homeowners in permanent HAMP modifications have saved an estimated $8.8 billion in monthly mortgage payments. Treasury says there are now just 974,095 delinquent borrowers eligible for HAMP assistance.Treasury also highlighted other foreclosure prevention efforts in its report. The Federal Housing Administration’s (FHA) loss mitigation interventions totaled 39,000 in September. Servicers’ proprietary mods, which Treasury listed under the HOPE NOW banner came to 55,800 for the month. This report is the first to include a data breakdown on HARP. During the month of September, 28,900 homeowners with Fannie Mae- and Freddie Mac-backed loans refinanced through the program at lower interest rates. Short sales continue to claim the lion’s share of HAFA transactions. Servicers completed 2,512 HAFA short sales in September and 91 HAFA deeds-in-lieu.

Knowing a Defaulter Depresses Economic Outlook

2011-11-08T08:17:00.001-08:00

November 2011

Those who know someone who has defaulted on a mortgage are more likely to have a pessimistic outlook on the economy, according to Fannie Mae’s third quarter National Housing Survey. However, knowing a defaulter does not seem to cloud their view of homeownership.

Ninety-two percent of owners who know someone who defaulted on a mortgage and 89 percent of owners who do not know a defaulter agree that owning a home makes more sense than renting. The rate of owners who believe buying a home is a safe investment is only a few percentage points higher for those who do not know a defaulter as those who do know a defaulter. Sixty-seven percent of owners who know a defaulter and 70 percent of those who do not now a defaulter believe a home is a safe investment. When the same question was posed to renters, 52 percent of both groups responded that a home is a safe investment. However, when considering the state of the economy, those who know a defaulter are more likely to have a negative outlook. For example, 80 percent of owners who know a defaulter believe the economy is on the wrong track, whereas 74 percent of owners who do not know a defaulter share this view. Among renters, 74 percent of those who know a defaulter believe the economy is on the wrong track, and 70 percent of those who do not know a defaulter believe the economy is on the wrong track. Nine percent of homeowners who know a defaulter say they are stressed about their ability to make debt payments, while 4 percent of owners who do not know a defaulter worry about their ability to make payments. Among all survey respondents, 36 percent expect their financial status to improve in the next year. Also, despite the fact that 77 percent of respondents are unlikely to buy a home in the next 12 months, 68 percent believe now is a good time to buy a home. “At the macro level, we see that economic activity picked up in the third quarter, thanks to a sizable rebound in consumer spending on services. However, the hike appears to have come out of consumers’ savings, as disposable income fell during the quarter,” said Doug Duncan, vice president and chief economist at Fannie Mae. “The improvement in consumer spending has not spilled over into big-ticket items such as housing, as consumers’ concerns over their finances and dissatisfaction about the direction of the economy remains elevated,” Douncan continued.

Freddie Mac Requests $6B More in Taxpayer Aid

2011-11-08T08:16:00.000-08:00

November 2011

The nation’s second largest mortgage company is asking the U.S. Treasury for another $6 billion in capital support after posting its largest quarterly loss in over a year.

Freddie Mac said Thursday that it recorded a net loss of $4.4 billion for the quarter ended September 30, 2011, compared to a net loss of $2.1 billion over the previous three-month period and $2.5 billion for the third quarter of 2010.The McLean, Virginia-based GSE explained that while its latest earnings results reflect net interest income of $4.6 billion, the company shouldered a $4.8 billion loss on derivatives and a $3.6 billion provision for credit losses. Freddie Mac’s CEO Charles E. Haldeman, Jr. pointed out that hundreds of thousands of borrowers refinanced into lower mortgage rates or shorter mortgage terms in the third quarter. Long-term interest rates declined by approximately 125 basis points in the third quarter, compared to a decrease of about 30 basis points in the second quarter. “[T]he borrowers we helped to refinance will save an average of $2,500 in interest payments during the next year,” Haldeman said. While the savings bode well for homeowners and should help to ensure those who were struggling to make their payments will remain current, it means less money coming in for the GSE, resulting in higher loss severity rates and thus the recorded increase in Freddie Mac’s provision for credit losses.Such losses will likely grow over the coming quarters with the administration’s retooling of the Home Affordable Refinance Program (HARP), which is expected to allow another 1 million borrowers with loans backed by Freddie Mac and sibling Fannie Mae to take out new mortgages at today’s rock-bottom rates. The GSEs’ are expected to issue guidance about the HARP changes to their mortgage servicers by November 15.Freddie Mac says the increase in its third-quarter credit loss provision was also driven lower expectations for mortgage insurance recoveries, as a result of the deteriorating financial condition of certain mortgage insurers used by the company. Freddie’s $4.4 billion loss in the third quarter combined with the $1.6 billion dividend payment it made to Treasury for past bailout money left the GSE with a $6 billion net worth deficit as of the end of September. To eliminate this deficit, the Federal Housing Finance Agency (FHFA), as conservator, is submitting a draw request to Treasury for the same amount.The company’s Q3 draw is the largest quarterly request since the first quarter of 2010, and brings the cumulative amount of Freddie Mac’s taxpayer-supported bailout to $72.2 billion. The GSE has returned $14.9 billion to Treasury in the form of cash dividends.Freddie Mac’s single-family serious delinquency rate was 3.51 percent as of the end of September, nearly unchanged from 3.50 percent at mid-year, but the company says its rate remains “substantially below industry benchmarks.” The GSE also stressed that new single-family business acquired after 2008 continues to demonstrate stronger credit quality.Freddie Mac says it helped approximately 48,000 struggling borrowers avoid foreclosure in the third quarter, finding home retention solutions – including loan modifications, repayment plans, and forbearance agreements – for three out of every four. The GSE completed 11,744 short sale and deed-in-lieu transactions over the three-month period.Freddie carried $127.9 billion in non-performing assets as of the end of September, including single-family and multifamily loans that have undergone a troubled debt restructuring, are seriously delinquent, in foreclosure, and REO. That figure represents 6.6 percent of the company’s total mortgage portfolio. The GSE’s REO operations expense skyrocketed to $221 million in the third quarter, compared to $27 million for the second quarter. REO operations expense primarily consists of costs incurred to maintain foreclosed properties, valuation adjustments on properties, disposition gains or losses, and recoveries from credit enhancements, such as mortgage insurance. Freddie Mac says the increase in REO operations expense last quarter was primarily driven by higher REO holding period write-downs as fair values declined during the third quarter, as well as a reduction in projected recoveries on mortgage insurance.

Randall McHugh Named a 'Best Lawyer' for Foreclosure Practice

2011-09-21T10:05:00.001-07:00

September 2011 - DS News

Randall S. McHugh, VP at Bendett & McHugh, P.C., has been selected by his peers for inclusion in the 2012 edition of The Best Lawyers in America in the practice area of mortgage banking foreclosure law.

This marks the third straight year that McHugh has been honored with the designation. Selection to Best Lawyers is based on a rigorous peer-review survey comprising more than 3.9 million evaluations by fellow attorneys.

As VP at his firm, McHugh is responsible for the overall management of the firm and co-manages the bankruptcy

department. He has authored many default servicing-related articles and has been a contributing author of several publications.

McHugh started his legal career in 1988 in Waterbury, Connecticut, where his practice focused on commercial foreclosures, bankruptcy, and real estate law. In 1991, he joined Reiner, Reiner & Bendett P.C. (now Bendett & McHugh, P.C.) and co-managed the foreclosure and bankruptcy departments alongside Adam Bendett.

McHugh received his J.D. from the Dickinson School of Law.

Bendett & McHugh, P.C. offers representation to the mortgage servicing and lending industry. The firm’s default servicing practice is comprised of routine and litigated foreclosures, senior lien monitoring, title issues, foreclosure avoidance, bankruptcy, evictions, and REO sales.

The firm’s coverage area includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. Bendett & McHugh is a Freddie Mac designated counsel and part of the Fannie Mae retained attorney network in Connecticut.

Past Due Mortgages = 6,397,000

2011-09-21T10:04:00.001-07:00

September 2011 - DS News

New data from Lender Processing Services (LPS) shows the population of mortgages going unpaid in the U.S. contracted during the month of August.

LPS offered the media a sneak peak at several key mortgage performance statistics slated for public release later this month. The company’s analysts derive their findings from LPS’ loan-level database of nearly 40 million mortgage loans.

They say there were 6,397,000 home loans at least 30 days delinquent or in foreclosure as of the end of August. That’s down from 6,538,000 the month before.

LPS puts the delinquency rate of mortgages 30 or more days past due, but not yet in foreclosure at 8.13 percent.

The national delinquency rate dropped by 2.5 percent between July and August, and is down 11.8 percent from a year earlier.

The industry’s inventory of properties in the midst of foreclosure, on the other hand, rose by both measurements, and now stands at 4.11 percent of all outstanding mortgages.

The foreclosure presale inventory rate edged up by 0.1 percent month-over-month and 8.2 percent year-over-year.

Of the 6,397,000 past due mortgages at the end of August, LPS says 2,148,000 were winding their way through foreclosure channels.

That leaves 4,249,000 delinquent by 30 or more days, but not in foreclosure. Of these, 1,866,000 were overdue by 90 days or longer.

According to LPS’ August study, the states with highest percentage of non-current loans – which combines foreclosures and delinquencies – held onto their rankings from the previous month. These include: Florida, Mississippi, Nevada, New Jersey, and Illinois.

States with the lowest percentage of non-current loans include: Montana, Wyoming, Alaska, South Dakota, and North Dakota.

Senate Holds Hearing on Foreclosure Glut

2011-09-21T10:03:00.002-07:00

September 2011

At a Senate hearing titled, “New Ideas to Address the Glut of Foreclosed Properties,” witnesses discussed several possible options for dealing with foreclosed properties and spurring recovery in the housing market.

Witnesses shared varying opinions on the concept of Fannie Mae and Freddie Mac conducting bulk sales to investors.

Laurie F. Goodman, senior managing director at Amherst Securities, said long-term investors “are the only potential buyers of many distressed homes that are likely to hit the market over the next 5-6 years.”

“Investors need to be part of the solution,” she stated, adding that the purchase of REOs is a good business opportunity for investors as the rental market continues to grow.

When asked if individual families should be given the opportunity to purchase homes at the rate offered to investors prior to the bulk sales, Goodman said the plan would adversely affect the bulk sales.

Goodman said allowing “cherry-picking” would ultimately lower the value of the bulk sales.

Bob Nielson, chairman of the board of the National Association of Homebuilders advised the government to avoid “fire sales,” which would negatively affect prices in the overall market.

Goodman suggested that if there were several large bidders for a particular pool of properties, the pool might not need to be sold at a discount.

However, Stan Humphries, chief economist at Zillow, pointed out that past bulk purchases of FDIC inventory came at a 20 percent discount.

In his statement before the committee, Humphries warned not to “underestimate the market’s ability to fix itself.”

“This, in fact, is already happening,” he stated.

Another topic discussed was offering tax incentives for home buyers. However, Humphries pointed out that short-term tax credits—such as the homebuyer tax credit offered last year—generally do not have a long-term impact. He believes the tax credit simply “shifted demand around during the year.”

In addition, Humphries pointed out that it’s particularly difficult to create policies that effectively aid those in need without extending superfluous aid to others at an undue cost to taxpayers.

Humphries categorized homeowners into three categories: those who do not need help, those who are beyond help, and those who could benefit from a small amount of aid.

It is the third group that government policies target, but it is difficult not to spill over into the other two groups. Thus, the expense of government programs often exceeds their effect.

OCC Requires Review of 4.5M Foreclosures

2011-09-21T10:03:00.001-07:00

September 2011 - DS News

The Office of the Comptroller of the Currency (OCC) is calling for independent reviews of almost 4.5 million loans.

After reviewing 200 loans from each of 14 major servicers, regulators determined enforcement actions were necessary, but said the review was “not nearly enough to answer all questions,” according to John Walsh, acting Comptroller of the Currency.

The independent review of 4.5 million loans that faced foreclosure actions between January 2009 and December 2010 will identify borrowers who “suffered financial injury as a result of errors, misrepresentations, or other deficiencies in the foreclosure process,” Walsh said.

On Monday, Walsh also announced the implementation of a new transparent, easily accessible complaint process for borrowers who feel they faced financial harm due to improper foreclosure action. This new process will be enacted in the next several weeks.

Borrowers will be contacted through direct mailings, and they will have the opportunity to request an independent review online or by phone through one common Web site or one phone number.

The independent consultants conducting the reviews will use one uniform complaint form for all of the 14 servicers in order to simplify the process for borrowers.

In cases where financial harm is determined, servicers will be required to make “appropriate restitution.”

“Remediation plans are subject to OCC and Federal Reserve approval,” Walsh said.

Walsh also stated, “The nature and severity of any financial injury will be case specific, so remedies could vary substantially.”

In addition to addressing improper actions in the past, Walsh addressed the future of industry regulation.

“Federally chartered servicers handle two-thirds of the nation’s mortgage loans, and as you know, we are in the midst of implementing a set of enforcement actions that are among the most complex and most significant of any that the OCC has ever initiated,” he stated.

New regulations designed to bring accountability to the industry have been signed by each member of the board of directors at each of the 14 banks.

The new orders call for further oversight of third-party vendors as well as a single point of contact for borrowers and an end of dual tracking.

“I continue to believe that we will be able to harmonize the mortgage servicing requirements in our orders with those of other regulators if and when they are reached. In fact, I think it is absolutely essential that we do so,” Walsh said.

Study Links 'Lightly Regulated' Lending to Foreclosures, Unemployment

2011-09-21T10:00:00.000-07:00

September 2011 - DS News

A recent study by Jihad C. Dagher and Ning Fu of the International Monetary Fund found a correlation between the increase in originations from “lightly regulated” non-bank lenders and the rise in foreclosures and unemployment.

The authors believe stricter regulation could have prevented the housing crisis.

The working paper titled, What Fuels the Boom Drives the Bust: Regulation and the Mortgage Crisis, states “We show that the lightly regulated non-bank mortgage originators contributed disproportionately to the recent boom-bust housing cycle.”

The authors assert that independent non-bank lending increased in nearly all counties across the United States during the boom years.

In 2003, independent lenders originated about 31 percent of loans. However, when the market grew between 2003 and 2007, independent lenders contributed to more than 60 percent of that growth and the ensuing decrease between 2005 and 2007, according to the paper.

Between 2003 and 2007, independent lenders grew at a rate 23 percent more than that of banks.

Dagher and Fu assert a correlation between increased participation by independent lenders and rising housing prices during the boom years and then foreclosures in the bust years.

“[T]he the market share of independents is a strong predictor of the early rise in foreclosures,” the authors state in the paper. They believe the market share of independents also predicts the contraction in credit, decrease in housing prices, and rise in unemployment.

According to Dagher and Fu, prior to the housing market crisis, banks functioned under much stricter regulation than independent, non-bank lenders.

The authors illustrate that the “relation between the pre-crisis market share of independents and the rise in foreclosure is more pronounced in less regulated states.”

“Overall our findings lend support to the view that more stringent regulation could have averted some of the volatility on the housing market during the recent boom-bust episode” state Dagher and Fu.

Surge in Defaults Breaks Six-Month Run of Declining Foreclosure Stats

2011-09-15T09:40:00.002-07:00

DS news - September 2011

The lingering effects of the foreclosure moratoriums enacted after evidence of improper foreclosure processing came to light appear to be fading. Data released by RealtyTrac Thursday shows the first rise in foreclosure filings since January, with all of the increase coming from new default notices.

The tracking company says filings – including default notices, scheduled auctions, and bank-repossessed REOs – rose 7 percent between July and August on the national stage. But with the steep declines seen over previous months, filings remain 33 percent below the level recorded in August 2010.

Default notices posted their biggest month-to-month increase since August of 2007, up 33 percent. The 78,880 new default notices filed last month represents a nine-month high, but is down 18 percent from a year earlier.

Default notices increased more than 40 percent on a month-over-month basis in several states, including New Jersey (42 percent), Indiana (46 percent), and California (55 percent).

James Saccacio, RealtyTrac’s CEO, says the big increase in new foreclosure actions is a sign lenders are pushing

foreclosures through and foreshadows more bank repossessions in the coming months.

Foreclosure auctions (NTS, NFS) were scheduled for 84,405 U.S. properties in August, a decrease of 1 percent from the previous month and a decrease of 43 percent from August 2010.

Despite the nationwide decrease, scheduled auctions were up substantially from the previous month in several states where the auction notice is the first public notice in the process, such as Oregon (19 percent), Arizona (20 percent), Georgia (22 percent), and Colorado (51 percent).

Lenders repossessed a total of 64,813 homes (REOs) in August, a 4 percent decrease from the previous month and a 32 percent decrease from a year earlier. The REO total in August marked a six-month low.

Five states accounted for more than half of the foreclosure activity in August. Leading the pack was California, where 59,383 properties had foreclosure filings during the month.

Florida posted the second highest state total with 23,569 filings, followed by Michigan (13,016), Illinois (12,493), and Georgia (11,743 properties).

RealtyTrac’s report shows that defaults surged in August in some of the hardest-hit local markets.

A 30 percent month-over-month increase in default notices helped Las Vegas maintain the nation’s highest foreclosure rate among large metropolitan areas.

Eight of the metros with top-10 foreclosure rates can be found in California. All but Stockton posted a double-digit monthly increase in default notices. The biggest jump was found in Visalia-Porterville, where new defaults climbed 97 percent from the previous month.

Closing out the metro top-10 list is Reno, Nevada. There, new defaults rose 23 percent in August.

Fannie Mae Finds Several Servicers Below Median Performance

2011-09-15T09:40:00.001-07:00

DS News - September 2011

Several servicers remain below median performance level as of the first half of the year, as ranked by Fannie Mae’s Servicer Total Achievement and Rewards (STAR) Program

Fannie Mae announced the STAR Program in February to measure servicers’ success in providing sustainable solutions to distressed homeowners.

The mid-year results released Wednesday by the GSE indicate that four out of the 11 banks in Peer Group 1 are

on track to receive at least a three-STAR rating at the end of the year.

Banks are ranked on a five-STAR scale, with three STARs signifying median performance level relative to peers and five STARs signifying superior performance.

Servicers are split into three peer groups based on the number of Fannie Mae loans they service.

Those in Peer Group 1 who are on track to receive at least three STARs are GMAC Mortgage, LLC, Citi Mortgage, Inc., Everhome Mortgage, and Wells Fargo Bank.

In Peer Group 2, six of 10 servicers are on track for a median rating at year-end, including, Fifth Third Bank, The Huntington National Bank, HSBC Mortgage Corporation, Aurora Financial Group Inc., Regions Bank and Central Mortgage Company.

The results for Peer Group 3 have not yet been released and are expected in the next 30 days.

“We are committed to helping stabilize the housing market by requiring servicers to prevent foreclosure whenever possible,” said Leslie Peeler, Vice President for Servicer Portfolio Management, Fannie Mae.

Technology May Eliminate Implementation Headaches for SPOC

2011-09-15T09:38:00.000-07:00

September 2011

While servicers attempt to develop processes to implement the single point of contact (SPOC) requirement that is part of the Federal Housing Finance Agency’s Servicing Alignment Initiative, several technology companies have developed solutions to address the new regulation.

“We believe technology is the heart of the solution,” said Jane Mason of eMason, Inc., at a panel discussion at the Five Star Default Servicing Conference and Expo Tuesday.

eMason recently developed the Clairfire Community Portal, which allows servicers to implement SPOC with business process automation and centralized communication.

“What we’re talking about here is an industry that’s been asked to change the way they do business on a dime,” Mason said.

Mason said what she’s hearing from servicers is they don’t know how they’re going to implement such a substantial change so quickly.

However, she feels the regulation provides a distinct opportunity for all sectors of the industry to begin working together more closely and become more efficient.

Like eMason, Decision Ready and Barthel Consulting, LLC are developing technology to address SPOC. All three companies’ solutions allow all information on a particular borrower to be stored in one data system and be accessed from one page.

The new programs also have “smart business rules” that each servicer can customize. For example, the system can automatically order a new BPO every 30 days, or check to make sure the homeowner is not on active military duty.

Ravi Ramanathan, president and CEO of Decision Ready said servicers are being held to a new standard in foreclosure actions. They are no longer innocent until proven guilty, but guilty until proven innocent, he says.

“The burden of proof lies with the servicer for each foreclosure,” Ramanathan said at the SPOC panel Tuesday.

Therefore, servicers must be able to track each action or communication with a borrower as well as any policy changes.

While the SPOC is meant to ensure better communication with borrowers, there are some logistical challenges. If a particular SPOC is not available, Ramanathan said another person can access the comprehensive file and address the borrower’s needs.

On the other hand, Nancy Barthel of Barthel Consulting, LLC, the panel moderator, said her client is planning to keep only one individual involved in each loan, a sort of “hand-holding in a sense,” she said.

Mason said her clients are split on methodologies. However, “as we get more efficient, having the data there is going to eliminate the need to have a person, I think.” Having the comprehensive file means anyone who accesses the file would have the same information as the assigned SPOC.

“We’re being made to do what we should have been doing all along,” said panel attendee Kurt Bertelsen, group vice president of default operations at Suntrust Mortgage.

Bertelsen said a previous servicer he worked with contemplated implementing SPOCs eight years ago but didn’t because of the cost.

“One of the bad ramifications is a significant change in cost structure,” Bertelsen said. Servicers now need a staff of employees who can have meaningful conversations with borrowers about their options, while also remaining empathetic and calm when borrowers become upset and agitated, rather than simply someone to answer calls and take information from a borrower.

Bertelson believes the increased costs will be reflected in mortgage costs, thus affecting originations and the overall market.

“From a regulation perspective, I think they may have underestimated the cost of changing the industry on a dime, and we don’t even know if it will work,” Mason said, adding that the industry needs to keep communicating with regulators.

New Jersey Lifts Its Final Foreclosure Ban

2011-09-15T09:36:00.002-07:00

DS News - September 2011

New Jersey’s Superior Court has lifted the last of six injunctions handed down late last year, giving Ally Financial and its GMAC Mortgage unit the go-ahead to resume foreclosure actions in the state.

Superior Court Judge Mary Jacobson issued an order this week stating that GMAC had demonstrated the “reliability of its processes” and is “permitted to resume prosecution of uncontested foreclosure proceedings.”

Beginning in late March, a court-appointed retired judge began conducting an extensive systemic review of GMAC’s procedures and practices related to the handling of foreclosures and defaulted loans.

The probe was ordered by the New Jersey Supreme Court and encompassed five other servicing shops in addition to Ally/GMAC. The companies were charged with proving to the courts that their foreclosure actions should not be suspended after robo-signing infractions came to light last fall.

Bank of America, Citibank, JPMorgan Chase, Wells Fargo, and OneWest Bank were given the green light to begin the regular order of processing foreclosures in the state last month.

The servicers were required to provide information proving chain-of-ownership and that they were authorized to foreclose on behalf of mortgagees other than themselves.

The companies were also asked to demonstrate they had sound record-keeping systems in place detailing payment history and loan status. Documentation was required showing steps that staff followed in executing affidavits, and each servicer had to detail their employee training programs for foreclosure processing.

Judge Jacobson is requiring all six servicers to submit to ongoing monitoring by the special master overseeing the procedural reviews to ensure their continued compliance with the state’s foreclosure statutes.

More Than One-Fifth of Mortgages Underwater: Report

2011-09-15T09:36:00.001-07:00

DS News - September 2011

Nearly 10.9 million, or 22.5 percent, of all residential mortgages had negative equity at the end of the second quarter of the year, according to a report released Tuesday by the analytics firm CoreLogic.

The figure is actually a slight improvement from the 22.7 percent of all mortgages with negative equity in the first quarter of 2011.

An additional 2.4 million borrowers had less than 5 percent equity in the second quarter, according to the report, which also shows that nearly three-quarters of homeowners in negative equity situations are also paying higher, above-market interest on their mortgages.

The states that had the most inflated property values before the housing bubble burst, and Michigan, which continues to suffer from the fall off of the automotive and manufacturing industries, had the highest negative equity percentages.

Nevada held the top position in terms of negative equity with 60 percent of all of its mortgaged properties underwater, followed by Arizona (49 percent), Florida (45 percent), Michigan (36 percent), and California (30 percent).

Yet there are some signs that the worst could be over in those states. According to the report, the average negative equity share for the top five states declined from 41 percent to 38 percent during the past year.

Nevada had the largest decline over the last year, with its negative equity share dropping from 68 percent to 60 percent. The reason for the Nevada decline is the high number of foreclosures that led to lower numbers of remaining negative equity borrowers.

“High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery,” said Mark Fleming, chief economist with CoreLogic in releasing the data.

Fleming added, “The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices.”

According to CoreLogic, 8 million borrowers with negative equity, or nearly 75 percent of all underwater borrowers, have above market rates.

Since the 2005 sales peak, non-distressed sales in ZIP codes with low negative equity have fallen 61 percent, compared to an 83 percent sales decline in high negative equity zip codes.

Fannie Mae Opens Sacramento Mortgage Help Center

2011-09-15T09:35:00.000-07:00

DS News - September 2011

Fannie Mae last week opened a mortgage help center in Sacramento, California, to provide free education and counseling services to struggling local homeowners with Fannie Mae-owned mortgages.

The facility is Fannie Mae’s 10th mortgage help center across the country.

The GSE developed the center in partnership with NeighborWorks HomeOwnership Center Sacramento Region, which staffs the office, as well as with local community and elected officials and area mortgage servicers.

The center offers consultations in person or over the phone with experienced housing counselors who review mortgage loans and financing options and help borrowers apply for loan workouts and other foreclosure alternatives.

According to Fannie Mae, more than 60 percent of the people who have worked with the GSE’s mortgage help centers have been able to stay in their homes.

In addition to providing counseling and access to mortgage education and financial literacy resources, the center’s staff will help homeowners coordinate with their mortgage servicers to help facilitate response times. They will also seek to help combat local mortgage fraud and abuse.

Mortgage default warnings surged in August

2011-09-15T09:34:00.000-07:00

AP - September 2011

Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.

The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.

The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.

"This is really the first time we've seen a significant increase in the number of new foreclosure actions," said Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here."

Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork, namely shoddy mortgage paperwork comprising several shortcuts known collectively as robo-signing.

Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.

Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, a possible settlement of government probes into the industry's mortgage-lending practices, and lenders' reluctance to take back properties amid slowing home sales.

A pickup in foreclosure activity also means a potentially faster turnaround for the U.S. housing market. Experts say a revival isn't likely to occur as long as there remains a glut of potential foreclosures hovering over the market.

Foreclosures weigh down home values and create uncertainty among would-be homebuyers who fret over prospects that prices may further decline as more foreclosures hit the market. There are about 3.7 million more homes in some stage of foreclosure now than there would be in a normal housing market, according to Citi analyst Josh Levin.

"This bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery," Levin said in a client note this week.

Banks have been working through a backlog of properties that first entered the foreclosure process months, if not years ago. But the August increase in homes entering that process sets the stage for a host of new properties being targeted for foreclosure.

That's bad news for homeowners who may have grown accustomed to missing payments for several months without the threat of foreclosure bearing down on them. In states such as New York and Florida, for instance, processing delays have helped some homeowners stay in their homes for more than two years before banks got around to taking back their properties.

In all, 78,880 properties received a default notice in August. Despite the sharp increase from July, last month's total was still down 18 percent versus August last year and 44 percent below the peak set in April 2009, RealtyTrac said.

Some states, however, saw a much larger increase.

California saw a 55 percent increase in homes receiving a default notice last month, while in Indiana they climbed 46 percent. In New Jersey, where last month a judged ruled that four major banks could resume uncontested foreclosure actions in the state under court monitoring, homes receiving a default notice increased 42 percent.

Despite the increase in new defaults, the number of homes scheduled for auction and those repossessed by banks slowed in August.

Scheduled foreclosure auctions declined 1 percent from July and fell 43 percent from a year earlier, RealtyTrac said.

Auctions increased from July levels in several states, including Colorado, where they rose 51 percent, and Arizona, where they grew 20 percent.

Lenders repossessed 64,813 properties last month, a drop of 4 percent from July and down 32 percent from a year earlier. Home repossessions peaked September last year at 102,134.

Banks are now on track to repossess some 800,000 homes this year, down from more than 1 million last year, Sharga said.

The firm had originally anticipated some 1.2 million homes would be repossessed by lenders this year.

In all, 228,098 U.S. homes received a foreclosure-related notice last month, a 7 percent increase from July, but a nearly 33 percent decline from August last year. That translates to one in every 570 U.S. households, said RealtyTrac.

Nevada still leads the nation, with one in every 118 households receiving a foreclosure-related notice last month.

Rounding out the top 10 states with the highest foreclosure rate in August are California, Arizona, Georgia, Idaho, Michigan, Florida, Illinois, Colorado and Utah.

Federal Regulators Close First National Bank of Florida

2011-09-12T10:16:00.000-07:00

DS News - September 12 2011

The Office of the Comptroller of the Currency (OCC) appointed the FDIC receiver of the First National Bank of Florida late Friday evening, making it the 71st FDIC-insured institution to go under this year.

The OCC said it acted after finding that the bank “had experienced substantial dissipation of assets and earnings due to unsafe or unsound practices.”

According to the federal regulator, the First National Bank of Florida was facing substantial losses that would have depleted its capital, with “no reasonable prospect” that would allow the bank to replenish its funds without federal assistance.

The First National Bank of Florida, headquartered in Milton, operated eight branch offices, with $280 million in deposits and $297 million in assets.

The FDIC entered into a purchase and assumption agreement with CharterBank out of West Point, Georgia, to assume all of the deposits of the First National Bank of Florida and purchase all of its assets.

The FDIC and CharterBank entered into a loss-share transaction on $216.3 million of the acquired assets. The Florida bank’s failure is expected to cost the FDIC’s deposit insurance fund $46.9 million.

Industry Calls for Less GSE Action, More Investor Protection

2011-09-08T10:49:00.000-07:00

September 2011

At a hearing Wednesday, four witnesses voiced concerns about the government’s participation in the mortgage market as well as the lack of transparency between servicers and investors.

The hearing before the U.S. House of Representatives Financial Services Subcomittee on Capital Markets and Government Sponsored Enterprises was titled, “Facilitating Continued Investor Demand in the U.S. Mortgage Market Without a Government Guarantee.”

“The state of housing finance in the US, where government sponsored entities (GSEs) account for over 90 percent of all mortgage loans currently made, is problematic,” said Ajay Rajadhyaksha, managing director at Barclays Capital.

Martin S. Hughes, president and CEO of Redwood Trust, Inc., agrees and believes it is time for the government to begin backing out of the market.

Citing Inside Mortgage Finance, Hughes said the top 10 jumbo mortgage lenders originated $25 billion in loans in the first quarter of this year.

“Clearly, the nongovernment guaranteed origination segment of the private market is functioning well,” he stated.

Hughes conceded that the private securitization market is not performing well, and he believes part of the problem is that “the government is crowding out the private market through loan programs that make 90 percent of borrowers eligible for a below‐market‐rate government guaranteed mortgage loan.”

As a first step, he suggests allowing the temporary increase in the conforming loan limit to expire as scheduled at the end of September.

Hughes noted that new standards for underwriting and servicing loans and more protection for investors are also needed to boost the secondary market.

However, Hughes stresses that reforms necessary for the prime mortgage market are not the same as those needed in the subprime market.

“A new regulation designed to accomplish one objective can easily do great harm to fulfillment of the other objective, if applied to both,” Hughes said. “We see that happening with much of the Dodd-Frank rulemaking.”

Echoing Hughes’ call for investor protection and representing the Association of Mortgage Investors, Chris Katopis stated, “[M]ortgage investors face enormous challenges in the capital markets due to opacity, an asymmetry of information, poor underwriting, conflicts-of -interests by key parties in the securitization process, as well as, the inability to enforce rights arising under contracts, securities and other laws.”

One of Katopis’ suggestions is to require a “cooling off period” during which investors can analyze loans in asset-backed securities before committing to them.

“Typically, deals came to market so quickly that investors were forced to rely on rating agency pre-issuance circulars, termsheets or weighted average collateral data,” said Joshua Rosner, managing director at Graham Fisher & Co. “These tools have proven inadequate.”

Rosner suggests, “data on the specific underlying collateral in each pool should be made available for a reasonable period (not less than 5 days) before a deal is sold and brought to market.”

Rosner and Katopis also stress the importance of transparency and a standardization of information and language among servicers.

“Asymmetry of information between buyer and seller remains the standard,” Rosner stated. “In fact, through elimination of the Regulation Fair Disclosure exemption for rating agencies, Dodd Frank has resulted in a reduction in the information available to investors.”

Home Price Gains Expected to Wane: Clear Capital

2011-09-08T10:47:00.000-07:00

September 2011 - DS News

The warm weather homebuying season has kept prices moving up, but Clear Capital says the rate of appreciation is already slowing and weak consumer confidence points to a stormy rest of the year.

The “company’s latest report shows that home prices rose 4.0 percent over the four-month period ending in August when compared to the previous three months – an assessment Clear Capital refers to as a rolling quarter.

The company notes, however, that the recent gains over the summer months have not been enough to recoup longer-term declines, with national home prices still 6.2 percent below last year’s levels.

Dr. Alex Villacorta, director of research and analytics at Clear Capital, points out that the short-term gains reported in recent months are coming off of the record lows of winter.

“With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter,” Villacorta said.

According to Clear Capital, low consumer confidence and a continued high unemployment rate support the company’s projection of downward home price movement for the remainder of 2011.

“The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices,” Villacorta added.

Based on Clear Capital’s latest report, the Midwest region leads the nation with a seasonal quarterly home price gain of 7.3 percent, buoyed by solid improvement in Chicago and the Ohio markets in particular.

In the Northeast home prices rose 4.9 percent, and in the South quarterly appreciation came in at 3.5 percent.

Home prices in the Western region of the U.S. were up just 0.7 percent. Clear Capital says with economic uncertainty and significant distressed sales activity affecting the West, this small gain may potentially represent peak price growth in the region for the rest of 2011.

Home prices in all four regions came in well below their readings at this time last year, with the smallest annual dip in the Northeast at 2.0 percent.

Jacksonville, Florida replaced Detroit as the “lowest performing” major market, posting a -2.7 percent quarterly price change. Eleven of the 15 markets on the low end of the price performance spectrum reside in the western part of the country.

Cleveland’s rolling quarter price gains jumped to 19.2 percent based on data through August, pushing the market to the top of Clear Capital’s “highest performing” list. The company says Cleveland’s large gains reflect vast differences in its REO composition between the winter and the spring-summer homebuying seasons.

Obama's Pick to Protect Consumers Testifies Before Senate

2011-09-07T08:23:00.001-07:00

DS NEWS - September 2011

Richard Cordray has been hand-picked by President Obama to lead the new Consumer Financial Protection Bureau (CFPB). On Wednesday, Cordray stood before the U.S. Senate to make a case for lawmakers’ confirmation of his appointment.

On the heels of major lawsuits announced by the Federal Housing Finance Agency related to mortgage bonds sold to the GSEs, Cordray told senators that regulatory authority is his weapon of choice as opposed to litigation.

“I know from my own experience that lawsuits can be a very slow, wasteful, and needlessly acrimonious way to resolve a problem,” Cordray said in his testimony. “The supervisory tool, in particular, offers the prospect of resolving compliance issues more quickly and effectively without resorting to litigation.”

Cordray said the CFPB has a “bigger and more flexible toolbox” and legal action will be used “judiciously” when banks or nonbank credit institutions are evading consumer protection laws or seeking to gain an unfair advantage over their law-abiding competitors.

Cordray acknowledged that when he held the position of attorney general for the state of Ohio, his only viable option to address the problems that consumers face was to open an investigation that might lead to a lawsuit.

While Cordray stressed that he instituted a policy while serving as Ohio’s lead counsel which opened the lines of communication early in order to resolve issues without going to court, he and his office made countless headlines for their mortgage-related lawsuits.

Ohio was one of the first states to file suits against servicers over the robo-signing infractions uncovered last fall, when Cordray was attorney general.

“[W]e pursued those mortgage servicers who, despite strong warnings, repeatedly violated consumer protection laws,” he told senators.

Cordray also pursued many actions against foreclosure rescue companies that he says “were reaching into the pockets of desperate people in an effort to steal what little remained as they sought to keep their homes.”

The foreclosure crisis, especially formidable in Ohio, has been a hot button for Cordray for some time. During his time as a county treasurer, Cordray says he saw the foreclosure crisis “wreaking havoc” in many neighborhoods. He helped create a ‘Save Our Homes’ task force to bring together businesses, banks, nonprofits, and government, to work in collaboration to help borrowers avert foreclosure.

Later, when he became state treasurer, Cordray expanded the ‘Save Our Homes’ program into a statewide effort, co-chaired a task force to work with mortgage servicers, and helped start a foreclosure mediation program.

Cordray says his past experiences as a public servant have given him “a strong resolve to address [the] kinds of financial difficulties that confront our communities,” and he vowed to streamline regulations and disclosures such as those related to mortgage loans.

Cordray has been with the CFPB since December when he was tapped to build out the bureau’s enforcement team.

His confirmation as head of the agency faces opposition from Republican senators who are are pushing for the role of CFPB chief to be replaced by a five-member committee.

AG Settlement Will Not Release Banks From Securitization Liability

2011-09-07T08:14:00.000-07:00

DS NEWS - September 2011

As state attorneys general and major U.S. banks continue to work toward a settlement, questions abound regarding the amount of legal liability the servicers should and will maintain after an agreement is signed.

The two groups have been working toward a settlement regarding robo-signing and other improper actions by the servicers since the beginning of the year.

According to a widely referenced article in the Financial Times Tuesday, one of the recent drafts of the settlement while “explicitly stat[ing] that the release does not include securitisation claims,” has “language is broad enough in that it could prevent state officials from bringing securitisation claims in the future should they sign up to the agreement.”

In the same article, the Financial Times reported, “State prosecutors have proposed effectively releasing the companies from legal liability for allegedly wrongful

securitisation practices, according to five people with direct knowledge of the discussions.”

However, Geoff Greenwood, a spokesperson for Iowa Attorney General Tom Miller told DSNews.com Tuesday, “We do not intend to release securitization.”

Miller is head of the executive committee of attorneys general working on the settlement and a key member of the negotiating committee.

Furthermore, in a response last week to New York officials’ concerns about the proceedings of the settlement after the removal of New York Attorney General Eric Schneiderman from the executive committee, Miller stated:

“While a final multistate case release has not been negotiated and the release is a work in progress, attorneys general on the Negotiating Committee are not preparing to, nor will they agree to, release the banks from all civil liability. We are also not preparing to, nor can we agree to, release the banks from any criminal liability.”

In other developments, HUD recently completed its investigation into robo-signing practices and has shared its findings with the attorneys general executive committee, according to American Banker.

“We have gathered information through state and federal sources, and we have a very clear picture of the extent of these practices,” Greenwood told DSNews.com, adding that information from all sources has been “very helpful.”

The negotiating committee and the banks will likely meet again later this week, but there is no clear indication yet as to when the groups will reach a final settlement.

Phoenix foreclosure crisis far from over

2010-04-07T06:56:00.001-07:00

In March, as a record number of homes were foreclosed on in metropolitan Phoenix, several pieces of Arizona legislation that would have helped homeowners
facing foreclosures or dealing with its aftermath died.
Unfortunately, the state's foreclosure crisis isn't over. There are many more struggling homeowners who need help and a growing number of other homeowners who are giving up and walking away because they don't see the housing market rebounding.
Last month, a record 5,556 homes across metropolitan Phoenix were foreclosed on by lenders, reports the Information Market. That's a 30 percent increase from February. Pre-foreclosures climbed to 8,045 last month, up from 7,604 the month before.
Six of seven bills that made up the proposed Foreclosure Rescue for Arizona Act were never even heard in the Legislature. The one piece of legislation from the package to be heard in the House will require landlords to give renters more notice and time to move out of foreclosure homes. This will help Arizona residents but not struggling homeowners. The bill is supposed to be heard in the Senate later this week.
There is legislation still alive that can help homeowners facing foreclosures.
House Bill 2626: Requires lender to contact homeowner to talk about their options to avoid foreclosure. This would apply to homes purchased between 2003 and 2008, and excludes investors.
House Bill 2309; Regulates the growing number of foreclosures consultants in the state. Many Valley homeowners have lost money and even their homes after paying firms to help them with government-backed loan modifications. There are reputable firms helping homeowners facing foreclosure, but hundreds of homeowners have been caught up in scams.
Homeowners can receive free help from counselors certified by the U.S. Department of Housing and Urban Development by calling the Arizona foreclosure hotline 1(877)448-1211.
Senate Bill 1130: Makes it illegal for foreclosure consultants to take up-front fees from homeowners.
These three pieces of legislation will help the state's foreclosure crisis. They are Republican-backed. The Foreclosure Rescue Arizona Act package of bills would have also helped. It was backed by the Democrats.
Foreclosure help shouldn't be a partisan issue. A record number of both Phoenix-area Democrats and Republicans are losing their homes now.

Home pain: Values fall while taxes might rise

2010-02-14T07:14:00.000-08:00

The Arizona Republic - February 2010

Most Maricopa County homeowners will see another significant decline in their homes' value when they open their 2011 property-assessment notices in the next few days. But property taxes for the coming year still may go up as the state, cities and school districts struggle to close huge budget deficits.

Less money coming in from lower property taxes would mean less money in state and local coffers and less money for education. Faced with growing operational deficits, municipalities and schools could be forced to raise property taxes by 10 percent or more to pay salaries and provide basic services, government officials and real-estate experts say.

During 2009, the overall median value of homes in the county fell 15.2 percent, from $155,300 to $131,700, according to the latest report by the Maricopa County Assessor's Office. This decline follows a 23 percent drop in home values during 2008.

A drop in values usually leads to a drop in property taxes.
But Arizona homeowners are taxed through a formula based on two main factors: property valuations set by the county assessor and tax rates set by cities and school districts. Tax rates set by cities and schools fluctuate each year based on funding needed for maintaining services and facilities.

Annual home valuations come out in February. Tax rates are set in the summer, then property-tax bills are mailed out in September. Property-tax rates are based on valuations from 18 months earlier. That means the bill homeowners receive this September will be based on 2008's 23 percent decline in values.

"Now that home values are nose-diving, we expect to reap the benefits of lower taxes," said Jay Butler, director of realty studies at Arizona State University. "But with all the state money drying up, local governments and schools can increase their taxes so they don't have to deal with such severe shortfalls. It won't be popular, but it's likely to happen."

Tax jurisdictions in any community can include elementary schools, community colleges and fire, water and library districts. The more than 1,000 jurisdictions in Maricopa County that rely on property taxes for funding must hold meetings open to the public to discuss all proposed rate hikes. Local decisions on tax rates are then handed over to the Maricopa County Board of Supervisors, which must approve them.

Arizona's property taxes have been low compared with property taxes in the rest of the country. Any increases have been small and raised little opposition. But this summer, the proposed increases predicted by economists and government leaders are bound to draw more attention from homeowners.

"Most jurisdictions will have little choice and will have to raise property taxes this year," said Keith Russell, Maricopa County assessor. "Residents will have to decide how many potholes they are willing to live with in their community and whether they want to get back the music class cut at their local school. Some jurisdictions will be sensitive to people's pocketbooks, and some jurisdictions will be sensitive to keep important services."

About 75 percent of Arizona's property taxes are earmarked for K-12 education. State schools are guaranteed certain funding, even if property taxes don't cover it all. The law requires any shortfalls from property-tax collection to be covered by the state's general fund. Some state leaders already are pressuring school districts to raise property taxes to reduce their dependence on the general fund.

"School districts don't lose spending authority because of losses in assessed values from property taxes," said Chuck Essigs of the Arizona Association of School Business Officials.
Arizona is still facing a huge budget deficit this year. The statewide school sales tax generated $150 million less in 2009 than it did in 2008. That means there already is a large gap in school funding without the drop in property taxes.

If a sales-tax increase proposed by Gov. Jan Brewer is approved by voters, K-12 education is still facing a $300 million to $500 million budget cut this year. If the sales-tax measure fails, the shortfall in funding to education could be much more.

Growth impact

Arizona's relatively low property taxes have long been a draw to businesses and residents.
The state's property-tax rate averaged about 0.60 percent of a home's value in 2009. That makes Arizona's property tax the 39th lowest in the nation, according to the Tax Foundation, a Washington, D.C.-based non-profit. Texas has the highest rate at 1.76 percent.

As more people moved to Arizona and bought houses, home values climbed steadily and so did property-tax revenues. Arizona was able to use money from property taxes, as well as sales and income taxes, to pay for the infrastructure and services needed to sustain growth.

But now most homeowners are seeing their third straight drop in property valuations, consumer spending and wages are down, and Arizona's government coffers are depleted. Raising property taxes is the only option for most municipalities to maintain the education and public services necessary to attract future growth.

In an effort to collect more property taxes, an Arizona lawmaker last month introduced a bill that would eliminate the 50 percent tax break that owners of historic homes receive. The tax break was enacted in the 1970s to entice people to buy homes in older neighborhoods and revitalize those areas. Only about 5,000 homes in the state are designated as historic, so the increase in property-tax revenue from those homes won't be enough.

Because of budget shortfalls the past three years, almost every city in Maricopa County has laid off employees, closed library branches and cut services. Now, the cuts are getting deeper. Phoenix recently announced it would lay off hundreds of police officers and firefighters, though their unions tentatively agreed Wednesday to a pay cut to save jobs. Phoenix also is implementing a 2 percent tax on food sales for five years to try to save some public-safety jobs.
"Arizona's future growth is at stake," Butler said. "Who wants to move to a city without enough firefighters and police officers, even if the property taxes are low?"

Raising property taxes would help narrow government budget gaps and save some services. But higher taxes would hurt homeowners, especially those already struggling to afford their mortgage payments. Most homeowners pay their property taxes through their mortgage payment to their lender. But a record number of Arizona homeowners are behind on their mortgage payments and in foreclosure. Already, it has become more difficult to collect property taxes in Maricopa County, according to the county treasurer.

Property-tax hikes for homeowners will be decided this summer as the many taxing jurisdictions balance their budgets for 2010-11.

"Schools and cities really have no choice but to raise property taxes," said Arizona real-estate analyst RL Brown. "Low property taxes do play a role in attracting new residents, particularly retirees.

"But the entire tax structure of the state must now be reviewed and revised," he said. "Now, we can't provide a satisfactory level of services to promote job growth."

Legislation has been introduced to research ways to improve Arizona's complex property-tax formula.

Some jurisdictions are now limited in how much they can raise property taxes each year. So even if a fire district, for example, raises property taxes this year as much as the law allows, the increase might not be enough to keep open all the fire stations in an area.

Although 2009's decline in valuations was smaller than 2008's drop, the state's property-tax system works on a formula that lags, so cities will likely have to raise taxes even more next year. One state official said Valley homeowners could see a 25 percent increase in the property-tax rate on their 2011 bill.

Real Estate - Job losses push back housing recovery in Phoenix

2010-01-27T07:20:00.000-08:00

The Arizona Republic - January 2010

Metropolitan Phoenix's housing market is not expected to recover until 2014, two years later than experts had previously predicted.

The biggest obstacle to a real-estate rebound in the Valley is a lack of jobs, according to analysts and economists speaking at Urban Land Institute Arizona's annual forecast conference on Thursday.

Without new jobs to draw more residents to fill almost 80,000 area homes left empty by the recession, home prices will remain depressed. But the state is not likely to see pre-recession job levels for another four to five years.

Experts said that high foreclosure rates also need to be reduced and that job growth would help lower the number of people losing their homes. According to experts at the realty-trends event, metro Phoenix homebuilding is at its lowest level since the 1970s and will remain there during 2010. If the area's population begins to grow again next year, homebuilding could increase significantly in 2012. But Phoenix-area home prices aren't expected to reach the highs of 2005 again until after 2014.

The annual conference hosted by Urban Land Institute, a real-estate think tank that examines land-use issues, has become a must-attend event for Arizonans involved in the industry because of the expert speakers and their frank projections.

"In metro Phoenix, the job market has killed the housing market," said Tim Sullivan, president of San Diego-based Sullivan Real Estate Advisors. "Foreclosures are still a problem for the area but don't kill the market if they are reselling."

Arizona has lost more than 210,000 jobs in the past 24 months, according to Elliott Pollack, a Scottsdale-based economist.

"It will be 2014 before we get back to 2007's employment level in the state," Pollack told the crowd at the Arizona Biltmore Resort.

He said that he expects metro Phoenix's housing market to start improving near the end of 2012 but that it won't be until 2014 when the area's supply of available houses and demand for those homes are back in balance.

At last year's conference, most experts agreed the region's housing market would recover by 2012. But new data shows Arizona's population growth has been flat or even declined in the past few years. The state must attract new residents for the housing market to recover.
As evidence of the drop in new residents, Pollack said, new utility hookups are at their lowest level in metro Phoenix since the 1950s.

"Our most serious problem is job growth," said Don Diamond, a long-time Tucson developer. "We have to concentrate on that this year so we can pull out of this by 2015."
"I am not going to feel good about anything until the jobless number comes down," said Howard Epstein, national executive for Bank of America's foreclosure and non-performing assets division.

"Unfortunately," Epstein added, "we will see some more bad things happen like more bankruptcies before we can recover."

Pollack is forecasting Arizona will add 250,000 new jobs and 550,000 new residents by the end of 2014.

That growth in population would create demand for 180,000 homes, which would take care of the current glut of vacant homes and apartments and create demand for new residential development.

Sullivan said Phoenix-area home prices have "overcorrected," meaning they have fallen lower than current conditions dictate. He said the overcorrection sets the stage for home values to begin to climb again soon.

Steve Hilton, chairman of Scottsdale-based Meritage Homes, said his company is now selling homes in the Phoenix area to buyers who believe prices are going to climb.
"I think 4 percent appreciation a year in desirable areas of Phoenix can be expected during the next few years," he said.

Bidding wars complicate housing market

2009-09-12T13:32:00.000-07:00

The Arizona Republic - September 2009

It should be the best time to purchase a home in decades.

Prices are at record lows. Many, if not most, of the houses on the market in areas such as Ahwatukee Foothills are owned by banks - not emotional and capricious homeowners.

Instead, even seasoned real-estate agents say it's the most difficult market they have worked in decades.

And buyers say they are frustrated with the condition of houses they find on the market - plus, they are getting caught up in unpleasant bidding wars with cash-rich real-estate investors.
"I have six buyers who want homes in Ahwatukee, but we can't find a thing," said Pam, a longtime Ahwatukee real-estate saleswoman.

"There also is a huge shortage of owner-owned, well-maintained homes," she said.
Pam said the selection of attractive, move-in-ready homes is low because owners who are not having financial problems intend to hang on to their properties until prices rise again.

So instead of walking through their dream houses, buyers are looking at repos gutted by evicted former owners.

"You would not believe the condition some of these places are in," said Nancy Nighswonger, an Ahwatukee resident who is helping her mother, Diane Moss, search for a comfortable home for her retirement years.

Buyers who want houses to live in must also compete with real-estate investors who have deep enough pockets to pay cash for discounted properties. Banks are creating bidding wars on such properties by calling potential buyers and asking them to up their offers, real-estate professionals say.

While that might sound similar to bidding wars for Valley houses at the peak of the real-estate market, experts say there is a difference: In 2005 and 2006, home prices were set at market value and buyers could offer higher amounts, depending on the competition.

"Now sellers are pricing their homes 25 to 30 percent below the market because they want to take eight or 10 offers to the bank (that foreclosed on the property)," said Pete Meier, who has sold real estate in Ahwatukee for 30 years.

Mike, another longtime Ahwatukee real-estate salesman, said the upside to the situation is that "the market is starting to move again."

Also, he said, buyers with the patience and fortitude to endure the bidding wars can wind up with great deals.

In some cases, houses in neighborhoods where houses/homes recently sold for $600,000 are now at "FHA levels" - the $300,000 range, he said.

Mike said he recently represented a house in Chandler that was offered as a "short sale" - the owners owed more on the house than what it was worth.

"I had nine offers on it," he said. "It was a very nice house. A million-dollar property originally."
The house sold for $449,000, he said.

Pam was so thrilled by a similar success story that she posted a message about it on Twitter.com the day the deal was signed.

The family she was representing - Honeywell engineer Rudy Dudebout, his wife, Tina Hynes, and their three sons, Eric, 6, Adam, 4, and Alex, 2 - had just paid $556,000 for a home that appraised for $1.2 million at the peak of the housing boom, she said.

The 1982 five-bedroom, 3,500-square-foot custom home backs to the South Mountain Preserve and has a pool, basketball court and a balcony overlooking a circular driveway.

"We had had our eyes on this neighborhood for a long time," Dudebout said. "It does not have the uniformity of looks that you find in other parts of Ahwatukee."

It helps not to be in a rush in the current housing market.

Dudebout said he and his family were prepared to stay in their old home until they found the right new house at the right price.

Theft of fixtures becomes major risk in foreclosures

2009-09-08T07:54:00.000-07:00

The Arizona Republic - September 2009

With a $165,000 price tag, the two-story, four-bedroom house for sale in Avondale was a steal.
Three years ago, when the house was new, a family paid $416,000 for it.

But its soaring living-room ceiling, whirlpool bath, three-car garage and pool with a slide and waterfall weren't enough to make it much more than a handyman's special.

Thieves made off with the home's $30,000 custom-kitchen and other fixtures after it went into foreclosure.

Custom cabinets, appliances, granite countertops and other fixtures just disappeared one day.
"These are fixtures that are supposed to be part of the house. They basically took $30,000 out of the kitchen and left," said John Lincoln, the real-estate agent who recently sold the house to buyers who don't mind fixing it.

Julie Halferty, a special agent who oversees the Phoenix FBI Mortgage Fraud Task Force, said no one knows exactly how many foreclosed houses in the Valley have been stripped by former owners, neighbors or strangers.

Those who work in real estate believe the number is in the thousands.
"Without question, probably 85 to 90 percent of houses on the market under $200,000 have been stripped," said Tempe real-estate agent Kim Baker.

"Appliances are the most commonly poached item, but plumbing fixtures and faucets, ceiling fans, light fixtures, water heaters and air-conditioning units are fair game" in the eyes of the strippers, she said.

Halferty said she and her fellow FBI agents "haven't been able to quantify it, but we know it is rampant."

She said that since metropolitan Phoenix foreclosures are up 600 percent since 2005 - half of the homes sold here this summer were bank-owned - she believes stripping is more common here than anywhere else in the nation.

"These crimes are happening with enough frequency that it has caught the attention of law enforcement, Realtors and lenders across our state," said Tom Farley, executive director of the Arizona Association of Realtors.

"Many Realtors are taking photos of the interior of the home as soon as they take a lender-owned listing to document the condition of the property in case of vandalism," Farley said.
Last week, the Maricopa County Attorney's Office announced five recent prosecutions of accused foreclosure strippers, including one involving a real-estate salesman.

Halferty said the task force hopes the information will educate owners of homes in foreclosure, neighbors and others that it is illegal to help themselves to fixtures and appliances in a vacant home.

"Take a look at Craigslist," Lincoln said. "It's full of things that have been stripped out of houses."

Halferty said Craigslist.org tipped the fraud task force to the extent of the problem.
"It is so blatant," Halferty said. "People would advertise that they were selling cabinets in a foreclosure sale."

Halferty said legally there should be no such thing as a foreclosure sale. The law states that anything attached to a home - stoves, cabinets, lights and ceiling fans - belongs to the property and stays there when it is sold.

Lincoln, who is based in Ahwatukee Foothills but represents properties all over town, said the problem is most widespread in Valley neighborhoods that were built during the housing boom a few years ago.

"Mature neighborhoods aren't seeing this as much as the newer neighborhoods in places like Avondale and Tolleson," he said.

While some homes are stripped by cash-strapped former owners, others are targeted by strangers.

Lincoln said one of his clients purchased a bank-owned house in Tolleson. Before it closed, thieves posing as pest-control workers broke in and removed $4,000 in appliances. The matter was reported to police, Lincoln said, but there has not been an arrest.

"Neighbors said two guys drove up in a white truck and said they were there to spray for bugs," Lincoln said. "What they really did was go in the backyard and bust a window to get into the house."

He said the deal still went through, but the family paid $6,000 less.

Talk to anyone searching for a deal on a house these days and you will hear similar stories.
"People are having to look at 20 or more houses before they find one that is suitable," said Jay Butler, director of realty studies in the Morrison School of Management and Agribusiness at Arizona State University at the Polytechnic campus.

"One of my students looked at 35. Doors are missing. Plumbing is gone. There is a huge secondary market for these things. People buy them and put them in their own homes."
In extreme cases, thieves rip copper pipes and wiring out of the walls, Baker said.

Nancy Nighswonger of Ahwatukee Foothills just wants to help her mother find a deal on a house for retirement. That might have taken a few weeks a couple of years ago.

"You would not believe the condition some of these places are in." Nighswonger said. "We've researched 100 houses and looked at 20 since June. All of them needed extensive repairs."
Getting financing to fix up damaged properties is not easy, Baker said.

"The FHA will not loan on a property that isn't fully intact," Baker said.

Struggling Valley homeowners left in limbo

2009-09-08T07:51:00.000-07:00

The Arizona Republic - September 2009

Five months into the $75 billion federal program meant to toss a lifeline to homeowners facing foreclosure, most people in need of help are still floundering.

Overall, about 15 percent of borrowers across the country who are eligible for the program have been offered help from their lender, according to a recent U.S. Treasury Department report. Of those homeowners, 9 percent have participated in a trial loan modification. President Barack Obama's administration is calling for lenders to ramp up their efforts and help 500,000 more homeowners by November.

For homeowners facing foreclosure, the loan-modification process is slow, time-consuming and exhausting. Homeowners fall further behind as lenders, who say they are training more workers to handle the flood of requests, keep them waiting. Even when a loan modification is approved, some people discover the results are disappointing.

Thousands of Valley homeowners have experienced tough going with the program.
Cheryl Edgemon
Cheryl Edgemon was laid off from her longtime position as a legal secretary in April 2008. The 66-year-old has been looking for a new job ever since.

Savings, Social Security and unemployment benefits allowed her to scrape by at first. But in April, after a year of being unemployed, her savings were gone and she fell behind on the mortgage for her Glendale home.

Edgemon has contacted her lender multiple times, asking for a loan modification. Because she has income from her monthly Social Security check, she was told that she qualifies for a loan modification under the Obama plan.

"At first, they wanted me to be three months behind before I applied for loan modification," Edgemon said. "I can't understand why they would want me to ruin my credit first. I have worked hard to have good credit."

When she did fall behind, her lender offered to let her skip a few months and then make a balloon payment.

"How did they think I could afford a balloon payment? I just wanted them to extend the terms on my loan, drop my interest rate, something to help me keep the house," she said. "I will pay, but my Social Security is $1,244 and my unemployment is about to run out. I am trying to find a job, but it doesn't help to spend so much time trying to save my home."

She contacted housing groups and her congressman, asking for help. But her pleas for help weren't enough.

Edgemon's home was sold in a short sale a few weeks ago. She is now renting a house in her neighborhood for $500 less then her old monthly mortgage payment.

"It was going to be my retirement home," she said. "Not only did I not receive help, the people who I talked to at my lender were nasty and made the process harder than it had to be."

Kasey Broach

Kasey Broach applied for a loan modification right after the new plan was announced. She sent her lender documentation on her income and expenses, including a student-loan statement and bill for the homeowners-association fees on her Phoenix condominium.

Broach, a public-relations specialist for a Valley law firm, was required to show receipts on everything from groceries to doctor bills. Her lender also required her to meet with a loan counselor. The counselor recommended her for a loan modification.

Broach bought her condominium in 2006, at the peak of the Valley's real-estate market, right before she was about to start an MBA program.

She had a roommate who helped with the bills. But her roommate moved to New York last year, and Broach hasn't found another. Payments on her student loans started this year.

"When I purchased my home, part of the deal was that I didn't have to pay HOA fees until 2009," Broach said. "The condo is in a great location. I thought I would be able to easily sell it in two years, allowing me to pay off my student loans and never have to pay HOA fees."

Her HOA fees are $150 a month. Her student-loan bill is $250 a month. Overtime at her job used to supplement her monthly income, but that stopped with the recession.

Broach's lender promptly processed her paperwork and modified her loan. However, her new monthly payment is only $40 lower than her old payment, not enough to help her.

Because condo values in her complex have fallen, Broach can't sell and break even, so she is a considering a short sale or deed-in-lieu-of-foreclosure deal with her lender. A deed in lieu requires a borrower to give back a house to the lender. In exchange, homeowners take a slightly smaller hit to their credit than they would with a foreclosure.

"What bothers me most is that I didn't mess up and could not have seen this coming," Broach said. "I have worked full-time since I was 19. I bought a small condo, which no one would consider lavish. I have had great credit and paid my own bills my entire adult life. However, I'm still stuck in this position."

Rick Scott

Rick Scott asked his lender for help in October, before he fell behind on his mortgage payments. His annual income had dropped by $30,000. His roommate girlfriend was out of work.
Scott was trying to be proactive. He still had a job at Boeing, earning $50,000. But before the housing crash, he had also worked part-time as a loan officer. When that extra income stopped, he saw trouble ahead.

But the lender said he didn't qualify for help. He later fell behind on his $2,000 monthly mortgage payment and feared a foreclosure notice would come any day on his Mesa home.
When President Barack Obama announced the new loan-modification program in March, Scott immediately checked the details and found he was eligible. He faxed information on his income and bills to his lender, which told him he would have an answer in 30 to 60 days. By then, his savings were exhausted.

The foreclosure notice came several weeks later. He called his lender. The foreclosure was postponed for a month while his application for a loan modification was considered.
"So then I thought, OK, this is going to work, despite all the confusion," Scott said. "We are going to keep our home, and get a payment that's not more than 31 percent of my income like the program calls for."

Next, Scott received a Fed Ex package from his lender. Inside was a contract he was to sign that required him to pay half his current monthly payment for six months to show he could afford that amount.

"I happily signed the contract and sent them a check," he said. "A week letter, I received another Fed Ex with a letter saying congratulations, my loan modification is complete. Except the new contract called for me to pay $150 more than I was paying for my original mortgage payment. My payment went up."

Scott has an adjustable-rate mortgage. His lender proposed a fixed-rate mortgage, but at a higher rate, and would not lower the principal amount, so the monthly payment went up.
Scott asked again about a modification that would lower his payment. The lender said he could reapply, but consideration would take 90 days, and it might foreclose before that.

"I asked to speak to a supervisor with my lender's loan-modification department," Scott said. "I was put on hold and then disconnected."

Scott isn't sure whether he's going to apply for another loan modification.

New-home sales in U.S. climbed 11 percent in June

2009-08-07T16:05:00.000-07:00

WASHINGTON - New-home sales in June posted the fastest increase in more than eight years as buyers took advantage of bargain prices, low interest rates and a federal tax credit for first-time homeowners.

While home prices are still falling, the figures released Monday were another sign the housing market is finally bouncing back.

Earlier this month, the government reported that new-home construction rose to the highest level since last fall. And data out last week showed home resales rose almost 4 percent in June, the third straight monthly increase.

"The worst of the housing recession ... is now behind us," said David Resler, chief economist at Nomura Securities. "We're turning the corner toward increased activity in housing."

New-home sales rose 11 percent in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000, the Commerce Department reported Monday.
Shares of big home builders soared on the news, with Beazer Homes USA up by more than 13 percent and Hovnanian Enterprises rising 8 percent in afternoon trading. But with home prices still falling, these companies won't be making much money anytime soon.

The median sales price of $206,200 was down 12 percent from $234,300 a year earlier and off nearly 6 percent from $219,000 in May.

In addition to lower prices, buyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price or up to $8,000 for first-time buyers. Home sales need to be completed by the end of November for buyers to take advantage.
"The window of opportunity is closing," said Bernard Markstein, senior economist for the National Association of Home Builders.

June's results were the strongest sales pace since November 2008 and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 360,000 units. The last time sales rose so dramatically was in December 2000.

There were 281,000 new homes for sale at the end of June, down more than 4 percent from May. At the current sales pace, that represents 8.8 months of supply - the lowest level since October 2007. If that number falls to just over 6 months, analysts say, builders will feel more comfortable ramping up construction.

Fallout from the housing crisis has played a central role in the U.S. recession, now the longest since World War II. Foreclosures have spiked, home builders have slashed construction and financial companies have lost billions.

Construction levels are still weak because builders still have too many unsold homes sitting vacant.

Foreclosures fuel home stripping by ex-owners

2009-06-25T06:05:00.000-07:00

The Arizona Republic - June 2009

When Surprise police arrested a man for stripping his foreclosed home of a dishwasher, oven and air-conditioning units last week, officials highlighted a rash of problems that have gone largely unsolved across the Valley.

Despite hundreds, perhaps even thousands, of similar offenses in the Phoenix area, authorities believe the Tuesday arrest of Roberto Garcia, who was arrested on charges of criminal damage and defrauding a secured creditor, is part of only a handful of its kind in the Valley since the start of the housing crisis.

Police, neighbors and task-force officers have reported finding homes in the process of foreclosure without toilets, bathtubs and even spiral staircases.

Investigators often find that in many cases homeowners are responsible for stripping and devaluing the homes.

Often, those who have stripped their foreclosed homes sell the removed fixtures on Craigslist or more recently, in garage sales.

"Stripping out your home is a new phenomenon. Somebody had to sit down and ask what the way for agencies to do this is. It's a lot of legwork," said Dan Hughes, Surprise police chief.
The difficulty comes in finding probable cause to make an arrest when ownership of the home is in limbo and officials can't determine whether a bank, mortgage company or person is the proprietor, said Julie Halferty, who supervises Arizona's FBI Mortgage Fraud Task Force.
To arrest someone they believe has stripped their home of fixtures, police need to identify the person or organization victimized in order to submit charges to a county attorney.

Though police and federal agents maintain that neighbors are victimized by eventual drops in property value, there is no victim unless a bank or mortgage company has officially taken ownership of the property.

Neighbors living near the stripped homes and frustrated that their neighborhoods are devalued often feel they are the unwitting victims.

"What can people like me do?" Phoenix resident Stacey Huscher said.

Huscher said she has desperately attempted to inform authorities that another homeowner in her northeast Phoenix neighborhood has stripped his foreclosed house of fixtures.
"It seems crazy to me that people can be arrested for speeding violations but a person is free to ruin a whole neighborhood," Huscher said.

The cases are further complicated because authorities must be able to prove it was the homeowner who stripped their former home of valuables, said Officer Luis Samudio, a Phoenix police spokesman.

"You have to catch them with their hands in a cookie jar in a sense," Samudio said.
So Surprise police got a head start in February when resident Lou Provenzano e-mailed City Manager Randy Oliver to tell him that one of the block- watch members in his neighborhood had been shocked by Garcia's actions.

Someone who lived near Garcia's home in the 11900 block of North 143rd Avenue in Surprise said he had been startled by pounding noises coming from the foreclosed home late at night.
The neighbor said he watched as Garcia removed fixtures from the garage and items such as air compressors on the side of the home went missing, Provenzano said.

Because most police agencies in the Valley don't have policies and specific training on foreclosure crimes, which have spiked in the past year, Surprise detectives spent weeks tracking down the current owner of Garcia's former residence before submitting the case to the Maricopa County Attorney's Office.

They recommended he be charged with criminal damage and defrauding a secured creditor, both felony offenses.

The Surprise case was the second that county attorneys agreed to prosecute, said Michael Scerbo, spokesman for the Attorney's Office.

Once the two offenders - Garcia and Valley real-estate agent Kailash Bhatt - go to trial, prosecutors will have to prove that the former homeowners knew what they were doing was illegal.

"In order to have a crime there has to be some intent," said Barnett Lotstein, a special assistant in the Maricopa County Attorney's Office.

"If someone in good faith (who) honestly didn't know takes a chandelier, then in most circumstances there would be questions about whether or not that person would be charged."
A jury is less likely to convict someone who wasn't aware what she was doing was a crime, Lotstein said.

Whatever the complications and red tape associated with home-stripping cases, arrests and convictions are the best way for law enforcement to show they take foreclosure crimes seriously and halt problems associated with them, said Halferty of the FBI.

"Everyone in Arizona is waiting for the housing market to go up, and when people are stripping their homes, I think it makes the rebound take longer," Halferty said.

Buyers flock to cheap foreclosed homes

2009-03-27T11:10:00.000-07:00

A Glendale home that sold less than two years ago for $259,000 sold again three months ago for $113,000. A Phoenix home that fetched $190,000 two years ago just went for $45,900. A Queen Creek home sold for nearly $275,000 when it was built in 2005. Last month's price: $78,000.

If there's an upside to the Valley's growing foreclosure problem, it's the number of home bargains now available.

Lenders saddled by a growing portfolio of foreclosed properties are selling homes for prices not seen in metropolitan Phoenix for a decade.

Almost half of all Valley home sales last year were foreclosed homes resold by lenders, according to an analysis of sales data by The Arizona Republic.

Investors, first-time buyers, retirees and people moving up to bigger homes are all taking advantage. Deals can be found on nearly new homes on the Valley's fringes, fixer-uppers in historic neighborhoods in central Phoenix, new and old condominiums from Mesa to Glendale, and even luxury homes in Scottsdale.

There are some potential pitfalls to buying foreclosure homes: bidding wars, repair costs, financing and the risk that home prices will continue to fall. But foreclosures do offer an opportunity to buy Valley homes at prices unthinkable just a few years ago.

"There's a lot of properties to choose from, particularly in the $100,000 range," Zeitzer said.

Finding deals

Nearly half of Valley homes for sale are properties that lenders have taken back or that are about to go into foreclosure, according to the Cromford Report, which analyzes area real-estate data. Market watchers expect that number to increase in the next few months as the foreclosure moratoriums put in place by big lenders begin to expire.

Prospective buyers can find foreclosed properties on most Internet sites that list houses for sale and by contacting real-estate agents.

Before buying a foreclosed home, check out the neighborhood. Are there other foreclosures that might threaten your hoped-for resale price? Are there rentals that might drive down your rental income? Are there empty homes for sale that soon might become foreclosures themselves?

"Look at other homes in the area, particularly on the same block," said Julie Bieganski, a real estate agent with 1st USA Realty. "Check out the schools, the shopping and the roads." In January, she and her husband paid $63,000 for a foreclosed home in Phoenix that they plan to sell or rent. More than $261,000 was owed on the home when it was foreclosed on last fall.

"Try to buy the ugliest home on the block," she said.

The most popular segment of the foreclosure market now is homes priced below $100,000. Many of the best deals can be found in the West Valley, south Phoenix and Pinal County, the areas hurt most by the housing-market downturn.

"You are going to find the real deals on the homes with the most (physical) damage in the neighborhoods with the highest foreclosure rates," said Realty Executives agent Brett Barry, who says 70 percent of his business now is listing foreclosures. "Those are the homes that draw the multiple offers."

He said lenders don't want to spend more than $15,000 to $20,000 to fix up a foreclosed home for a sale. So if a home has extensive damage, the price is discounted more. Some foreclosed homes have been stripped of appliances, light fixtures, tile and even toilets by former residents.

Bob Ortega bought a foreclosed home in Queen Creek for $90,000 late last year. Similar homes in the area that aren't in foreclosure were listed for more than $150,000. But he had to buy a new stove, refrigerator, washer and dryer and then repaint and carpet the house.

"The last owners must have been mad because they did some real damage," he said. "It was a big headache, but I think I ended up with a deal."

Unfortunately, he is seeing other foreclosed homes in his neighborhood now selling for $10,000 to $20,000 less than he paid.

Buying

There are two ways to buy a foreclosed home now: directly from a lender by working with a real-estate agent or at an auction.

When working with an agent, it helps to find someone who knows how to negotiate with lenders. Most lenders have downsized their staff and may not respond quickly to offers on foreclosed homes.

In January, Brady Switzer bought a 2,290-square-foot foreclosure home in Litchfield Park.

"The asking price was $229,000, but we haggled with them and got it for $190,000," he said. "The lender was fairly easy to deal with."

To sell foreclosed homes quickly, lenders have been hiring big auction firms.

George Bein has bought three Valley foreclosed homes at auction. One he bought for less than what he had offered the lender a month earlier.

"Wait for the auctions if you can," he said. "The deals are better. But it's extremely important to inspect the properties and know your top bid and stop there."

Typically, photographs, addresses, information on the size of the homes and opening bids are available on the auction firm's Web site. Most auction firms also hold open houses on foreclosed properties, but the viewings are limited. Buyers can get their own appraisals on foreclosed homes and use those to negotiate with lenders.

"Due to the increase interest in foreclosures, lenders are now being flooded with offers," Zeitzer said.

She advises buyers to keep their offers simple, without too many demands or contingencies.

Financing

A foreclosure sale can close more quickly when the buyer has financing lined up before making an offer.

More buyers are paying with cash now because the mortgage industry, battered by loan defaults, is making financing tougher to obtain, especially for people who don't plan to live in the home. Some lenders will discount foreclosure prices even more for cash deals. More than 30 percent of all Valley homes sales in January were paid for with cash, compared with 19 percent in January 2008.

Financing is available to buy foreclosed homes, particularly for buyers who are going to live in them.

Jay Luber, president of Phoenix-based Galaxy Lending, said borrowers with good credit can usually take out a conventional loan with a 5 percent down payment.

For buyers who plan to live in the home, the Federal Housing Administration offers mortgages that require a 3.5 percent down payment. This program has a sales price limit of $346,000 in Arizona.

Both of those loans require the house to be in decent shape, and the loans don't usually come with money for renovations.

There is a loan that will finance fixing up a foreclosure home: the FHA 203K streamline loan.

"Homeowners can take the purchase price of a foreclosure home and add the home's rehab cost to come up with an adjusted sales price," said Reg Gustin of Mesa-based Sun American Mortgage. "Buyers can finance the adjusted amount through FHA if the property appraises for that much."

These loans require the buyer to keep the home for 90 days.

Other financing help for foreclosure home buyers is coming soon from the federal government. A portion of the $121 million coming to Arizona next month from the federal Neighborhood Stabilization program includes money to help people buy foreclosed homes. Specifics on the program vary by city. More information will be available soon on the Arizona Department of Housing's Web site.

The city of Phoenix plans to use a portion of its neighborhood funds to give qualifying buyers $15,000 to cover the down payment or closing cost on a foreclosed home.

Who's buying

Many investors bought Valley foreclosed homes during the past year, and more investors are jumping into the market as prices continue to fall.

Hossien Safaie of Keller Williams Arizona Realty said he works to find foreclosed homes for clients that can be fixed up in four weeks and then resold quickly before being undercut in price by new foreclosures.

"The last foreclosure home I worked with a client to buy and fix up was in north Phoenix," he said. "It resold in a day for a $60,000 profit. The day we bought the foreclosure house, we had contractors ready and started marketing it for resale."

Some market watchers are concerned about too many investors buying foreclosed homes.

"It's great that foreclosure homes are selling and investors are interested," said Margie O'Campo de Castillo of Arizona Dream Realty. "But too many investors got us into the current mess."

For first-time buyers, the foreclosures are a blessing of sorts.

O'Campo recently worked with a young family who bought their first home in El Mirage for $86,900. The house sold for more than twice that much when it was built a few years ago.

"Valley foreclosures are one family's tragedy and another family's opportunity now," O'Campo said.

Market overview

Foreclosure-resale deals aren't likely to go away anytime soon, and in some areas the deals are getting even better.

Only about half of the 50,000 Valley homes to go into foreclosure during the past year have resold.

Tom Ruff, an analyst with the real-estate research firm Information Market, recently looked at buying a small home in Phoenix.

The property sold for $232,000 in March 2005. The lender foreclosed on the home in early February and turned around and listed it for $45,900.

"The bungalow sold within hours, and there were multiple cash offers on the property." Ruff said.

Last month, foreclosure sales climbed to account for almost 70 percent of all Valley resales, a figure that may alarm fretful homeowners. But the figure also suggests better things ahead.

"Homeowners with foreclosures in their neighborhood might not like what these sales with low prices do to their values, but these homes must be resold and fixed up for the market to come back," said Arizona housing analyst RL Brown. "The good news is that the foreclosure homes are selling."

Builders: E.V. new home sales picking up

2009-03-27T11:09:00.000-07:00

Tribune - March 2009

Growing interest from buyers, reduced inventory and a slight uptick in construction has homebuilders with communities across the south East Valley cautiously optimistic about 2009.

Homebuilders are in the middle of what is traditionally the busiest time of the year for new home sales. However, continued anxiety over the economy, as well as stiff competition from foreclosure homes, is keeping new home sales to a minimum.

However, homebuilders say slow progress is being made in the new home market.

"We are pleased with an apparent increase in consumer demand and interest, but it is premature to count on a few recent months' numbers for any long-range conclusions about the local market conditions," said Jacque Petroulakis, Southwest spokeswoman for Pulte Homes & the Communities of Del Webb, which has 18 communities in the East Valley.

Last week, housing analyst RL Brown reported the Valley's new home market appears headed for recovery at a much faster pace than the existing home market. Prices have stabilized and the new home market is no longer plagued by oversupply unlike the existing home market, he said.

The new home market will slowly improve as 2009 progresses, but it's still going to be a tough year for builders, said Steve Hilton, chairman and CEO of Meritage Homes, which recently opened a new community in Queen Creek.

"We need to have a healthy resale market before we can have a healthy new home market because most people have to sell a home before they can buy one," he said. "There's so many foreclosures out there, so many (existing homes) for sale that we're competing against more than we are competing with other builders. We need that inventory to clear in the resale market in order for the new home market to be healthy again."

THE MYTH OF INVENTORY

Contrary to popular belief, homebuilders don't have a big inventory of new homes just waiting for buyers, Hilton said. Throughout the market downturn, Meritage's communities have only included a handful of vacant homes, he said.

"At least the public builders that I know of ... they have a lot of land, they have a lot of lots, but they don't have a lot of standing homes on the ground," he said. "There's certainly a lot of resale homes and foreclosure homes for sale, and a lot of those are empty and available."

Ken Peterson, vice president of Shea Homes, said the company started the year with an inventory of 94 homes and that has since dropped to 28 homes. It has communities in Gilbert and Queen Creek.

"We do not build speculative homes or inventory homes," he said. "The inventory resulted because people canceled on their homes. I talked to many of the builders across the Valley and the fourth quarter of 2008 was one of the worst quarters for cancellations that we have seen. That was really scary to see people just walk away from a home that they wanted us to build."

Meritage has been attracting buyers by aggressively lowering its prices and redesigning its product to compete with the foreclosure market, Hilton said.

"Most of the homes that are being sold today in Maricopa County are foreclosures," he said. "If we want to survive and compete as a new-home builder, we've got to be able to match those prices and in many cases we have."

Out in Maricopa, buyers can get into a new Meritage home for a monthly mortgage payment of $700, including principal, interest, taxes, insurance and homeowners association fees, Hilton said.

"We're selling homes," he said. "We do have traffic in our communities, but I'd also say it's at record low levels."

OUT OF THE GROUND

New home construction permits plummeted starting last fall and remain at an all-time low, according the Phoenix Housing Market Letter. There are signs, however, that permit activity will be increasing in the coming months.

Standard Pacific Homes recently sold seven homes at its Vincenz community in Gilbert, and not at reduced prices, said Cathy French, vice president of sales and marketing. The message is getting out that the new home market seems to have hit bottom and "you don't know where the bottom is until prices start going up and then it's too late," she said.

"We did real well in the East Valley last month," she said. "In four communities we have about seven total (unsold homes) left, which is not very many."

With inventory down, Standard Pacific will be ramping up construction early next month, French said.

"In the East Valley ... I anticipate about 20 to 25 homes under construction in the Gilbert area and Queen Creek," she said. "We didn't start many homes in January or February, but now we have seen more people coming out. Plus, there's a lot of people moving here from out of state and I'm very happy about that because they can't find speculative homes to suit them, so they're doing new builds."

Also, numerous winter visitors from Canada are in the market for new homes, French said.

Shea started construction on 14 homes this month and will have another 20-plus homes under construction in the near future, Peterson said.

"We had very few homes under construction," he said. "We now have homes under construction in Seville in Gilbert, at Old Stone Ranch in Chandler, and then out in Cabrillo Canyon (in Pinal County)."

Meritage has homes under construction, but it remains minimal as fear continues to grip consumers, Hilton said.

"We need to get people to feel confident that they're going to be able to keep their jobs and that they're going to get a loan," he said. "There's 40,000 homes that need to be (built) every year in Phoenix just to provide housing for the births over deaths."

Pulte and Del Webb continue to sell homes and build homes, Petroulakis said.

"Consumer confidence is an issue that has affected the housing industry and many others," she said. "We have been doing all we can to provide incentives for consumers to take advantage of the great home prices that exist right now. We've had several sales events and traffic generators at our ... communities in recent months and weeks, and we've been very pleased with the large amount of traffic."

9 Housing-Market Head Winds for 2009

2009-01-03T18:41:00.000-08:00

US News - January 2009

Here's a look at the factors that will be weighing down the housing market in 2009:

With home prices having dropped a painful 21 percent from their 2006 peaks, property owners everywhere could use a splash of good news in their New Year's Eve cocktails. But as a nasty recession is now part of the picture, the chances of an aggressive housing market rebound next year are dim. "A lasting recovery in the housing market?" says Mike Larson, a real estate analyst at Weiss Research. "I don't see it in the cards1. Recession: After months of speculation, the National Bureau of Economic Research made it official Monday, announcing that the U.S. economy entered into a recession in December 2007. The only question now is: How painful a recession will we have? In a November 21 report, economists at Goldman Sachs revised their previous forecast to reflect a more significant economic contraction and higher unemployment. "We now estimate that real GDP is falling at a 5 percent annual rate in the current quarter, and we expect this to be followed by declines of 3 percent and 1 percent in the next two quarters," the economists said. "This deepens and extends the expected recession, bringing the drop in GDP close to the decline seen in 1982 (2.3 percent in our forecast versus 2.7 percent then)." The recession will exert downward pressure on the housing market in a number of ways.

2. Higher Unemployment: The shrinking economy will result in additional layoffs, which will work to smother housing demand. The unemployment rate has already been climbing—it now stands at 6.5 percent—but many expect it to increase significantly in the coming year. Goldman Sachs projects the unemployment rate to hit 9 percent by the end of 2009. "This forecast, if correct, makes the current recession unequivocally the worst single downturn on record since World War II insofar as increases in joblessness are concerned," the economists said. Fewer jobs mean fewer home buyers, since an income stream is essential to obtaining a mortgage. "A job is necessary for a home," says Mark Zandi, chief economist at Moody's Economy.com. "Without [a job] you can't get [a home]."

3. Consumer Confidence: If consumers are worried about the state of the economy and their jobs, they are much less likely to make the biggest financial investment of their lives: buying a house. With a leading survey showing that consumer confidence in the United States dropped to 28-year lows in November, downward pressure on this front will be working against the housing market as well. "You generally don't buy a home unless you feel pretty good about your economic situation," Zandi says. "No one feels good [today]."

4. The Underwater Effect: A recent Zillow report found that 1 in 7 American homeowners has negative equity—owing more on a home than it is worth. (For those who bought a home in the past five years, it's nearly 1 in 3.) Many homeowners in this situation will choose to simply walk away from their homes rather than continue to pay off a devaluing investment. And with home prices expected to fall further next year, the number of "underwater" mortgages will most likely increase. "The underwater phenomenon is going to be very bad in 2009," says Christopher Thornberg of Beacon Economics.

5. Tighter Credit: As banks face higher loan delinquencies, they've responded by jacking up their lending standards for even well-qualified borrowers. The Federal Reserve's most recent Senior Loan Officer Survey found that 70 percent of domestic banks had boosted their lending standards for prime mortgages. More stringent terms will prevent certain borrowers from obtaining mortgages, thereby limiting demand for housing.

6. Slowing Household Formation: At the same time, the pace of new household formation is slowing, which further chips away at housing demand. Richard Moody, chief economist at Mission Residential, says the development is linked to three factors: More singles are moving in with each other, young adults are returning to live with their parents, and fewer immigrants are entering the country. "For those three reasons, you are seeing a slowdown in the rate of household formation," Moody says. "And to the extent that the economy and the labor market remain weak this year—which I think they will—then that's going to continue."

7. Radioactive Effect: Despite lower real estate prices and cheaper mortgage rates, the pain inflicted by the housing bust will frighten many would-be buyers away from the market next year, Larson says. "Enough of your 'average Joes' have been burned very badly and will be burned by the time this is all over that investment money is not going to flood back into the market," Larson says. "Any recovery—in my opinion—will be gradual and is going to take time."

8. Foreclosure Sales: A huge problem for the housing market in 2008, foreclosure sales will continue weighing down the market next year. "There was a surge this year," Zandi says. "But next year [there] will be even more." While that will give buyers an opportunity to go bargain hunting, it's bad news for sellers. "It puts more homes out there for sale at a very deep discount," Zandi adds.

9. Subprime Mortgages: While resetting subprime mortgages may not be a leading factor behind the decline in home prices—as they were this year—such products will again be working against the housing market in 2009, Thornberg says. "There are still lots of subprime mortgages out there that are going to reset not just in 2009, but 2010 and 2011," he says. "And so that's going to be a consistent problem for a while, although it is probably reduced in magnitude [from 2008]." until the back end of the year—if that."

Low-rate mortgage plan generates hope - Valley would benefit, analysts say

2008-12-09T07:12:00.000-08:00

The Arizona Republic - December 2008

Home builders and industry analysts say a proposal to offer federally subsidized mortgage rates as low as 4.5 percent could go a long way toward reviving the Valley's decimated housing market.

Mortgage rates have not been that low for more than a generation.
RL Brown, publisher of the Phoenix Housing Market Letter, said the projected low rates could bring in more buyers and help slow falling housing values. More stable values, in turn, could help slow rising foreclosures.

In September, Phoenix led the nation in declining home prices, and in October, Arizona was pegged as No. 2 in foreclosures, after Nevada.

The lower rates would be available only for purchases, according to the proposal, which is under consideration by the Treasury Department. They could not be used to refinance higher-interest loans.

The mortgage-rate program could get prospective buyers off the fence by offering a rate almost 1.5 percentage points lower than the 5.92 percent that large lenders are offering for 30-year, fixed-rate mortgages, according to a Dec. 3 Bankrate.com survey.

Buyers would have to document income, be able to afford the payments and qualify for guarantees from Freddie Mac, Fannie Mae or the Federal Housing Administration.

Thus, the initiative would be geared toward boosting the housing market to stem future foreclosures rather than helping people whose homes now are in the process of being taken back by lenders.

Besides stimulating sales, Brown said, the low rates could send a message that there may never be a better time to buy.

"Right now, buyers are sitting on the sidelines waiting for prices to go even lower," Brown said
Stephanie Dunbar of Phoenix said she has been looking to buy a house to take advantage of the "incredibly low prices." Dunbar, a property manager, said she would jump at a 4.5 percent mortgage rate.

"I've been waiting for interest rates to fall," she said, adding that the lower rates would enable her to buy a better house.

Dunbar, who has been looking at mortgages in the $125,000 range, said that a 1 percentage-point decrease in the interest rate would reduce her monthly payments by about $100.

At a fixed-interest rate of 6 percent over 30 years, a $250,000 mortgage would cost $1,498.88 a month. At 4.5 percent, a $250,000 mortgage would have a $1,266.71 monthly payment.

Prospective buyers, paralyzed by the credit issues or the economy, as well as mounting foreclosures, are keeping Valley home prices in a free fall, which is further feeding the downward cycle.

Under the plan, the Treasury would offer to buy securities that finance newly issued loans for home purchases. But to sell the securities to the government, mortgage lenders would have to charge interest rates of no more than 4.5 percent.

Further intervention in the housing market appears likely as serious troubles persist.
Federal Reserve Chairman Ben Bernanke estimates that U.S. lenders could initiate 2.25 million foreclosure proceedings this year and that as many as 20 percent of mortgage-holders could be "underwater," meaning they owe more than their homes are worth.

In September, metro Phoenix led the nation in falling home prices, logging a 32 percent decline in a year and 38 percent over two years, according to the S&P/Case-Shiller Home Price Indices.
RealtyTrac, a service that follows foreclosure filings, counted 17,507 Arizona foreclosure notices in October, up 35 percent from the previous month and 176 percent from October 2007.

Jay Butler, director of realty studies at Arizona State University's Morrison School of Management and Agribusiness, believes lower interest rates could slow foreclosures. But he is worried that the stimulus could be offset by mounting job losses and worsening economic conditions.

Traditionally, he said, the primary reason for a home falling into foreclosure has been loss of employment by the owner.
"We're just starting to see than now," he said.

Many of the recent foreclosures have been the result of investors walking away from houses that have declined in value and homeowners getting in over their heads.

The plan to offer low-interest loans, would work through quasi-government mortgage giants Fannie Mae and Freddie Mac. Longtime Valley home builder Garth Wieger believes the program could help stem the persistent slide in home values and growing foreclosures that are the underpinning of the current financial crisis.

"It would certainly go a long way to bring in more people to take the inventory off the market," he said.

Brian Esquivel, a loan officer with Security Mortgage in Scottsdale, said 4.5 percent interest rates definitely would stimulate sales.

"It would move a lot of the Valley's inventory of unsold houses," he said. "Rates are low, prices are low and Arizona is a great place to live."

Meanwhile, government agencies continue to work on other plans to jump-start the nation's ailing housing industry.

• On Thursday, Bernanke suggested sweeping moves are needed to halt falling home prices, including a plan for the government to buy troubled mortgages and refinance them under more favorable terms.

• Last week, the Federal Reserve and Treasury Department announced a plan to cut mortgage rates by purchasing up to $600 billion in debt issued or backed by federal agencies. The announcement briefly helped push mortgage rates down almost a point to about 5.5 percent.

• A third plan, offered by Federal Deposit Insurance Corp. Chairman Sheila Bair would use $24 billion from the government's $700 billion financial-rescue fund to stave off 2 million foreclosures by modifying loans and providing government guarantees.

Valley foreclosures down

2008-12-09T07:10:00.000-08:00

The Arizona Republic - December 2008

Valley foreclosures significantly fell in November, suggesting that lenders are finally working with borrowers to help them pay their loans and that the area's housing market may have hit bottom.

Last month, 3,826 Phoenix-area homes fell into foreclosure, according to the Information Market. That is down 17 percent from October.

Foreclosures are likely to fall again in December because notices of trustee sales, or pre-foreclosures, fell 23 percent in November, to 6,509.

In the past few months, several big lenders announced programs to work with more struggling borrowers. Fannie Mae and Freddie Mac halted foreclosures during the holidays and plan to begin lowering interest rates and payments on some loans.

Valley housing recovery on track

2008-12-09T07:09:00.000-08:00

The Arizona Republic - December 2008

National real-estate analyst Tim Sullivan of the Sullivan Group put together a seven-point test to track a recovery of metropolitan Phoenix's housing market. Last December, the Valley passed only one of the measures.

Check out the area's current housing report card on Sullivan's seven criteria. The market is getting better marks.

• The number of resales on the market falls below a seven-month suply.

The Valley has 55,620 homes for sale, according to the Cromford Report's analysis of Arizona Regional Multiple Listing Service data. That's about a 12-month supply, which is better than the market's 14-month supply of homes for sale a year ago.

• Home sales need to stop slowing.
Resales are up from a year ago, according to realty studies at Arizona State University. Last month, 4,465 existing homes sold Valley-wide. That compares with 3,280 in November 2007.

• New-home permits must fall.
New-home permits dropped to 697 in October, their lowest level in more than 25 years, according to RL Brown's Phoenix Housing Market Letter.

• Mortgage-purchase applications increase.
Applications from home buyers did increase last week, according to the Mortgage Bankers Association of America.

• Thirty-year mortgage rates drop to 6 percent.
The average 30-year rate is down to almost 5.9 percent this week, according to Freddie Mac.

• Affordability must improve dramatically.
Valley home prices dropped 26 percent through August, according to data released Tuesday from ASU's Repeat Sales Index. The Valley's median has dropped to $175,000. That makes many Valley homeowners, including me, cringe. But it means a lot more first-time buyers can afford homes, which will help the market.

• At least one major home builder goes away.
Unfortunately, several builders have gone under.

Score: The Valley's housing market has six out of the seven indicators, a much better score than last year. Unfortunately, now the financial and credit markets must stabilize and the recession must end before the housing market recovers.

Flipping homes profitable, but not risk free

2008-11-27T07:11:00.000-08:00

Yahoo Finance - November 2008

If flipping a house in today's real estate market seems riskier than trekking with a ragtag band of hobbits to Mordor, take heart: Home flippers can still find plenty of opportunities, though they're not entirely without risk.

It may seem counterintuitive to invest in real estate when the housing market is in its darkest hour. But in fact, it may prove to be the most optimal time for such a venture. According to RealtyTrac, a seller of mortgage default data, the foreclosure rate is at its highest level in 50 years, rising to record numbers in the third quarter of 2008. Real estate investors are finding bargains everywhere, particularly in formerly hot housing markets such as Florida, Nevada and California.

Angie Hicks, founder of Angie's List, a compendium of consumer-service reviews, says a recent informal poll of list members found that of those who had purchased a home in foreclosure, 29 percent of respondents had done so within the last six months. Of those, 95 percent said their purchases were profitable.

"The key ... is doing your research and knowing what you're getting into," says Hicks. "Know the area you're buying, the market, how the price compares to the neighborhood."
The horizon is flush with opportunity for those with the money and know-how to snap up a bargain and flip it, but to make it pay you first must understand how the rules of the game have changed.

The new rules for flipping homes
1. Stick with familiar territory
2. Check your capital
3. Cut your costs creatively
4. Consider it a long-term investment

1. Stick with familiar territoryCharlotte, N.C., resident Emma Allen, CEO of Emma Allen Enterprises and an experienced flipper, says there's lots of inventory on the market.
"The prices that were recently so outrageous are down again, so those with capital or access to credit will find it's a very good time to pick up bargains in the marketplace," Allen says.
Allen finds those bargains mostly in neighborhoods where she would like to live. "Properties I've added lately are near our downtown area, with an urban feel to them," Allen says.
Areas undergoing urban renewal present good investment opportunities. Allen, who owns a home on a large, popular lake, also thinks waterfront is a win-win on a flip, but she echoes Hicks' caution. "If you're not terribly experienced, stick with what you know -- just like buying stocks," says Allen.

The dreary economy has resulted in increased inventory, but it has also affected financing. Allen and other veteran home flippers say the days of flipping on a thin wallet have officially ended.

2. Check your capitalIt seems elementary, but in the recent past many flippers found themselves in trouble because they had not correctly calculated the amount of money it takes to finish a flip and market it. Allen says investors should figure out how much money they'll need right up front, and not just the purchase price. It translates to being realistic about both renovation costs and the hidden expense that gets so many in trouble: carrying costs.
"You may have carrying costs on the books longer than you think. The days of the 60-day flip are gone," Allen says.

Carrying costs, or house payments you must make until you sell the property, can subtract thousands from the bottom line. And even though you are technically chipping away at the debt incurred when you purchased the property, the interest you're paying at the top of the flip probably won't be earned back in the sale. Those payments come right out of your potential profit.

What about financing in general? While it's certainly more difficult to obtain a bank loan, it still can be done. But having a stash of cash is still important. Veteran Southern California flipper and interior designer Nicole Sassaman advises would-be flippers looking for a loan to: "Be sure to have 25 percent down and 18 months of reserves in the bank."

If you can't come up with it any other way, consider putting together a consortium of investors -- either share the cost of the project or divide the responsibility by contributing the manpower while your investor brings cash to the table. But when partnering on such a deal, Sassaman cautions, remember that the process has changed.

"In the last 10 years, any dummy could make money in real estate. Now you must buy sharp, do a professional finish job on your product, (and) you must create something very special," Sassaman says. "You must have the staying power and the stomach to go with it all."

3. Cut your costs creativelyFlipping in an economy that's not terribly user-friendly takes guts and creativity. Home flipper and Internet entrepreneur Scott Patterson says he increases his chances for success by breaking as many rules as possible, including making aggressive "low-ball offers" on potential flips.

"(I) offered $80,000 on a house I would have offered $100,000 (on) a year earlier," Patterson says. His strategy worked and he sold the renovated home for a tidy $160,000 a few months later.

Patterson also hopes to cut the middleman by obtaining his real estate license, letting him pocket the commission he would normally pay to sell his flips. He actively seeks capital via Internet and e-mail lists, marrying projects to the right investors.

"The stock market tanking has more people thinking that real estate is looking good right now," Patterson says.

He also expands his chances of selling his flips by targeting VA and FHA homebuyers. "We are concentrating on the first-time buyers market (and) will offer to pay closing costs where possible," Patterson says. He plays up a home's VA or FHA eligibility when advertising.
But buying and selling aren't the only places where a flipper needs to become adventurous to succeed. It also helps to get creative with materials.

Think good secondhand appliances or new ones sold as scratch and dent models, refinishing old cabinets by painting them and changing out the hardware, purchasing leftovers from rolls of carpet, close-outs on tile and fixtures, clearance items and even recycled stuff. By cutting renovation costs, you can keep your asking price low and make your property attractive to more potential buyers.

4. Consider it a long-term investmentReal estate consultant and mortgage broker Todd Huettner of Huettner Capital says changing markets have forced his clients to alter their business practices. Huettner says that while a quick flip is possible, investors should be prepared to hold the property for several years as a rental.
"If they flip it at their price, then they made their short-term gain. If they can't sell it at their price, then they will have a good long-term flip investment and just sell it in a few years," he says.

Huettner says renting protects investors from losing properties they can't sell. "Some complain they tie up too much money if they hold a property, but I point out they will be much better off with money tied up with a return than losing money." In other words, a positive return is always better than a negative one.

Huettner concedes it's more difficult now to qualify for loans and the terms are not always as favorable to buyers, but that well-qualified investors can still make a profit if they meet three criteria: understand their risk tolerance, know their market and come prepared to hold a property long term if needed.

The journey from Point A to Point B may take more time, but in the long run, there's still profit to be made in flipping homes.

Home values stay ahead of 2004 levels

2008-10-29T06:51:00.000-07:00

The Arizona Republic - October 2008

Foreclosed homes are shredding the paper gains made during the market's run-up in recent years, but Southeast Valley cities are still ahead of 2004 levels.
Median home values fell from 2005 to 2008, but they're still greater than four years ago, according to data from Information Market and analyzed by The Arizona Republic.

"The only people generally who have lost real value in their house are those who have bought in the last three to four years," said real-estate analyst RL Brown, who produces the Phoenix Housing Market Letter. "It's tragic when someone has to sell their home in this market."

Homeowners who bought at the market peak in 2005 and 2006 have seen values decline to record lows in many cases throughout the Valley. But those in the Southeast Valley have fared better, in part, because they aren't located in the farthest-flung areas.

The average median home values in Mesa, Chandler, Gilbert and Tempe through mid-September this year are still $42,000 to $68,000 greater than the average median home values in 2004.

But communities in outlying areas aren't holding onto their gains. They are the ones that boomed during the real-estate heyday and the "drive till you qualify" buyer mantra.

Banks have taken back many of those homes through foreclosure, while others have agreed to "short sales" in which buyers pay less than what is owed on a mortgage.

"Mostly what I'm doing are short sales, and I've got quite a few listings in Queen Creek," said Julie Bieganski, a real-estate agent with Century 21 Premier Realty. "Oh, man, that place is getting decimated."

Like many real-estate agents, Bieganski recommends homeowners sit tight and not try to sell their homes until the market recovers.

"If you don't need to, don't," she said.

The number of foreclosures and short sales are driving down median home values but so is the sheer number of homes for sale. The number of properties on the Arizona Regional Multiple Listing Service totaled more than 44,000 plus another 6,800 under contract or pending as of Tuesday.

In a so-called normal market, listings total 15,000 to 20,000 at any given time.
Bill Ryan, a broker with Re/Max Elite, said the majority of single-family homes being sold are foreclosures, also known as bank-owned properties, and short sales.

"Buyers know that there are opportunities on properties that have been written down as a loss," he said. "One foreclosure sale drives the market, and people have to take that into account."

Ryan sympathized with homeowners who lose their jobs, become ill or otherwise can't keep up with their mortgages. But he had harsh words for homeowners who walk away from their homes because they are "upside down" on their mortgages, meaning they owe more to the bank than they their homes currently are worth.

"It's unconscionable to walk away just because the market has gone down," he said. "It's not an excuse to go into default if you are capable of paying. A deal is a deal."

Homeowners who believe their credit won't be ruined by a foreclosure and in some cases, a short sale, are wrong, he added.

For the vast majority of homeowners, declining or rising home values are immaterial to their everyday lives.

"When you think about it, what you have really lost is this big fluff of paper," he said. "That's the outlook you have to have on it."

Most real-estate analysts say it's impossible to predict when the housing market will bottom out and when values will rise again. A lot, they say, has to do with the current economic slump.
But for first-time buyers, the home buying picture couldn't be brighter, said Jodi Erwin, a real-estate agent with Coldwell Banker Residential Brokerage in Tempe.

Erwin said she has several clients in the Southeast Valley who are first-time homebuyers who have pre-qualified for mortgages and are shopping for homes under $350,000.

"I'm working with a lot of buyers because everyone wants a deal right now," she said.

Banks anxious to unload bad mortgages have priced homes cheaply, Erwin said, adding that she has found more than 100 single-family homes throughout the Valley listed for $200,000 or less.

"Two years ago, you couldn't touch a condo for $200,000," she said.
But even with the prospects for first-time homebuyers, Erwin is candid about the complexity involved in trying to buy short sales and bank-owned properties.
"I tell my clients, 'Don't expect logic to prevail because it won't. It's out of our control,' " she said.

US working on plan to help homeowners refinance

2008-10-23T11:41:00.000-07:00

Associated Press - October 2008

The federal government is working on a loan-guarantee plan that could help many homeowners escape foreclosure, a banking regulator told Congress Thursday. At the same time former Federal Reserve Chairman Alan Greenspan said the financial crisis will get worse before it gets better.

Accused of contributing to the meltdown, but denying that it was his fault, Greenspan told a House panel the crisis left him — an unabashed free-market advocate — in a "state of shocked disbelief."

Federal regulators told Congress they were making steady headway in confronting the worst financial crisis since the 1930s as committees in both the House and the Senate held hearings on a contagious financial collapse that has infected global markets.
Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the Senate Banking Committee that the government can do more to help tens of thousands of home borrowers avert foreclosure. She suggested the government set standards for modifying mortgages into more affordable loans and providing loan guarantees to banks and other mortgage services that meet them.

"Loan guarantees could be used as an incentive for servicers to modify loans," Bair said. "By doing so, unaffordable loans could be converted into loans that are sustainable over the long term."

The FDIC is working "closely and creatively" with the Treasury Department on such a plan, she said.

While Bair, a Bush appointee and independent regulator, has publicly nudged the administration in recent months to go further on remedies for troubled home borrowers, Democrats have voiced vigorous support for her and have applauded her public pleas on this front.

On the other side of the Capitol, Greenspan, who stepped down in February 2006 after serving as Fed chairman for 18 1/2 years, was asked to explain his role in the crisis.

Some critics have blamed Greenspan for contributing to the problem by leaving interest rates too low for too long and for failing to regulate risky banking practices such as the issuance of subprime mortgage. But he put the blame on soaring mortgage foreclosures on overeager investors who did not properly take into account the threats that would be posed once home prices stopped surging upward.

Greenspan called the global financial crisis is a "once in a century credit tsunami" that policymakers did not anticipate.

He said that he and others who believed lending institutions would do a good job of protecting their shareholders are in a "state of shocked disbelief." And Greenspan also blamed the problems on heavy demand for securities backed by subprime mortgages by investors who did not worry that the boom in home prices might come to a crashing halt.

"Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Greenspan said. "Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity."

He told the House Government Oversight and Reform Committee that a necessary condition for the crisis to end will be a stabilization in home prices but he said that was not likely to occur for "many months in the future."

Committee Chairman Henry Waxman, D-Calif., suggested that Greenspan contributed to "irresponsible lending practices" by rejecting appeals that the Fed intervene to regulate a surging subprime mortgage industry.

"The list of regulatory mistakes and misjudgments is long," Waxman said of oversight by the Fed and other federal regulators.

In other testimony, Neel Kashkari, a Treasury Department official who is overseeing the government's $700 billion bailout program, told the Senate Banking Committee that the administration was making "tremendous progress" in carrying out the bailout program enacted earlier this month.

There have been "numerous signs of improvement in our markets and in the confidence in our financial institutions" since the program was started, he said.
Still, Kashkari cautioned that "while there have been recent positive developments, the markets remain fragile."

The administration must move to resolve the deepening financial crisis as swiftly and aggressively as it has so far addressed only the symptoms of the debacle, said Sen. Christopher Dodd, D-Conn., the Banking Committee chairman.

Otherwise, continued "volatility and paralysis" will reign in the markets, he warned.
Dodd said he was troubled by recent reports that some major banks receiving multibillion-dollar cash injections from the government under the rescue plan are weighing using the money to buy up other institutions rather than making loans.

Just as it is crucial to stabilize U.S. banks, "it is absolutely imperative" that homeowners be helped to avoid foreclosure, he said.

Sen. Charles Schumer, D-N.Y., said that by not setting conditions on banks in return for the government injections of money, "We're feeding them a little too much dessert and not making them eat their vegetables."

Schumer said he's "still not convinced" that banks receiving the government money should continue paying dividends to their shareholders.

Greenspan said that when home prices finally stabilize "the market freeze should begin to measurably thaw and frightened investors will take tentative steps towards re-engagement with risk."

Greenspan called the $700 billion rescue package passed by Congress on Oct. 10 "adequate to serve the need" and said that its impact was already being felt in markets.

Greenspan's critics charge that he left interest rates too low in the early part of this decade, spurring an unsustainable housing boom, while also refusing to exercise the Fed's powers to impose greater regulations on the issuance of new types of mortgages, including subprime loans. It was the collapse of these mortgages and rising defaults a year ago that triggered the current crisis.

Data show how foreclosures pull down Valley home values

2008-10-23T11:37:00.000-07:00

The Arizona Republic - October 2008

Here's a new way to help better track home prices in Valley neighborhoods: foreclosure resales.
For the first time, homeowners can see exactly how foreclosures are affecting their home values.
New data tracks the prices of homes taken back by lenders through foreclosure and then resold. It then compares that median price of the foreclosure resales to the median price of regular resales in a ZIP code.

With that, homeowners can look at the overall median price for home sales in their neighborhood and see how much foreclosures are pulling down overall values.

"This is the indicator to watch now," said Tom Ruff, analyst with real-estate data-research firm Information Market, which began tracking foreclosure resales a few months ago. "Everyone knows foreclosures can drag down home prices in an area. It's surprising to see how low lenders are selling some homes for in the Valley now."

In summer 2007, when Valley foreclosures had just started to climb, the foreclosure-resale number wasn't that important an indicator of where the housing market was headed. But now that foreclosures are at record levels and haven't yet peaked, what happens to those houses is key for neighborhoods.

In a normal housing market, most homes to go into foreclosure are sold at trustee-sale auctions. Since last fall, about 98 percent of all homes to go into foreclosure have instead been taken back by the lender. What lenders resell foreclosure homes for now is driving home values, particularly in neighborhoods where a higher percentage of existing-home sales are foreclosure resales.
Foreclosure resales make up at least one-fourth of all sales in a many Valley neighborhoods now. In a few areas, the rate of foreclosure resale is much higher. In the El Mirage ZIP code 85335, there were more foreclosure resales than regular resales. The overall median home price in the area is $135,000. The foreclosure resale is $133,750. In most other Valley neighborhoods, the overall median price is $20,000 to $40,000 higher than the foreclosure resale.

"These foreclosure homes need to sell for the Valley's housing market to recover," said Brett Barry, a Phoenix real-estate agent with Realty Executives. "It's a good thing they are selling, but it's not going to make you happy if you are a homeowner in a neighborhood with a lot of these properties."

He said for buyers who are patient and will work with lenders, there are great deals in foreclosure resales.

Gloria Giroux recently bought a foreclosure-resale home from Deutsche Trust Bank. She paid $560,000 for a 3,400-square-foot Carefree home on a half-acre lot that had sold for $815,000 in 2005. "The pool was green. It needed work, and it was frustrating waiting for answers on my offers from the bank," Giroux said. "But I got it, and the house behind me is almost identical and sold for $839,000 in April of this year."

Strategy to stave off Arizona foreclosures falls short of goal

2008-10-23T11:33:00.000-07:00

The Arizona Republic - October 2008

More than 7,000 homeowners facing foreclosure in the Valley are trying to sell their homes through a process known as a short sale, according to Arizona Regional Multiple Listing Service data.

But less than 5 percent manage to sell before lenders seize their houses.

The failure by banks and homeowners to agree to a short sale - to sell a home for less than the amount still owed on the mortgage - is adding to the Valley's growing foreclosure problem.
And the government's recent financial-bailout package to help alleviate the nation's housing crisis will do little to address the problem of short sales.

When homeowners whose property values have collapsed fall into arrears on a mortgage, short sales allow them to negotiate a deal with their lender to sell their home for less than they owe and avoid foreclosure.

An increase in the number of short sales could slow the Valley's record foreclosure rate, which has yet to peak.

However, a number of factors are preventing short sales:
• Lenders, overwhelmed by a record number of mortgages in default and their own losses in the financial-market meltdown, are not negotiating with many borrowers seeking a short sale.

• Many homeowners facing foreclosure wait too long before contacting their lenders.
"I don't see many people having success with short sales, either sellers or buyers," said Mike Orr, a Valley real-estate agent. "For buyers, the process of getting lender approval is lengthy and tiresome. Sellers often run out of time if they are already behind in their mortgage payments."

Because there are so many foreclosed-on homes that lenders are trying to resell at bargain prices, he said, there is little incentive for a buyer to go through the "laborious" process of a short sale.

Lenders have foreclosed on almost 30,000 Valley homes this year. Most are sold for tens of thousands of dollars below what was owed on them. And many resell for thousands of dollars less than what was offered through short sales.

Better than foreclosure

The purpose of a short sale is to allow a homeowner to sell a house at its current market value and get off the hook for however much of their mortgage isn't paid off by the sale.

Homeowners don't get any cash from a short sale but avoid a foreclosure black mark on their credit. A short sale impacts credit, too, but not as badly.

A short sale is better for a neighborhood because it means a home is being purchased by someone and not foreclosed on by the lender, left vacant for months and then resold for even less.
Also, short sales usually cost lenders less than a foreclosure. Research from the national financial-consulting firm Clayton Holdings Inc. indicates lenders lose only 19 percent of a home's loan amount on a short sale, compared with 40 percent on a foreclosure.

"Short sales are the best solution out there for the borrower, the bank and the buyer," said Randy Kutz of HomeSmart's Phoenix Heritage Real Estate Group. However, he said short sales are "the brain surgery of real estate" and take time and expertise to execute.

There's no exact way to track short sales in Arizona. The best indicator is how many homes in pre-foreclosure sell before a foreclosure. In the Valley, only about 200 homes a month in pre-foreclosure sell before the lender takes them back, according to housing-data firm Information Market. In September, pre-foreclosures hit a record 7,447 in the Valley while foreclosures hit a high of 4,378.

A slow process

Myra Shane has been shopping for a home in an east Phoenix neighborhood for months. Her agent found one that a couple were trying to sell through a short sale. That was four months ago.
"I thought the lender would want to move quickly and keep the house out of foreclosure," Shane said. "We can't get answers on anything from the lender."

Shane said she is about to give up and make an offer on a home in the same neighborhood that a lender has already foreclosed on and is now reselling for even less than her short-sale offer.
Slowing the process are the multiple lenders and investors involved.

"It's even trickier if there's both a first and second mortgage involved," said Chris Doyle of American Alliance Mortgage of Tempe. He said lenders with second mortgages on properties are asking for more money before agreeing to a short sale.

The Consumer Bailout That Nobody Knows About

2008-10-04T08:05:00.001-07:00

RISMEDIA, Oct. 1, 2008-As congress considers various bailout proposals for the financial system, there is a little known ‘bailout’ for home owners that has already been enacted into law, according to Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. Section 1403 of the new housing bill that was signed into law on July 30, 2008 (HR 3221) requires mortgage servicers to modify loans for homeowners and help them avoid foreclosure as long as three requirements are met:
1. Default on the mortgage either has already happened or is “reasonably foreseeable”
2. The home owner is living in the property as his or her primary residence
3. The lender is likely to recover more through the loan modification or workout than by forcing the home owner into foreclosure
“The fact is that this law is effective immediately, and most distressed home owners are simply not aware that they have this option,” Nicholas said. Borrowers make their monthly payments to mortgage servicers, and servicers keep a portion of the payment as their profit while sending the rest to the Wall Street investors who actually own the mortgage. “This law requires servicers to act in the best interest of all their investors and obligates them to modify your loan if you can afford the modified loan terms and if they are likely to recover more for their investors by working with you than by going all the way through the foreclosure process,” Nicholas said.
When negotiating a loan modification with your mortgage lender, it is advisable to follow this four step process:
1. Make sure you are dealing with your lender’s loss mitigation and/or work out department.
2. Write a hardship letter demonstrating job loss, serious medical condition, balloon payment coming due, adjustable rate reset or some other financial calamity that will make it impossible for you to continue making your mortgage payments as scheduled. Unless you are in imminent danger of default as required by this new law, lenders are not likely to work with you.
3. Send the lender your financial statements, employment records, tax returns and bank statements demonstrating how you would be able to afford the modified loan terms under your present financial circumstances
4. Send the lender a current appraisal of your home or some documentation on recent comparable sales in your neighborhood demonstrating the current value of your home. “The key is to demonstrate how the lender is likely to recover less money through foreclosure than they would by working with you in your proposed loan modification plan,” Nicholas said.
Here is a sample letter that you can use during your renegotiation:
http://www.cmpsinstitute.org/pdf/SampleLoanModificationRequest.pdf
It may be advisable to consult with an attorney - especially if you qualify for a loan modification under the law and your lender still refuses to work with you.

Getting a loan is tough, here's what you need to know

2008-09-20T07:13:00.000-07:00

The Arizona Republic - September 2008

With tighter lending standards and a slumping housing market, opening the door to a home of your own is more challenging than it has been in years.

Experts say the rules for obtaining a home loan have undergone more revision in the past 18 months than during any comparable period since the Great Depression, as lenders seek to do away with practices that landed their industry in its current crisis.

Changes include tougher credit-score and down-payment requirements; a recent crackdown on stated-income "liar loans"; the disqualification of rental income on some loan applications; an expected lowering of Federal Housing Administration insurance limits and the pending elimination of seller-funded down payment assistance for FHA loans.

More changes are expected in the coming months, and even lenders say they have yet to understand the future impact of a federal housing bill passed in July.

"Everything is pretty much in flux," said Jill Hoogendyk, president of the Arizona Mortgage Lenders Association.

Here is a rundown of the current situation on several lending fronts:

• Down-payment requirements.

Down-payment requirements, paramount to any prospective home buyer's ability to obtain a loan, have risen dramatically for conventional loans and are scheduled to increase Jan. 1 for FHA loans.

Up until a year ago, lenders were still offering conventional loans with no down-payment requirement, said Hoogendyk, owner of HomePoint Mortgage in Phoenix. Now the bare minimum is 5 percent for borrowers with "stellar credit," she said.

Most applicants for conventional mortgage loans can expect to put down at least 10 percent, she said, and certain loan types require up to 30 percent.

The federal government's recent decision to place mortgage-lending giants Fannie Mae and Freddie Mac into conservatorship should help keep interest rates down for conventional loans, but the increased down-payment requirements have made them cost-prohibitive for most borrowers, Hoogendyk said.

As a result, most borrowers have turned to FHA-insured loans, but an expected decrease in the maximum-allowable loan amount could limit their future appeal.

Lenders expect the limit for FHA loans in Maricopa County to decrease by about $50,000 or more as of Jan. 1. The FHA limit is generally 115 percent of a county's median home price for the previous year, and area property values continue to decline.

Hoogendyk said she expected the local limit to drop below $300,000 from the current $346,250, which was inflated to begin with.

"That $346,250 was really a gift, because it had nothing to do with reality," she said.
FHA loans require only about 3 percent down, but that requirement will increase to 3.5 percent on Jan. 1. Meanwhile, Hoogendyk said most sellers in today's market were covering the buyers' closing costs, usually another 3 percent, which wasn't happening prior to the downturn.

• Down-payment assistance.

Still, lenders say as many as 80 percent of recent home buyers in the Valley have taken advantage of a loophole in FHA guidelines that allows sellers, usually home builders, to pay the entire down payment on an FHA loan by funneling it through one of two large non-profit organizations.

A ban on the practice, known as seller-funded down-payment assistance, was included in the recent federal housing bill and is set to take effect Oct. 1. From a practical standpoint, it is already dead, Hoogendyk said, because banks have stopped accepting new loan applications that involve seller-funded assistance.

However, a bill to revive the practice is scheduled for committee action on Tuesday, and some supporters say it has gained traction in recent weeks.

House Resolution 6694 would allow borrowers with credit scores of 620 or higher to use seller-funded assistance, and the U.S. Department of Housing and Urban Development would be allowed to lower that threshold beginning in mid-2009.

Ann Ashburn, president of seller-funded down-payment assistance provider AmeriDream Inc., said there has been support for the bill.

"Support for H.R. 6694 in Congress is gaining steam," Ashburn said. "This is encouraging news, and the credit goes to the 32,000 Americans who called on leaders in Washington to protect down-payment assistance."

• Credit scores.

Though there is no credit-score requirement to obtain an FHA loan, Hoogendyk said underwriters have also gotten a lot pickier about credit.

Standards vary from one lender to the next, but the typical credit-score requirement for an FHA loan is now 580, and the minimum score to obtain a conventional loan is generally 620, she said.

To get the best available interest rate on a conventional loan, the borrower must have a near-pristine score of 740.

One loan that was popular during the housing boom but has proven particularly onerous for lenders is the stated-income loan, nicknamed the "liar's loan. "

Though the loans are still available, increased credit score and down-payment requirements have rendered them inaccessible to most borrowers, Hoogendyk said.

For instance, in the past year the required down payment has crept upward from 10 percent to 30 percent, she said.

Liar loans belong to a category of alternative prime loans, referred to as Alt-A loans, which includes jumbo loans, 80/20 loans, interest-only loans and option-ARM loans, in which the borrower can pay less than the amount of accrued interest for a limited period of time.
None of those loans have been eliminated, Hoogendyk said, but most have become prohibitively expensive in the past year.

• Qualifying income.

Another factor that will limit some potential borrowers is a recently imposed restriction on the use of income from renters to qualify for a home loan, she said.

In July, Fannie Mae announced that it would no longer accept rental income as a qualifier to obtain a second home loan unless the applicant had accrued at least 25 percent equity in the first home.

The purpose was to thwart buy-and-bail schemes, in which a homeowner facing foreclosure qualified for a second loan before walking away from the first mortgage.
Some buy-and-bailers had been using estimated rental income to qualify even though they had no intention of renting out their existing home.

Investors boost Valley home resale activity

2008-07-25T11:15:00.000-07:00

The Arizona Republic - July 2008

Renewed investor interest in low-priced properties helped make June the best month so far this year for Valley home resale activity, but foreclosures were almost just as prevalent, according to the latest report from Arizona State University's Realty Studies department.

ASU reported Wednesday that Valley home resales hit 4,565 in June, up slightly from May and almost exactly the same as in June 2007.

Foreclosures, however, were way up from the previous June - 3,275 this year compared with 575 in 2007, according to the latest report from Jay Butler, director of Realty Studies at the Morrison School of Management and Agribusiness at ASU's Polytechnic campus. In May, the split was 2,895 foreclosed homes and 4,315 resale transactions, the report says. June 2007 saw 575 foreclosures and 4,570 resales.

June is usually a strong month for home sales, so it's not surprising that it has been the best month so far this year for home resales.

The year-to-date total for 2008 is 21,060 resales and 14,590 foreclosures, according to Butler's report. That number is slightly less than the 16,647 foreclosures The Arizona Republic's own data analysts reported recently.

Housing-aid bill not a cure-all

2008-07-25T11:13:00.000-07:00

The Arizona Republic - July 2008

A federal housing bill poised to become law this week is likely to help ease Arizona's housing-market pain, but a variety of local voices in the industry said it won't heal the deeper wounds.

Too many residents are neck-deep in unaffordable mortgages for Arizona's cut of the proposed $300 billion in federal refinancing aid to save them all, government and business leaders said Wednesday.

"We've got a huge problem here," said Fred Karnas, state Department of Housing director. "It's obviously not going to solve the problem, but it will bring a variety of resources for partial solutions."

Those resources provided in the bill include a higher cap on Federal Housing Administration loans; $3.9 million in community-development block grants to buy and restore abandoned properties; an unlimited line of credit to stabilize mortgage giants Fannie Mae and Freddie Mac; and the creation of an independent regulator to ensure sound management and operating standards for those lending institutions.

"Overall, we're really positive about it," Karnas said. "I've been joking . . . that every housing bill we've wanted to get passed in the last 18 years somehow wound up in this bill."

Kevin Egan, president of Tempe luxury-home builder T.W. Lewis, said any measure that helps maintain the stability of Fannie Mae and Freddie Mac is good for Arizona's housing market.

Egan said home builders such as T.W. Lewis that specialize in "move-up" homes, those for existing homeowners who have accrued equity and want or need a larger home, have been struggling even more than builders at the extreme high and low ends.

Therefore, raising the cap for FHA loans from $362,790 to $625,000 (which follows a temporarily higher limit earlier this year) will help get midrange customers buying again, he said.

"I think we have to get investors back into the market," Egan said.
ARM conversions

Home buyers struggling to keep up with adjustable-rate loan payments would be allowed to convert those loans to 30-year, fixed-rate FHA loans under the legislation.

But Karnas said some Arizona borrowers are so deep in negative equity that no realistic refinancing deal would allow them to keep their homes.
"I think there are some markets in which the bottom has completely fallen out," he said.

Margie O'Campo de Castillo of Arizona Dream Realty said she doesn't understand why lenders aren't already trying to help homeowners refinance into fixed-rate loans to avoid foreclosure.

"The housing package will help some," she said, "but we shouldn't kid ourselves. Housing is just one failing pillar of our economy, and I'm not sure we the taxpayers have enough money to fix our housing crisis."
Property-rehab grants

The housing bill also will provide $3.9 billion in community-development block grants for local governments nationwide to buy and rehabilitate foreclosed properties.

President Bush initially threatened to veto the bill unless Congress removed the grant provision, which his administration called a bailout for banks.

Still, Karnas said, the amount is not significant enough to take on a large percentage of foreclosures.

Foreclosures across metro Phoenix numbered 16,647 for the first half of the year, up from 9,966 during all of 2007 and 1,070 in 2006.

Karnas said Arizona officials expect to receive about $100 million of the bill's grant money, based on a formula that favors states with the greatest number of foreclosures.

"A hundred-million dollars maybe buys you 500 homes," Karnas said. "It'll make a dent, but it won't solve the problem."

Federal backing

The bill also is aimed at protecting future loans by offering mortgage giants Fannie Mae and Freddie Mac an unlimited line of credit and allowing the federal government to buy equity in those institutions. Federal legislators say it will also promote sound management and operating standards of those government-sponsored institutions by creating an independent regulator with wide-ranging authority.

Herbert Kaufman, a finance professor at ASU who used to work at Fannie Mae in Washington, said the legislation should help to lower mortgage interest rates. Kaufman also said the bill, along with recent government promises to support Fannie Mae and Freddie Mac, should help calm jittery investors here and abroad.

"Foreign investors, so far, have been very patient," said Kaufman, referring to turmoil in the U.S. financial markets.

Another provision likely to affect Arizona's new-home market is the proposed ban on federal insurance for mortgage loans in which a home's seller pays the buyer's down payment through a non-profit intermediary.
Down-payment assistance requires the buyer to receive approval for a Federal Housing Administration loan, and the seller must agree to pay the buyer's down payment, usually 3 to 6 percent of the home's sale price. Then, the lender arranges with a non-profit assistance provider to accept the seller's donation, which it then gifts to the buyer, minus a transaction fee.

Seller-funded, down-payment assistance has drawn criticism from the FHA, which considers the practice a "shell game" that circumvents sound lending standards and carries a higher default rate.

However, some local lenders say down-payment assistance is responsible for at least half of all mortgage loans currently being issued in the Valley. They are worried that eliminating the practice would knock the already staggering local housing economy flat on its face.

"It has really opened the doors to so many people, and now those doors are going to be shut," Phoenix loan originator Dean Wegner said.

Wegner also questioned why the bill includes an increase in the required down payment on FHA loans from the current 3 percent to 3.5 percent.
"It's going to hurt good people who want to buy houses, who don't have any issues," he said about the bill, "and it's going to help the people who are in trouble."

NE Valley foreclosures surge

2008-07-25T11:12:00.000-07:00

SCOTTSDALE - About 800 Northeast Valley property owners lost their homes to foreclosure in the first half of this year, nearly five times as many as the same period a year ago, according to a data analysis by The Arizona Republic.
Plus, nearly 2,000 area homeowners have been issued a notice of trustee sale, a precursor to foreclosure. That is nearly three times as many as the first six months of 2007.
Foreclosures by city through June 30 of this year and the percentage increase from a year ago are:
• Scottsdale, 640 homes, an increase of 378 percent.
• Fountain Hills, 82 homes, up 531 percent.
• Cave Creek, 58 homes, up 164 percent.
• Paradise Valley, 17, up from zero.
• Carefree, 7, up 250 percent.
Notices of a trustee sale were sent to 1,543 Scottsdale homeowners and another 410 went to owners in the four other Northeast Valley communities.
The highest concentration of foreclosures are in these areas:
• Downtown, south to Thomas Road.
• The Scottsdale Airpark area, bounded by Shea Boulevard, Bell Road, Scottsdale Road and 104th Street.
• The Kierland area, bounded by Tatum Boulevard, Shea, Bell and Scottsdale Road.
• DC Ranch, McDowell Mountain Ranch and other areas in the 85255 ZIP code.

Arizonans brace for summer mortgage resets

2008-07-10T07:55:00.000-07:00

The Arizona Republic - July 2008

More Arizonans than ever before will face the threat of foreclosure this summer as their adjustable-rate mortgage loans jump to a higher interest bracket.

Adjustable-rate mortgage "resets" - in which a low initial interest rate is converted to a higher rate - are expected to peak this month in Arizona, and experts say the summer resets undoubtedly will lead to fall foreclosures.
In a state where one in 20 mortgage borrowers is already at least 30 days behind on payments, government officials, nonprofit organizations and even some lenders have stepped up efforts to help Arizona families stave off foreclosure. A statewide hotline set up in late May to connect borrowers with HUD-approved foreclosure intervention counselors received nearly 1,500 calls in its first month of operation, and a large nonprofit organization with strong lobbying power recently opened an office in Phoenix to bring its counseling services to the state.

Those efforts have contributed to a growing number of success stories. Unfortunately, the fastest-growing segment of delinquent borrowers is just beginning to grapple with the prospect of higher monthly bills, which typically are triggered by resets two to three years into the term of a sub-prime loan.

The effect of a reset varies tremendously based on each loan's specific terms, ranging anywhere from a slight increase in the required monthly payment to doubling it.

Most borrowers awaiting initial loan resets have accrued no equity because of plummeting land values, making it virtually impossible to refinance. For some of them, foreclosure is all but inevitable.

"My opinion is that we haven't seen the worst of it," said Kevin Murphy, executive director of Labor's Community Service Agency in Phoenix. "People who got into those stupid loans did so with the idea that the property value would increase."

Resets rising As of February, an estimated 157,000 adjustable-rate loans had yet to reach their initial reset dates in Arizona, according to economic research firm First American CoreLogic, based in Santa Ana, Calif. The total value of those Arizona loans was roughly $38.7 billion, company spokeswoman Meghan Donovan said.

First American determined that nearly 10 percent of those loans would reach their initial reset dates between March and August, with the highest monthly total - about 2,600 loans, valued at nearly $665 million - occurring in July.

The number of monthly resets is then expected to gradually decline and stabilize until a second, even more dramatic increase in resets occurs in mid-2010, according to First American's research.

The second spike represents so-called "option ARM" adjustable-rate loans, in which borrowers are allowed to make lower monthly payments until the loan reaches an automatic 5-year reset date or the borrower hits the maximum limit on negative amortization, usually 110 percent to 125 percent of the original loan amount.

The vast majority of adjustable-rate mortgages in Arizona that have yet to reach their initial reset dates were issued from 2004 to 2006, when the housing market crested and fell, Donovan said.

The lending industry has since phased out most of the loan types responsible for the ensuing foreclosure crisis, but homebuyers who agreed to those terms are still contractually bound to fulfill their obligations unless the lender is willing to renegotiate, said Murphy, who runs a free, nonprofit foreclosure intervention counseling service in Phoenix.

Since September, calls from struggling borrowers with adjustable-rate loans have increased from a small fraction of all inquiries to nearly half, Labor's counselor Liz Henry said.

"Prior to that, it was more traditional loans," she said.

Murphy said most lenders won't even consider modifying a loan to reduce the effects of a reset until the borrower is at least 60 days delinquent and has demonstrated a willingness to eliminate excess spending, sell off luxury items and even take a second job if necessary to keep the home.

Even then, the mortgagor must have sufficient monthly income and a history of timely payments before the reset made them unmanageable.
"They're not going to bend over to the extent some of these homeowners need them to," Murphy said.

The surge in resets has made it far more difficult to negotiate agreements that will keep homebuyers out of foreclosure, Murphy said.

"Up until six to eight months ago, our success rate was up in the 90 percent range," he said. "That's when some of those ARMs started to reset."
Sweat equity Labor's Community Service Agency has still enjoyed some recent successes, however bittersweet.

Phoenix resident Connie Vasquez was one of hundreds of struggling Valley homebuyers who picked up the phone in June and called for help.
Vasquez, 56, reached out to the Arizona Foreclosure Help Line, a new service administered by the Arizona Department of Housing that connects residents with one of a dozen state-contracted foreclosure intervention services.

"When I first called, I was a bit leery," said Vasquez, who works for the Arizona Public Safety Retirement System. "I just took a shot."

Vasquez, who has a traditional, fixed-rate loan, struggled to pay the monthly bills after worsening arthritis made it impossible for her 58-year-old husband, Nolberto, to continue practicing his trade as a concrete finishing contractor.

"My husband hasn't worked in about a year, and so I got stuck with everything," she said.

At first, Vasquez was able to keep her mortgage current by taking on a second job at the post office and cutting back on family expenses.
However, the seasonal job ended after the New Year, and before long she had missed a house payment.

The already difficult task of scraping together $1,400 a month to pay off the mortgage suddenly became double, Vasquez said. Now she would have to come up with $2,800 to avert the foreclosure process.

"It was very stressful during that time," she said. "I was getting desperate."
Vasquez was connected by the hotline service to Labor's Community Service Agency, where counselor Henry asked her to collect the required documents to prove her income and expenses.

Two weeks later, Vasquez arrived for a face-to-face meeting to go over the documents with Henry and answer some questions. By that time, her mortgage had become three months past due.

Henry convinced Vasquez' lender, HSBC Mortgage Services, to forgive the past-due payments and add them back into the loan's principle. The lender did not reduce her interest rate or the amount of her monthly bill.
Vasquez still had to make one payment of $1,400 in June, but she is no longer in default.

"It took every penny I had," she said, sitting in her 115-degree living room on Monday afternoon. Air-conditioning is a luxury she can no longer afford.
Still, Vasquez said she is committed to keeping the home at any cost.
"I don't want to worry about where I'm going to live in 10 or 20 years," she said. "It's stability - I'll always have someplace to go."

New hope Though it might seem harsh, Henry said the forbearance agreement she negotiated for Vasquez would not have been possible six months ago.

Faced with the prospect of taking on massive inventories of abandoned homes, lenders are becoming more flexible in situations where the borrower shows a strong desire to honor their mortgage agreement.
"A lot of the lenders are creating special departments dedicated to what they call 'home retention,'" Henry said, adding that it's a big step forward from the typical "loss mitigation" departments focused entirely on recovering the lender's money.

The home retention staff usually has limited autonomy to negotiate with foreclosure intervention counselors, which makes the process more productive, she said. In some recent cases, lenders have agreed to reduce the interest rate of an adjustable loan to what it was before the reset and fix it at that rate, though such concessions are still rare.

One persisting obstacle to loan renegotiation is that mortgage lenders have a fiduciary responsibility to the investors who have purchased bundles of sub-prime loans, also known as mortgage-backed securities, on the open exchange.

"A lot of these policies are set by the ultimate investor in the loan, and not the people who administer the loan," Murphy said. "They can only go so far, because everybody up the chain has someone to answer to,"
Darren Duarte, spokesman for nonprofit mortgage lender and foreclosure intervention provider Neighborhood Assistance Corporation of America, said his organization also has seen a greater willingness on the part of lenders to make deals with counseling services on behalf of borrowers.
One lender even agreed to reduce the total amount of a client's debt by $20,000 and lower her interest rate from almost 15 percent to less than 7 percent, Duarte said, adding that such deals are not typical.

Neighborhood Assistance Corporation, based in Boston, opened a Phoenix office two months ago and already has helped several Valley residents hang on to their homes, he said. The nonprofit group also offers its own low-interest, fixed-rate mortgage loans to responsible borrowers and lobbies against predatory lending practices.

Duarte said the middlemen of mortgages, including bankers, brokers and investment marketers, are responsible for creating and selling loans that doomed borrowers and mortgage-backed securities investors to failure.
"People took advantage of these people," he said. "We had all these players here trying to make money off them."

Murphy said he believes regulators also failed the borrowers and backers of adjustable-rate mortgage loans, and the half-baked efforts of Congress to bail out borrowers are too little, too late.

"There needs to be more control at the federal level," he said. "This whole mess is the result of lax enforcement by the federal government."

Fed to curb shady home-lending practices

2008-07-10T07:49:00.000-07:00

July 2008

WASHINGTON - The Federal Reserve will issue new rules next week aimed at protecting future homebuyers from dubious lending practices, its most sweeping response to a housing crisis that has propelled foreclosures to record highs.

To prevent a repeat of the current mortgage mess, Bernanke said the Fed will adopt rules cracking down on a range of shady lending practices that have burned many of the nation's riskiest "subprime" borrowers — those with spotty credit or low incomes — who were hardest hit by the housing and credit debacles.

The plan, which will be voted on at a Fed board meeting on Monday, would apply to new loans made by thousands of lenders of all types, including banks and brokers.

Under the proposal unveiled last December, the rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.

"These new rules ... will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Bernanke said.

Consumer groups have complained that the proposed rules aren't strong enough, while mortgage lenders worry that they are too tough and could crimp customers' choices.

The Mortgage Bankers Association urged the Fed to "take a balanced approach in devising final regulations so that the credit crisis is not worsened."

Meanwhile, the Center for Responsible Lending, a group that promotes homeownership and works to curb predatory lending, warned the Fed that weak regulation and oversight has led to the "worst credit crunch in generations."

The Fed — under former chairman Alan Greenspan — came under attack for not acting early on to crack down on dubious lending. Some critics complained that Greenspan, who ran the Fed for 18 1/2 years — failed to act as a forceful regulator especially during the 2001-2005 housing boom, when easy credit spurred lots of subprime home loans and many exotic types of mortgages.

Meanwhile, signs emerged Tuesday that the housing market's slump is likely to persist through the summer, and the real estate market may not recover for at least another year.

The National Association of Realtors' pending home sales index slipped by 4.7 percent in May to the third-lowest reading on record. The decline "suggests we are not out of the woods by any means," said the group's chief economist, Lawrence Yun.

In an extraordinary action aimed at averting a financial catastrophe, the Fed in March agreed to let investment houses go to the Fed — on a temporary basis — for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.

The Fed's decision to act — temporarily at least — as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.

Bear Stearns was eventually taken over by JPMorgan Chase & Co., with the Fed providing $28.82 billion in financial backing.
Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk.

Bernanke, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.

In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.

"Allowing Bear Stearns to fail so abruptly at a time when the financial markets were already under considerable stress would likely have had extremely adverse implications for the financial system and for the broader economy," Bernanke said to the mortgage forum, organized by the Federal Deposit Insurance Corp.

Dodd, meanwhile, praised the Fed's actions in a statement Tuesday, saying, "I am pleased that the Federal Reserve is now taking steps to issue new rules for mortgage lending and to improve oversight of our financial system. As documented by the Senate Banking Committee, it was the lack of regulatory will, not lack of regulatory authority, that contributed to the current credit crisis."

The Fed's consideration of giving Wall Street firms more time to tap the Fed's emergency loan program is part of an ongoing effort by the central bank to bring back stability to fragile financial markets and help to bolster shaky confidence on the part of investors.

Policymakers — in the White House, in Congress and other federal agencies — will need to work together to come up with ways to make the U.S. financial system more resilient and stable and to prevent a repeat of the types of problems that brought about the end of Bear Stearns, an 85-year-old institution, Bernanke said.

Although those efforts are already under way and will be the focus of a House Financial Services Committee hearing Thursday, it will fall to the next president and next Congress to settle them. Both Bernanke and Treasury Secretary Henry Paulson are scheduled to testify at Thursday's hearing.

The Bush administration has proposed revamping the nation's financial regulatory structure. That plan would make the Fed an ubercop in charge of financial market stability. But the Fed would lose daily supervision of big banks. Bernanke said the Fed must maintain this power if it is to be an effective overseer of financial stability.

The Fed, which regulates banks, and the Securities and Exchange Commission, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system.

Over the longer term, though, Congress may need to adopt legislation to bolster supervision of investment banks and other large securities dealers, Bernanke said.

Bernanke recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the SEC's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.

Report: May Valley home resales up over April

2008-06-21T07:18:00.000-07:00

The Arizona Republic - June 2008

Valley home resale activity increased in May over the previous month but still lagged behind the pace of a year earlier, according to the latest Arizona State University Realty Studies report.

There were 4,265 home resales in May, compared with April's total of 3,760 sales, ASU reported. Both figures exclude foreclosure transactions.

Home resales totaled 4,915 in May 2007, according to the report. Realty Studies Director Jay Butler said May is typically a strong month for home sales.

Still, he said factors such as job losses and layoffs are weakening the economy and likely will add further stress to the housing market.

Smart Ways To Profit From Foreclosures

2008-06-21T07:17:00.000-07:00

Forbes.com - June 2008

With 700,000 bank-owned homes on the market, and another one million in some state of foreclosure, according to RealtyTrac, an Encino, Calif., provider of foreclosure listings, you might be tempted to add a distressed property to your portfolio.

Beware. Buying a home in foreclosure is not for the meek. Those with an appetite for risk, however, will find the tumultuous market stocked with plenty of investment opportunities.

These may include the sale of brand new luxury homes in an upscale Nashville community for half their marked value or a bank giving away a foreclosed property in a poor Detroit neighborhood for back maintenance.
But this complex arena is teeming with professionals. Private equity juggernaut Blackstone Group alone this year raised an $11 billion war chest to chase distressed properties, and large homebuilders looking to recapitalize, like Centex and Lennar, unloaded over $1.5 billion in homes to vulture funds between December 2007 and April 2008, for between 30 and 40 cents on the dollar.

Whether you're looking to flip a home, buy into a neighborhood you couldn't otherwise afford or planning to rent the home, you, like these big companies, must have heaps of cash on hand.

There are properties that can be turned within a few months, but the overall market is still slow. Even if you have a renter lined up or have enough money for a 10% to 20% down payment, you should be ready to weather a depressed market for another two or three years.

Go to the county assessor's office and study recent sales for price-per-square foot and time spent on market to determine what sort of price you can expect at resale. Be conservative. If you are renting, calculate a capitalization rate, and subtract 10% or more of the annual yield for maintenance and depreciation. Make sure that your endeavor is still profitable if you incur two to three years of carrying costs and depreciation.
It's also crucial to remember that bad loans that plagued speculators and unprepared borrowers don't simply disappear when distressed owners sell their properties. Unless the property goes through foreclosure auction and becomes bank-owned, outstanding liens and fees are simply transferred to the new owner. If you plan to buy out of pre-foreclosure, make sure the property has a clean title; otherwise you'll just be trading places with the distressed homeowner.

In such situations, outstanding fees, second liens and the like aren't automatically washed away. It isn't always the case that pre-foreclosure homes lack clear title, but once a home goes into the auction on the courthouse steps and is bought back by the bank, it is clear of all the bad loans that got the original owner into trouble. Making sure a home has clean title is a critical first step to a sound investment.

It's also important to note that you make money on a foreclosure the moment you buy the home. You can make a good return if you're selling in a sinking market, for example, by unloading a home at 70 cents on the dollar, if you bought it for 50 cents on the dollar. In heavily hit foreclosure areas, banks are juggling so many properties that offers on distressed homes, out-of-business homebuilders' developments and excess inventory are being entertained at under-listing prices.

Just don't get attached. As in any market, falling in love with a home--and overpaying--is a surefire way to lose money in a highly risky one.
When you've located an appealing property, order a new appraisal and study foreclosure patterns in the neighborhood. You'll also want to explore creative financing options to defer costs.

However you do the math, the most important thing to keep in mind is that the investment has to be worthwhile--even if you can't sell the home at your desired price for two or three years and the current housing market deteriorates a further 10% to 20%.

If that's a model you can live with, it might be time for a subscription to a foreclosure listing service.

Down market doesn't stop some builders from new developments

2008-06-21T07:15:00.000-07:00

Tribune - June 2008

For many Valley builders, launching new housing developments amid a languishing real estate market and ailing economy isn't an option.

Experts say most are still busy purging excess speculative houses.
But a few builders are bucking the trend and starting work on new master-planned communities with thousands of homes - betting the right price and location will entice buyers.

Tempe-based Fulton Homes opened sales today for its latest project, called Ironwood Crossing - a 2,100-home master-planned community near Queen Creek.

"Houses are selling if they're priced right, if they're in good shape and in a good area," said Dennis Webb, Fulton's vice president of operations.
Located at Ironwood and Ocotillo roads, the development is closer to the urban center than areas like Johnson Ranch and Florence, but it's still affordable, Webb said.

And price is key.
When Fulton began planning out the project three years ago, prices were originally set from the mid-$200,000s up to $450,000.

Now, houses start at just less than $150,000 for starter homes and reach up to $300,000 for a more-than-4,000-square-foot house.

The company was able to cut prices by redesigning the houses, Webb said. Laminate countertops became standard instead of granite. And 10-foot ceilings were lowered to 9 feet.

"It doesn't sound like a lot, but it makes a big difference," he said.
Fulton isn't the only builder moving forward on projects.

Blandford Homes recently started work on a 1,200-home development, called Mountain Bridge, at McKellips and Hawes roads in northeast Mesa.
"Just because the market is down doesn't necessarily mean it wouldn't be a good time to enter the market," said Ben Sage, head of Houston-based Metrostudy's Arizona division.

Some builders want to be prepared for the market's return. Others have poured so much money into projects, it's not that much more expensive to build some model homes, Sage said. In Blandford's case, the local builder isn't burdened by dozens of other communities like some larger builders, he said.

Fulton, a private company, also has an advantage over big public builders which must answer to stockholders, Webb said. Fulton is still profitable, he added.

"We haven't just given away houses because we had to," Webb said.
John Fioramonti, with Scottsdale-based Meyers Builder Advisors, said this is the first time he's seen Fulton offer homes less than $200,000. Even so, they'll be competing with dozens of other new-home communities and prices that are closer to $120,000, Fioramonti said.

"Queen Creek is just a tough area," he said.
Still, Queen Creek is well-positioned to feed growing employment centers, such as the Phoenix-Mesa Gateway Airport area in Mesa and parts of Gilbert, said market analyst RL Brown.

Blandford also has a good location, which is one of the last areas to build in that part of Mesa and is close to employment centers, Brown said.
"Everybody's commute-sensitive right now," he said.

Some buy a new home to bail on the old

2008-06-14T10:17:00.000-07:00

The Wall Street Journal - June 2008

Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.

"I can find the same exact house as what I live in right now for half the price," says Ms. Augustine, 44 years old, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn't want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago.

In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the "buy and bail," in which borrowers with good credit buy a new home - often at a much lower price - then bail out of the "upside down" mortgage on their first home.

Homeowners are able to pull off this gambit - which some lenders and real-estate agents call mortgage fraud - by taking advantage of mortgage-lending practices that allow them to buy a new primary residence before their existing residence has been sold. And with the lending industry in disarray as it tries to restructure millions of mortgages, some boast they are able to pull off the strategy with ease.

In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it. Some blame the phenomenon in part on lenders' unwillingness to cut deals or restructure loans made when home prices were inflated. "It's just a business decision," says Linda Caoili, a Sacramento real-estate agent who is working with Ms. Augustine and others who are considering walking away from their mortgages. "If you're upside-down $250,000, why would you keep it? It just doesn't make sense."

To be sure, walking away from a mortgage, even if legal, has plenty of drawbacks: Borrowers lose the ability to take out unsecured loans, since foreclosures can stay on a credit report for seven years. In some states, lenders can sue for assets, including a new house. Fannie Mae, the government-sponsored mortgage underwriter, recently revised the amount of time borrowers with a foreclosure must wait to receive a home loan to five years from four. Proposed Fannie Mae guidelines, which could take effect later this month, also would require those borrowers to make a 10 percent down payment and meet a minimum credit score after the five-year period.

While buy-and-bail is on the rise, the practice doesn't appear to be widespread. Credit is much tighter now than it was during the real-estate boom, and most families with an upside-down mortgage likely will hold on to their homes and hope the market improves in the future - even though many of them could lose their properties.

Still, with home prices falling rapidly in some parts of the country, a growing number of frustrated consumers are willing to take the risk - especially in so-called nondeficiency states such as California and Arizona, where it is more difficult for a lender to sue consumers who walk away from their mortgages. Borrowers who bought or refinanced their home with a personal line of credit, however, instead of a home-purchase loan - a common practice during the housing boom - could be sued by a lender in those states. Borrowers also could be on the hook if lenders can show that homeowners committed fraud by misrepresenting themselves on their loan application.

Yet even in cases in which a lender could attach a lien on the new home, some homeowners simply assume that lenders are too swamped. "So many people are foreclosing, is it cost effective for lenders to go after all of these people?" says Steve Hawks, a Las Vegas real-estate agent who handles lender-owned properties.

That works in the favor of borrowers such as Blair Morrow. Last year, he rented out his Sacramento home when he moved to Houston for a new job, but he lost those renters in February. He quickly arranged to buy a new home in Houston, fearing that his old residence would be foreclosed and he would take a big hit on his credit.

"I had 30 days to make a decision: Live in a rental house the rest of my life or buy a house and walk away from the one in California," says Mr. Morrow, 56, who works at a car dealership. He wrestled with the decision for a while, but justified it once Countrywide Financial Corp., the lender for his first home, approved the new home loan. "Countrywide didn't say peep," he says. Countrywide didn't return calls seeking comment.

Ms. Augustine, the Sacramento day-care provider, became a first-time homeowner in November 2006 by taking out two loans with nothing down to cover the $426,000 home purchase. With her home valued at about $220,000 now, she is actively looking in nearby communities for another one to buy before the bank forecloses on her current home.

The mortgage industry is starting to wise up to the practice and is scrambling to fight back. Buy-and-bail is "certainly fraudulent and unfortunately on an uptick," says Gwen Muse-Evans, vice president for credit policy and controls at Fannie Mae. Although she doesn't have data to quantify the size and scope of the trend, Ms. Muse-Evans says overwhelming anecdotal reports have prompted the agency to draft tougher regulations aimed at closing one big loophole that allows underwater homeowners to qualify for new home loans.

That loophole currently works like this: Homeowners provide a rental agreement showing that they will rent out their first home, and underwriters allow rental income to cover as much as 75 percent of the mortgage payments on the first home when determining whether the borrower can make payments on two homes. This allows homeowners to secure a second mortgage that they might not otherwise afford.

Under revised Fannie Mae guidelines, which could take effect next week, loan applicants who claim they will rent out their first home will have to produce supporting evidence, including an executed lease agreement. Borrowers also will have to prove that they can pay the mortgage, property taxes and insurance for both residences. The guidelines will make an exception only for borrowers who have at least 30 percent equity in their current home.

Of course, many individuals still can qualify for that second loan because of a strong credit and cash position. If they "have the intention of fraud, then at the end of the day there's really little you can do to totally prevent that," says Ms. Muse-Evans.

Some private lenders aren't waiting for Fannie's lead. In April, underwriters handling bank-owned properties at IndyMac Bancorp Inc. told brokers they would require borrowers purchasing new homes while retaining their existing home as a rental to prove that they could make full payments on both homes to qualify for a loan. A memo sent to a Southern California broker said the policy change was prompted by "losses from individuals walking away from properties after the acquisition of a new home."

An IndyMac spokesman said the bank hadn't changed its policies and had always "underwritten loans with an eye towards insuring that our borrowers could readily rent out their current property and/or reasonably support both payments."

Realtors say the new guidelines could put further pressure on sales, but Lawrence Yun, chief economist for the National Association of Realtors, says the impact of such guidelines on sales would be marginal. He calls Fannie Mae's response appropriate because any artificial increase in home sales hurts the average consumer.

Meanwhile, Mr. Hawks, the Las Vegas broker, says he receives one to two dozen inquiries every week from individuals inquiring about a buy-and-bail. "People are starting to ask how much their good credit is worth," particularly when their home is underwater by hundreds of thousands of dollars.

The tactic doesn't appeal to people such as John Ristuccia, a 48-year-old Buckeye, Ariz., paper-company sales director whose job was moved to Houston in August. He is trying to complete a "short sale" for $425,000 on his five-bedroom, 4,000-square-foot home, which was appraised for $800,000 last year. In a short sale, a lender allows the sale of property for less than the amount due on the outstanding loan and often forgives the remaining debt.

Even though he might be able to qualify for a second home loan, Mr. Ristuccia says he wouldn't consider sticking his bank with his suburban Phoenix property. "Just personally I've got a problem with that," he says. "I really can't put it in terms other than it feels wrong."

Real estate agent boom over, too in Arizona

2008-06-14T10:15:00.000-07:00

Tribune - June 2008

In the past year, real estate school instructor John Dyer has watched class enrollments dwindle, as agents struggling amid the stagnant housing market fled the business.

Many of those leaving got into the industry during the boom to make a quick buck, the Scottsdale broker said.

"When it came down to having to know what the heck you were doing, they didn't want to," Dyer said.

A growing number of Valley real estate agents are putting away their for sale signs and jumping into other jobs.

In June, the number of active real estate licenses fell to 69,771, down 5.6 percent from a year ago, according to the Arizona Department of Real Estate. Meanwhile, the number of inactive licenses has risen to more than 16,500, up from roughly 9,400 in 2002.

Some former agents are going back to school or teaching jobs. Others are bartending, waiting tables or selling cars.

Industry professionals say it's tough for inexperienced agents who haven't developed a client base to compete.

In 2001, an agent who wanted to make $100,000 needed to keep nine listings, averaging $250,000, at any given time, Dyer estimated. Now, they need to keep 27 listings to bring in the same amount, he said.

Dyer said his classes, which used to be at least half full with newer agents, are filled mostly with veterans now.

"It's the easiest business to get into. It's the hardest business to succeed at," said Mike Wasmann, president-elect of the Arizona Association of Realtors.
Agents who pushed themselves to become skillful in marketing, sales and other keys to the business are surviving, Wasmann said.

Those staying in the game are also scrambling to become experts in short sales, bank-owned properties and other niches. Dyer's classes on short sales - where a lender agrees to accept less than what a borrower owes - are standing room only these days.

"If you don't know short sales and foreclosures, you only have 20 percent of the market to deal with," he said.

Agents are taking classes on Federal Housing Administration, or FHA, loans, said Bill Gray, chief operating officer of the Arizona School of Real Estate & Business. The government-insured loans don't have specific credit score criteria and allow borrowers to put 3 percent down.

"That's the hottest market you will see today," Gray said.

Enrollment at the school has fallen to 2001 or 2002 levels, but Gray is optimistic.

Foreclosures hit a record high, and more coming

2008-06-08T16:26:00.000-07:00

Asociated Press - June 2008

WASHINGTON (AP) — The foreclosure hammer is hitting ever harder. People lost their homes at the highest rate on record in the first three months of the year, and late payments soared to a new high, too — an alarming sign that the housing crisis and its damage to the national economy may only get worse.

Dumping more empty homes on an already glutted market also is likely to put a further drag on home prices — extending a vicious cycle.

Slumping home values are being blamed in large part for the rising tide of foreclosures. Troubled borrowers are left owing more to the bank than their homes are worth. They can't sell without taking a huge financial hit, so they just walk away.

In fact, Americans' equity in their homes — usually their single biggest asset — now has dropped to the lowest level on record in figures going back to the end of World War II. Homeowners' portion of equity fell to 46.2 percent, which means the amount of debt tied up in their homes exceeds the equity they have built up.

Watching their home values sink, consumers have pulled back on spending, a factor in the economy's slowdown. Buoyed by rebate checks, shoppers did get back in the buying groove in May, but analysts predict that consumers — pounded by galloping gasoline prices — will still be cautious.

“The economy is treading water, and the housing market is one of the undercurrents trying to pull it down,” said Stuart Hoffman, chief economist at PNC Financial Services Group.
Nearly 1 percent, or roughly 447,723 loans, fell into foreclosure during the January-to-March period, the Mortgage Bankers Association said Thursday in its quarterly snapshot of the mortgage market. That surpassed the previous high of 0.83 percent over the last three months in 2007.

The report also found that more homeowners slipped behind on their monthly payments. The delinquency rate jumped to 6.35 percent — or 2.87 million loans — compared with 5.82 percent for the previous three months. Payments are considered delinquent if they are 30 or more days past due.

Both the rate of new foreclosures and late payments were the highest on record going back to 1979.

With prices expected to keep dropping, foreclosures and late payments “are going to continue to go up,” Jay Brinkmann, the association's vice president of research and economics, told The Associated Press.

Homeowners with tarnished credit who have subprime adjustable-rate loans took the hardest hits. Foreclosures and late payments for these borrowers also swelled to all-time highs in the first quarter.

The percentage of subprime adjustable-rate mortgages that started the foreclosure process climbed to 6.35 percent. The rate was 5.29 percent in fourth quarter, the previous high. Late payments rose to 22.07 percent from 20.02 percent, the previous high.

The association's survey covers just over 45 million home loans.

More problems also cropped up with loans to more credit worthy borrowers.

The percentage of such loans falling into foreclosure was 0.54 percent, compared with 0.41 percent at the end of last year. Late payments rose to 3.71 percent from 3.24 percent.

The numbers were higher for those prime borrowers with adjustable rate mortgages. Initially low rates reset to much higher ones, making it difficult, if not impossible, for homeowners to keep up with monthly mortgage payments. The proportion of those loans falling into foreclosure jumped to 1.55 percent from 1.06 percent. The delinquency rate rose to 6.78 percent, compared with 5.51 percent.

The number one problem is the drop in home prices,” Brinkmann said. Declining prices, especially in newer built areas, “are hurting people's ability to recover when they run into trouble — a divorce or loss of job,” he said. “In other days, you could sell the home. But because home prices have fallen so much, in many of those cases, the homes are going into foreclosure.”
California, Florida, Nevada and Arizona accounted for 89 percent of the total increase in new home foreclosures, he said. Those are places where prices have fallen sharply and there was a lot of home building, creating too much supply, Brinkmann said.

These extra inventories from foreclosures complicate what is already a heavily built situation,” said David Seiders, chief economist at the National Association of Home Builders.

After a five-year boom, the housing market fell into a deep slump two years ago. That dragged down sales, and prices with it. As the value of homes plummeted, many newer homeowners found themselves owing more on their mortgages than their homes were worth.

Nearly 8.5 million homeowners had negative or no equity in their homes at the end of March, representing more than 16 percent of all homeowners with mortgages, according to Mark Zandi, chief economist at Moody's Economy.com. He estimates that will increase to 12.2 million, or almost one out of every four homeowners, by the end of June.

Nearly three in 10 people say they are worried their home's value will decline over the next two years, according to a recent Associated Press-AOL Money & Finance Poll. Sixty percent said they definitely won't buy a home in the next two years. That's up from 53 percent two years ago.

As foreclosures and late payments climbed, financial companies took multibillion-dollar losses when their investments in mortgage-backed securities soured. A credit crisis spread, crimping other types of financing. The fallout plunged Wall Street in turmoil, disrupting the normal functioning of markets.

All those troubles have pushed the economy to the brink of a recession. Employers, cutting costs, have eliminated more than a quarter-million jobs in the first four months of this year.

To bolster the economy, the Federal Reserve made aggressive interest rate cuts. But with inflation on the rise, Fed Chairman Ben Bernanke this week sent his strongest signal yet that the central bank's rate-cutting campaign is coming to an end.

The Bush administration has urged lenders to freeze rates for some homeowners and encouraged lenders to rework mortgage terms so troubled borrowers can stay in their homes.
A congressional plan that includes a foreclosure prevention program has stalled as lawmakers figure out how to pay for it.

Lenders slash prices on foreclosed houses

2008-06-08T16:23:00.000-07:00

Associated Press - June 2008

Lenders stung by the housing bust are slashing prices dramatically to rid themselves of an unprecedented number of foreclosed properties, sparking bidding wars in some places that harken back to the market's go-go years and may signal the bottom is near.

The trend is most dramatic in many parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously. Sales of foreclosures, vacant new homes and other distressed properties now dominate some markets, causing grief for individual homeowners who need to sell for other reasons, like a job in a new city.

Nationwide, one out of every four sales between January and March was a distressed sale, and that figure jumps to more than 50 percent in the hardest-hit areas like Las Vegas, Detroit and distant suburbs of Los Angeles, said Mark Zandi, chief economist at Moody's Economy.com. The number can be as high as 90 percent in some newly built subdivisions, where loose lending standards and speculation ran rampant, real estate agents say.

By setting prices at extraordinarily low levels, say, $175,000 for a house that sold for $350,000 three years ago, banks can spark multiple offers.

"It's not uncommon to have 10 to 20 offers on one house, and for the house to end up selling for more than its market price," said Erin Attardi, a Sacramento Realtor. The strategy, she said, allows the bank to be selective, picking buyers with solid financing or those able to pay in cash.
Over the past year, as the housing crisis accelerated, the number of properties turned over to bank ownership has more than doubled. As of April, there were more than 660,000 such properties in the U.S., up from 254,000 in April last year, according to real estate information company First American CoreLogic.

And there's a risk this isn't the bottom at all.

Investor demand could be swamped by the foreclosures expected to hit the market over the next year.

A record of almost 3 million American homeowners were at least one month late on their mortgages in the first quarter, the Mortgage Bankers Association said Thursday. And another record of almost 450,000 had entered the final stage of foreclosure.

Wherever the turning point, buyers are finding that the deep discounts on bank-owned homes can be a fabulous opportunity, but also a source of anguish. Sally Zuniga, 29, and her husband have been looking to buy their first home outside Sacramento and have been unsuccessful so far due to the intense competition.

"It's been aggravating, frustrating and emotionally straining," said Zuniga, a media buyer for an advertising agency.

This week, the couple put in an offer for a three-bedroom house with a pool that's listed as a "short sale," where the home is sold for less than the amount owed on the mortgage.

They've given the property owner until July 18 to respond - an indication of the longer period it commonly takes for such arrangements to be worked out. Their offer of $195,000 was $6,000 over the asking price, in an effort to make it stand out from competitors.

Some in the real estate industry see such competition as a sign that the housing market's gloom is lifting.

"It's actually stimulated the market," said Janice Ziesig, owner of Z House Realty Group in Orlando, Fla. "Things are moving now - more so than they were."

In the Orlando area, about a third of bank-owned properties receive more than one offer, Ziesig estimates. However, deals are more likely to fall through for foreclosures, she says, and properties often return to the market.

For would-be sellers who need to move soon, it's a particularly painful situation. In many cases, sellers whose houses are now worth less than their mortgage must bring cash to the closing table to pay off the balance of the loan. They can find renters or postpone their moving plans.

Leslie Jordan pulled her family's six-bedroom house outside Orlando off the market last month after listing it for nearly a year. She was willing to sell for $415,000, down from her original asking price of $565,000, but wasn't able to reach a deal.

While most of the foreclosures in Jordan's area are on smaller homes, the overall environment of soaring foreclosures and overbuilding has pushed prices down dramatically.

"The buyers, they just want a deal," said Jordan, who had hoped to move to a less-dense area with better schools. "We just have to wait until things turn around."

For real estate agents, helping banks sell off properties is one of the only flourishing businesses these days. But it's not for everybody.

Agents can easily pay hundreds of dollars a month on upkeep - including utility bills, cleaning and lawn care - and must go through the hassle of getting reimbursed by the bank. They sometimes have to evict homeowners, tenants or squatters. And in many cases, they have to deal with vandalism or theft of everything from copper pipes to appliances and air conditioners.
Jeff Dolfinger, a broker in Poughkeepsie N.Y., who specializes in managing and selling foreclosed properties, estimates that about 90 percent of those homes in his market are being bought by investors.

"To them, this is the best real estate market ever," he said. "They'll wait for this turmoil to end and they'll put the properties right back on the market again"

Inevitably, there are tensions between real estate agents and mortgage companies, particularly when a short sale or foreclosure gets tied up in a bureaucratic tangle.

"The lenders don't work on the weekends," which are the busiest time for house-hunters, said Cindy Jones, associate broker with Re/Max Allegiance in Lakeridge, Va. "If you make on offer on a Thursday, the earliest anybody's going to (examine) it is Monday or Tuesday of the following week,"

A quick way for a lender to dispose of properties is through an auction. However, lenders lose an average of 56 percent of a property's value through auctions, compared with a 40 percent loss for ordinary sales, according to a report last month by Fitch Ratings.

Nevertheless, the report found that the use of auctions has been rising as lenders try to cope with rising inventory.

Some are more hesitant to cut prices. Chris Bowden, vice president of HomeSteps, a division of Freddie Mac that handles foreclosure sales, says being too aggressive on price can affect the value of nearby properties, which sometimes are also owned by Freddie Mac.

"We want to make sure that we are getting back every dollar that we can and preserving values in neighborhoods," Bowden said. "Our goal is to try to get the highest value we can for the property, and yet we've got to remain competitive."

Still, with foreclosures continuing to rise, there may be no better option than to follow the market.

"We're reacting to market conditions very quickly," said Cary Sternberg, who heads IndyMac Bancorp Inc.'s bank-owned properties division. "We're in the business of making loans to people. we're not in the business of owning property."

NAR Denies Recession, Says Home Sales and Prices Will Pick Up in Second Half of 2008

2008-06-08T16:21:00.000-07:00

National Realty News - June 2008

WASHINGTON, D.C. - Home sales and prices throughout most of the country are poised for improvement in the second half of 2008, and the recovery will vary by market, Lawrence Yun, chief economist for the National Association of REALTORS® said during NAR’s Midyear Legislative Meetings & Trade Expo.

Middle-America cities that performed evenly over the past few years – like Cincinnati, Milwaukee and the Kansas City, Mo., area – are likely to experience home price gains in the 20 to 30 percent range over the next five years, while markets like Miami, Las Vegas and Phoenix could see prices go up as much as 50 percent during that time period, Yun said.
Yun blamed most of the softening of the housing market over the last year on the “subprime mess,” where consumers with blemished credit records got loans they couldn’t afford when the interest rates reset to higher levels.

“In fact, if you look at where home prices fell the most, it’s the markets were subprime loans were prevalent,” Yun said. Cape Coral, Fla.; Detroit; Las Vegas; Miami; Orlando, Fla.; Phoenix and Riverside, Calif. were among the cities with a high percentage of subprime lending and where the markets suffered the biggest downturns, he explained.

“It’s important to keep things in context,” he said. “While much of the media is focusing on the fact that the rate of foreclosures doubled this year from historic averages, the foreclosure rate has gone from 1 percent of all homeowners with mortgages to 2 percent. Foreclosures are being driven principally by subprime loans.”
He further explained that more than half of today’s foreclosures are concentrated in the subprime market. The great majority of homeowners are making their mortgage payments on time.

Now that the subprime market has dried up, and loans insured by the Federal Housing Administration and those purchased by Fannie Mae and Freddie Mac are making a comeback, the housing markets will strengthen and prices are likely to begin a steady uptick in the coming months, Yun said.

Yun urged the Congress and White House to enact NAR-supported legislation to modernize FHA programs, reform regulation of the government-sponsored enterprises (Fannie Mae and Freddie Mac), establish a first-time home buyer tax credit, and make the temporary increases to the conforming loan limits established by the Economic Stimulus Act of 2008 permanent.
“These measures would quickly stabilize the housing markets and get fence-sitters into the market to buy homes,” Yun said.

“There are many reasons for people to get into the housing market today, and very few reasons not to. With the plentiful supply of homes for sale at affordable prices, interest rates approaching 40-year lows, and the strong track record of housing as a good long-term investment, conditions are ripe for buyers,” he added. “Those are the facts, plain and simple.”

As for a recession, it’s not happening, Yun said. “A slowdown, yes, but the definition of a recession is two consecutive quarters of negative GDP growth. It’s not in the cards – no matter how you look at it.”

Sales of new Valley homes rise

2008-05-04T10:33:00.001-07:00

Tribune - May 2008

The Valley's new-home market showed more signs of steadying last month with some developments even seeing a slight uptick in prices.

A total of 1,890 new homes were sold in March, according to the latest Phoenix Housing Market Letter by analyst RL Brown. That's a 4.2 percent increase from the previous month but still nearly 50 percent below the same time last year.

The number of sales still isn't what the industry is looking for, but it marks a halt to the market's steep free-fall, Brown said.

Prices are stabilizing in areas where builders have rid themselves of excess speculative houses and are back in production mode, he said.

"Some builders are finding enough business to actually raise prices," Brown said. "It's a good sign."

An analysis of 4,754 floor plans shows a 9 percent increase in price over the past four months, while 60 percent saw prices remain unchanged.
Some builders raising prices are trying to create a sense of urgency for buyers, said John Fioramonti, senior managing director of Meyers Builder Advisors in Scottsdale.

Fioramonti said one developer in north Scottsdale has seen a big jump in foot traffic through the sales office, but people aren't taking the plunge. They're waiting for prices to drop further, he said. "The builders are trying to create a sense of the bottom has been hit," he said.

Fioramonti added that rises in price are being seen in developments closer to the urban core, not in outlying areas.

In places such as Maricopa, builders are facing off against sellers whose houses are only a few years old and are priced at $30,000 or $40,000 less, he said.

Builders are also still burdened by a lack of consumer confidence, a continuing wave of foreclosures and an oversupply of houses on the market, Brown said.

Sellers are "cluttering the marketplace," Brown said. "The smartest buyers are the ones who are shopping now, shopping carefully for real bargains."

Pinal County resale home market on upswing

2008-05-04T10:31:00.000-07:00

Phoenix Business Journal - May 2008

The resale home market in Pinal County is turning around.
The area southeast of Phoenix recorded 1,680 sales in the first quarter of this year, according to Arizona State University Realty Studies. That's up from 1,145 sales in the fourth quarter of 2007 and only 625 in the third quarter.

Measured month-to-month, the numbers are equally positive. The area had 465 recorded sales in January, 600 in February and 620 in March.
This activity is close to the record 1,785 sales in second-quarter 2005.
The Queen Creek area accounted for 39 percent of the resale activity, followed by 18 percent in the Maricopa area and 15 percent in the Apache Junction area.

Even with an increase in home sales, the median price of Pinal County homes is dropping. The median price of a resale home has eroded from $220,000 in fourth quarter 2005 to $193,000 in third-quarter 2007 and $156,160 for the current quarter. It was $204,600 a a year ago.

After months of declines, home sales up

2008-03-26T09:13:00.000-07:00

Low interest rates, bargains are helping
The Arizona Republic - March 2008

Existing-home sales climbed unexpectedly in February, as home buyers took advantage of low interest rates, falling home prices and foreclosure bargains.

The uptick in resales ended multiple-month losing streaks both nationally and in metro Phoenix and is prompting speculation that the housing market is close to hitting bottom.

National figures for February show U.S. resales climbed 2.9 percent from January, according to the National Association of Realtors. Valley existing-home sales climbed 10 percent in February, according to figures released earlier this month from realty studies in the Morrison School at Arizona State University.

With the spring buying season under way, March resales in the Valley are on track to top February's pace, according to an early count from Phoenix real-estate data firm Information Market.

"We are still bumping along the bottom, but the Valley's housing market is starting to gain some traction," said Jim Sexton, president of Phoenix-based real-estate firm John Hall & Associates. "Sellers are getting more motivated. Prices are coming down, and there's a lot of activity from first-time home buyers again."

He said foreclosure bargains are also beginning to attract real buyers instead of just speculators.

In metro Phoenix, the median price of a used single-family home fell to $220,000 in February from $230,000 the month before. Nationally, the median home price was $195,900 in February, down from $201,100 in January.

Jay Luber, vice president of the Phoenix office of First Horizon Home Loans, said many potential buyers are still "making the mistake" of trying to gauge when the market will hit bottom.

"But nobody can predict the bottom, and I have several clients that didn't have homes to sell who are thrilled with the deals they made when they bought," he said.

Home sales and prices, locally and nationally, are both down substantially from the pace set in February 2007.

During a boom or downturn, month-to-month figures are a better indicator of where the market is headed.

Lawrence Yun, chief economist at the Realtors Association, called February's gain over January encouraging.

"We're not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing," he said.

New-home sales in metro Phoenix were down less than 2 percent in February. National figures will be released later this week.

A drop in the number of homes for sale will be another sign that the housing market is poised to stop slowing. Home listings in the Valley climbed by a few hundred in February, to top 53,000. But that figure is down from last fall, when there were more than 54,000 homes for sale across metro Phoenix. Nationally, listings fell by 3 percent in February.

Across the country, tougher credit standards are knocking some potential buyers out of the market, and lenders are expected to get even tougher as mortgage losses mount.

Foreclosures continue to be the wild card for the housing market. As long as the number of people losing their homes continues to climb, inventories of homes for sale will rise and home prices will likely keeping falling.

Tom Ruff, real-estate data analyst with the Information Market, said foreclosures aren't likely to peak in the Valley until late summer.

"But I am optimistic," he said. "I feel like we are finally approaching the housing market's bottom."

Census: Booming growth in Pinal County

2008-03-20T13:49:00.000-07:00

Tribune - March 2008

Pinal County continued a trend of explosive growth into 2007, despite a housing market that has slowed across Arizona and in Pinal's suburban neighborhoods.

The U.S. Census Bureau reports today that Pinal County saw the third-highest rate of growth in the nation, with an 11.5 percent increase in population from July 1, 2006, to the same time in 2007. That places the county's population at 299,246, according to census figures.

The two areas that topped Pinal County during that time were parishes surrounding New Orleans, which are repopulating after Hurricane Katrina scattered many people in Louisiana.

The explosion of population in Pinal County creates both positive and negative impacts, real estate agents and academic experts say.

Since 2000, the county has experienced a 66.5 percent burst in growth, the fourth-highest rate in the nation. In 2000, the county was home to 179,715 people, according to census figures.

Much has changed since then in a county whose growth has been fueled largely by people who are employed in Maricopa County, but have looked for more affordable housing farther from their jobs.

In 2005, the housing market in Pinal County boomed. In the last three months of 2005, Pinal County saw 6,055 new and resale homes purchased, according to statistics issued by Arizona State University Polytechnic. In the first three months of 2007, home sales dropped steeply, to 3,320.

However, much of the resale market is based on bank foreclosures and short sales of homes by banks that want to get as much as they can out of a house at risk of foreclosure while developers sit on the sidelines, said Bambi Sandquist, a Pinal County real estate agent.

The market has brought in investors, but not necessarily a population of families that will continue to live and spend money in the area, she said.
"This kind of happened overnight," Sandquist said. "There's lots of investors. They've been coming and buying new homes. Prices are half of what they were in some places."

Stephen Doig, an ASU professor who studies the census and demographics, said that Pinal's substantial growth since 2000 could create a changing political representation that could place more emphasis on Pinal County.
Pinal County is split between congressional districts 1, 6 and 7.

District 6 includes Queen Creek and some of the new development that has boomed around it in the last several years. District 1 encompasses Florence and parts of eastern Pinal County and then extends to Prescott, Flagstaff and all the way to Arizona's northern border. District 7 covers some of western Pinal County, as well as Tucson and Nogales.

State reapportionment of legislative and congressional districts after the 2010 Census will bring more focus to what is still a fringe community when compared with Maricopa County, Doig said.

"Pinal is certainly going to gain some political clout," Doig said. "It'll be seen most strongly when reapportionment comes."

A housing market that's slowed could give Pinal County the opportunity to catch up with services that have been spread thin, especially road building. The area surrounding Johnson Ranch is notorious for bad traffic, as the two-lane Hunt Highway connects thousands of houses to Maricopa County.
"Growth is definitely one of those silver linings that has a cloud in it," Doig said. "It can be a burden on government ... building roads and services to suburbs that increasingly have numbers of people and places that are owned by the bank."

Jordan Rose, a local land-use lawyer, said that the slowdown in the housing market and the population growth could give the county a chance to catch its breath.

For instance, the first wave of suburbs built in the county were assessed no fees that would help pay for roads, schools and parks.

"The slowdown is allowing government to catch up with some of the planning," Rose said.