Friday, March 2, 2012

Mortgage Applications for Purchases Jump 8%

Mortgage applications for those purchasing homes were on the upswing last week: Applications for purchases grew a seasonally adjusted 8.2 percent during the week ending Feb. 24, the Mortgage Bankers Association reports. The MBA's unadjusted Purchase Index increased 0.9 percent compared with the previous week and was 4.3 percent lower year over year.

Mortgage refinance applications, on the other hand, dropped 2.2 percent during the same period, which brought overall mortgage applications down 0.3 percent compared to a week earlier.

The MBA report was adjusted to take into account the President’s Day holiday last week.

"Mortgage rates remained near survey lows last week, but refinance volume fell slightly," says Michael Fratantoni, MBA’s vice president of research and economics.

Home buyers continue to favor fixed-rate 30-year mortgages over other financing options, according to the MBA survey. In January, 86 percent of all home purchase applications were for 30-year fixed-rate mortgages, 6.5 percent for 15-year fixed-rate mortgages, and 5.4 percent were for adjustable-rate mortgages.

Source: Mortgage Bankers Association

Fannie Needs $4.6 Billion More in Bailout Money

Fannie Mae announced Wednesday that it will ask for an additional $4.6 billion in federal aid after posting a big loss in the fourth quarter and a disagreement with Bank of America, Reuters News reports.

Fannie Mae said it had a $2.4 billion loss in the fourth quarter, bringing the government-sponsored enterprise’s total to $16.9 billion in losses for 2011.

The government took control of Fannie Mae and fellow GSE, Freddie Mac, in September 2008. Both GSEs have faced steep losses from a surge in defaulting loans the last few years.

Besides the fourth quarter losses, Fannie said in a statement that a disagreement with Bank of America may also prompt the GSE to ask for more aid. Bank of America announced last week that it would no longer be selling certain mortgages to Fannie Mae.

"If Fannie Mae collects less than the amount it expects from Bank of America, Fannie Mae may be required to seek additional funds from Treasury," the company said in a press release.

To date, Fannie has borrowed more than $116 billion from the government.

Source: “Fannie Mae Seeks $4.6 Billion in Aid After Q4 Loss,” Reuters News (Feb. 29, 2012)

Bernanke: Economy Improves, Threats Loom

Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday that the economy is improving, and the Fed plans to carry on with its policy of holding key interest rates low — at least for now.

In recent months, the economy has steadily shown signs of improvements: Unemployment rate has dropped for five consecutive months, and consumer confidence has been on the rise, posting its highest point in a year in February. Stocks recently have posted large gains.

But Bernanke cautioned threats remain to economic recovery, such as a still sluggish housing market, rising gas prices, and the European debt crisis.

“The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards,” Bernanke told the House Financial Services Committee on Wednesday.

Bernanke did say that the Fed’s vow to keep interest rates low until late 2014 may need to be revisited if the economic outlook continues to improve. The Fed’s rare move has kept mortgage rates hovering at record lows in recent months.

"The policy is conditional," Bernanke told lawmakers. "It is based on what we know now."

Lawmakers and some economists have questioned the Fed’s move on keeping rates low until 2014, arguing it poses risks to inflation if the economy continues to improve. But the Fed has maintained its needed to aid economic recovery.

Source: “Bernanke Acknowledges Economy has Outperformed Fed’s Expectations; Markets See Less Stimulus,” Associated Press (Feb. 29, 2012) and “Federal Reserve Chairman Sees Modest Growth,” The New York Times (Feb. 29, 2012)

Short Sales Rise, More Banks View it as a Better Option

Banks are more willing to agree to a sale at a lower cost than a home owner’s mortgage balance in order to avoid having the property fall into foreclosure, which can be more costly for a lender.

In the fourth quarter of 2011, there were more than 88,000 short sales, a rise of 15 percent compared to a year prior. In all, short sales made up 10 percent of all home sales sold in the fourth quarter, according to recent data released by RealtyTrac.

On the other hand, bank-owned homes dropped 12 percent year-over-year (to 116,000), making up 13 percent of all home sales during the fourth quarter.

The average short sale in the fourth quarter sold for $184,221, according to RealtyTrac. The average foreclosure, on the other hand, sold for $149,686.

Banks are now more willing to do short sales and that trend will likely “show up in more local markets in 2012 as lenders recognize short sales as a better option for many of their non-performing loans," said RealtyTrac CEO Brandon Moore.

Meanwhile, during the fourth quarter, 24 percent of homes sold — nearly one in four — were in some stage of foreclosure, either already bank-owned or already winding through the process, RealtyTrac reports. The number is slightly down compared to a year prior when foreclosures accounted for 26 percent of all home sales, RealtyTrac reports.

However, Moore says he expects foreclosure sales to rise this year, "particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months.”

Source: “Foreclosures Made Up One in Four Home Sales,” CNNMoney (March 1, 2012)

Beige Book Sees Continued Modest Improvement in Economy

By: Mark Lieberman, Five Star Institute Economist 02/29/2012

Overall economic activity continued to increase at a modest to moderate pace in January and early February, the Federal Reserve said in its periodic Beige Book, an anecdotal report of conditions in each of the 12 Federal Reserve districts.

The report showed economic improvement varying across the country — economic activity rose at a “somewhat faster pace” in the Philadelphia and Atlanta districts but growth was slower in New York. Activity expanded at a “moderate pace” in the Cleveland, Chicago, Kansas City, Dallas, and San Francisco districts and St. Louis noted a modest pace of growth. Minneapolis characterized the pace of growth as firm, the Beige Book summary said, while the Boston and Richmond Districts reported economic activity expanded or improved in most sectors.

The Beige Book report was based on information collected through February 17.

Though followed closely by economists and the media, the Beige Book – issued two weeks in advance of a meeting of the Federal Open Market Committee – is rarely cited in the minutes of the Committee meetings. That said as an “anecdotal” report it often precedes confirming data and is sometimes considered “anecdatal.”

Residential real estate activity, according to the reports, increased “modestly” in most parts of the country. Philadelphia reported “strong” residential sales activity. The Boston, Cleveland, Richmond, Atlanta, Kansas City, and Dallas districts also reported growth in home sales, but without the adjective. New York noted “steady to slightly softer” home sales and home sales declined in St. Louis while San Francisco noted “home demand persisted at low levels.”

That said, the Beige Book reported “contacts’ outlooks on home sales growth were mostly optimistic” with contacts

in Boston, Philadelphia, Atlanta, and Dallas expecting home sales to rise further.

Home prices, the report said, declined or held steady in many areas. Cleveland and Atlanta reported little movement in house prices, while contacts in Boston, New York, Philadelphia, Richmond, Chicago, and Kansas City reported some declines.

Single-family residential construction was weak in Chicago and declined in St. Louis; Cleveland reported a year-end uptick seen in construction had slowed although Minneapolis noted increased single-family building permits. Boston, Atlanta, Chicago, Minneapolis, Dallas, and San Francisco reported increased multifamily construction activity.

Reports on banking conditions were generally positive across the country. Lending increased in the New York, Philadelphia, Richmond, Chicago, Dallas, and San Francisco districts but was little changed in St. Louis and Kansas City. Loan demand was described as weak in Richmond and soft at regional banks in Atlanta.

Demand for residential mortgage loans increased in New York and Richmond. Mortgage demand was flat to moderately stronger in St. Louis but “softened” in Kansas City.

Overall, the Beige Book report said, lending standards remained restrictive in San Francisco and Richmond and were largely unchanged in St. Louis and Kansas City. Lending standards tightened further for commercial borrowers in New York. Credit conditions in Chicago improved slightly, while quality improved in Philadelphia and Kansas City. Delinquencies were steady or declined in Cleveland. Mortgage delinquencies were steady in the New York district but delinquencies decreased in other loan categories.

The Beige Book is often cloaked in secrecy. The district reports are sent to one of the banks, which prepares the national summary. The identity of district bank, which prepares the summary is closely guarded. This report was prepared by the St. Louis Federal Reserve Bank, which last wrote the summary in July 2010 when it reported “economic activity has continued to increase, on balance, since the previous survey, although the Cleveland and Kansas City districts reported that the level of economic activity generally held steady.” The nation’s economy swooned shortly after that report was issued.

The Federal Open Market Committee is scheduled to meet March 13 to review monetary policy.

Foreclosure-Related Sales in 2011 = 907,138

By: Carrie Bay 02/29/2012

Pre-foreclosure short sales and sales of foreclosed REOs totaled 907,138 for the 2011 calendar year, RealtyTrac reported Thursday. These foreclosure-related transactions made up 23 percent of all residential sales in the U.S. last year, with short sales accounting for 9 percent and REOs accounting for 14 percent of 2011 home sales.

During the last three months of the year, third parties purchased a total of 88,303 pre-foreclosure homes that were in default or scheduled for auction, according to RealtyTrac. That tally represents a decrease of 5 percent from the previous quarter but is up 15 percent compared to the fourth quarter of 2010.

Pre-foreclosure sales increased more than 20 percent on a year-over-year basis in several states, including Michigan (103 percent), Georgia (59 percent), Arizona (48 percent), Washington (36 percent), Nevada (29 percent), Oregon (27 percent), Illinois (26 percent), Ohio (25 percent), California (23 percent), and Texas (22 percent).

RealtyTrac says pre-foreclosure short sales went for an average of $184,221 in the fourth quarter. The average sales price of a pre-foreclosure home in the fourth quarter was 21 percent below the average sales price of a non-foreclosure home, similar to the discount of 22 percent on pre-foreclosure purchases for the entire year.

Pre-foreclosure homes that sold in the fourth quarter of 2011 took an average of 308 days to sell after starting the foreclosure process.

Third parties purchased a total of 115,777 bank-owned REO homes in the fourth quarter, down 10 percent from the previous quarter and down 12 percent from the fourth quarter of 2010.

Despite the nationwide decrease, RealtyTrac says REO sales increased 20 percent or more on a year-over-year

basis in several states, including Minnesota (65 percent), Wisconsin (23 percent), Washington (21 percent), and Illinois (20 percent).

REOs sold for an average of $149,686 in the fourth quarter, 36 percent below the average sales price of a non-foreclosure home, while the average discount on bank-owned homes for the entire year was 40 percent.

REOs that sold in the fourth quarter took an average of 175 days to sell after completing the foreclosure process.

“Sales of foreclosures in the fourth quarter continued to be slowed by questions surrounding proper foreclosure paperwork and procedures,” said Brandon Moore, RealtyTrac’s CEO. “Even so, foreclosures accounted for nearly one in every four sales during the quarter and for the entire year.”

Moore says his firm expects to see foreclosure-related sales increase in 2012, particularly pre-foreclosure short sales, as lenders start to more aggressively dispose of distressed assets.

“We continued to see a shift toward pre-foreclosure sales, or short sales, and away from REO sales in the fourth quarter,” Moore said. “Nationally, pre-foreclosure sales increased 15 percent from a year ago while REO sales decreased 12 percent.”

Moore says short sales outnumbered REO sales in several bellwether markets, including Los Angeles, Miami, and Phoenix – all metros where REO sales had outnumbered pre-foreclosure sales a year ago.

“That trend will likely show up in more local markets in 2012 as lenders recognize short sales as a better option for many of their non-performing loans,” according to Moore.

Among metro areas with at least 500 short sales during the fourth quarter and where short sales increased at least 5 percent from a year ago, the San Francisco-Oakland-Fremont metro in California posted the biggest short sale discount at 41 percent.

Among metro areas with at least 500 REO sales during Q4 and where REO sales rose by at least 5 percent from the year-ago period, Wisconsin’s Milwaukee-Waukesha-West Allis metro saw the biggest discount. There, bank-owned properties sold for 58 percent less than non-foreclosure homes.

Combined, short sales and REOs accounted for 56 percent of all residential sales in Nevada in the fourth quarter, the highest percentage of any state.

Non-Traded REITs May Look to Cash In On Market Cycle With Public Offerings

American Realty Capital Trust Inc.’s board of directors and chairman believe that the timing is right for more REITs to enter the publicly traded market.

That’s exactly what the non-publicly traded REIT is doing this week, with plans to offer up to 6.6 million shares of common stock at an assumed price of $11.50 per share in an initial public offering as the REIT’s operating partnership looks to repay indebtedness and raise general working capital.

American Realty Capital Trust, which owns single-tenant, free-standing retail, distribution warehouse and office properties primarily leased to investment grade-rated credit tenants, is scheduled to make its debut on the Nasdaq Global Select Market on Thursday, March 1, almost four years to the day after the company launched. It will trade under the symbol ARCT.

At the same time, it will conduct a secondary offering to raise an additional $50 million to $100 million, and make a tender offer to outstanding shareholders.

"It’s the perfect time to buy real estate and the markets are good right now, with a low interest rate environment, strengthening capital markets and strengthening economic conditions," noted ARCT Chairman Nicholas S. Schorsch. "Capitalization rates are stabilizing and there’s a lot of volatility in the market, so the net-lease space is viable and strong, because the general market is looking for yield."

Schorsch told CoStar the most unique thing about his company is that it’s a net lease REIT focused on investment-grade tenants, with the durability of portfolio and the income stream that it brings.

Indeed, many of the new players are attempting to exploit market niches through the REIT structure.

By Randyl Drummer

Developers Turning To Adaptive Reuse; Eye Excess U.S. Property

What's a developer to do? With development financing still very tough to come by and construction levels at all-time lows, many are turning to redevelopment, adaptive reuse and jump-starting stalled projects ahead of an expected broader recovery as a potentially less expensive and more lucrative alternative to ground-up development.

Developers are closely monitoring dual legislation from the White House and in Congress that could result in the disposition of thousands of excess or under-used federal buildings. The potential disposition targets include choice properties in top U.S. metros, which could be converted or repurposed as hotels, apartments, shopping centers and commercial office projects.

In a rare occurrence of bipartisan agreement, both political parties have supported efforts calling for more efficient use of government space. Last May, the administration sent a bill to Congress that would establish a commission to consolidate, shrink and realign the federal property footprint by expediting the disposal of properties.

On Feb. 7, 2012, the interests of lawmakers and would-be redevelopers of excess federal property converged in the nation’s capital. The GOP-led House of Representatives passed a similar bill to the President’s, the Civilian Property Realignment Act (HR 1734). The legislation, patterned after the Defense Department’s Base Realignment and Closure Commission the 1990s, was introduced by Rep. Jeff Denham, R-CA, who cites an Office of Management and Budget report that such a "Civilian BRAC" commission could raise $15 billion from property sales, and generate much more in savings by eliminating future operating costs of the buildings.

The same day the Civilian BRAC legislation was introduced, the U.S. General Services Administration (GSA) confirmed it had selected an investment group headed by Donald Trump’s hotel group and private-equity firm Colony Capital to redevelop the 113-year-old Old Post Office Pavilion at 1100 Pennsylvania Ave. in Washington, D.C. With its distinctive 315-foot clock tower, the Old Post Office will be redeveloped into a 250-room luxury hotel as part of a $200 million adaptive reuse project.

By Randyl Drummer

Cash Buyers Are 'Mopping Up Inventory'

Thirty-four percent of home sales in January were paid for with cash, according to Campbell Surveys and Inside Mortgage Finance. And housing experts say the growing number of cash buyers on the market -- who are often investors -- can be a good thing in removing some of the overhang with foreclosures.

"I think a lot of people are throwing in the towel and deciding they would rather invest in real estate than have their money in a deposit account in the bank," Tom Popik, research director at Campbell Surveys, said about the increase in cash buyers in the market.

The advantage of coming with cash to a real estate transaction is that cash buyers don't have to worry about qualifying for the more stringent underwriting standards by lenders that have kept so many other buyers out of the market recently. They also have less concern about appraisals derailing a deal, another common problem plaguing many real estate markets.

That means it can be a challenge for financed buyers going up against cash buyers on the same house. A lender "might turn down a higher purchase price made by someone they feel has a questionable ability to get the mortgage," says Bob Davis, executive vice president of the American Bankers Association.

Because of that, some housing experts have criticized the upswing in cash investors as pushing home prices down even more, since banks may be more willing to take an offer for a foreclosure for a little less from a cash buyer if it means they can get it off their books quicker.

But Richard Green, a professor at the University of Southern California's Lusk Center for Real Estate, says it's probably worth any potential trade-off.

"These cash buyers are mopping up inventory, and that's probably the most important thing that can happen right now," Green told Realty Times. "You're not going to see a recovery in prices until inventories return to more normal levels."

Source: "Cash Buyers Squeezing Out Traditional Home Seekers," Realty Times (Feb. 27, 2012)

Rich Stay Put Longer When in Foreclosure, Study Says

How pricey your home is may influence how quickly you're evicted from a home in foreclosure, finds a new study.

An analysis by The Wall Street Journal finds that banks take longer to evict once-wealthy home owners who live in expensive homes but stop making their payments than defaulting home owners who live in more modest homes.

"Nationally, borrowers with loans of at least $1 million were in default for an average 792 days last year before banks repossessed their homes," the study notes. On the other hand, home owners with mortgages under $250,000 don't tend to get to stay as long, being evicted six months -- or about 180 days -- earlier than that.

The states where the disparity was found the most in:

The Wall Street Journal study suggests that the difference in the eviction rates may be explained for a number of reasons, such as that banks tend to hold larger mortgages on their books while tending to bundle small loans and resell them. Also, researchers suggest that lenders may view home owners living in expensive homes as more likely to recover financially. Plus, expensive homes can take longer to sell and are more costly for banks to maintain, so banks may be more hesitant to take ownership of them.

Source: "Foreclosures Take Longer for the Rich, Report Says," (Feb. 28, 2012)

Buffett: 'I'd Buy Up a Couple Hundred Thousand' Homes

Warren Buffett, the billionaire investor and Berkshire Hathaway CEO, said on CNBC's "Squawk Box" recently that he'd "buy up a couple hundred thousand" single-family homes if it was practical.

Buffett said that's because he believes purchasing a home with ultra-low mortgage rates and holding it for the long-term has become a better investment than stocks right now.

"Housing will come back, you can be sure of that," Buffett wrote in his annual letter to shareholders recently.

Buffett forecasts an increase in household formations, as more people who moved in with their parents or family members during the recession look to move out and get their own home soon.

"People may postpone hitching up during uncertain times, but eventually hormones take over. And while 'doubling-up" may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure," Buffett said.

Buffett said the recovery in the housing market could vary quite a bit among local housing markets, however. He did not provide a timeline of when he expected a full housing recovery, admitting that his prediction last year that a housing recovery will take shape within the year turned out to be "dead wrong."

Source: "Housing Market Forecast Beyond 2012 From Warren Buffet," International Business Times (Feb. 28, 2012) and "Warren Buffet on CNBC: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could," CNBC (Feb. 27, 2012)

Sellers Willing to Do More to Get Home Sold

Real estate pros are reporting that sellers are more willing this year to price their homes competitively as well as change the appearance of their home in order to lure buyers, according to a survey of 600 agents conducted by Coldwell Banker Real Estate.

Agents reported that, compared to last year, sellers are more willing to remove clutter; make cosmetic updates, such as minor repairs; "depersonalize" the home; and stage the home to better their chances of getting it sold, the survey finds.

"Depersonalizing and making it easy for a buyer to imagine him or herself living in the property is crucial, especially when there are many homes on the market," says Jessica Edwards, consumer specialist for Coldwell Banker Real Estate.

Meanwhile, the survey also found that agents say buyers are most putting a value on new or updated kitchens, bathrooms, and open floor plans when touring homes.

Source: "Survey Reveals Sellers More Willing to Price Competitively," RISMedia (Feb. 27, 2012)

FHA Raises Insurance Premiums

By: Carrie Bay 02/28/2012

The Federal Housing Administration (FHA) has seen its capital reserves quickly dissipate over the past few years amid a growing number of mortgage defaults and payouts on insurance claims. In an effort to bolster its capital cushion, the federal agency has announced a new premium structure for FHA-insured single-family mortgage loans.

FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500, effective for new loans insured by FHA beginning in April. The agency is increasing the annual MIP by 0.35 percent for loans above that amount, effective in June. Upfront premiums (UFMIP) will also increase by 0.75 percent, beginning April 1. Existing borrowers who are already part of an FHA insurance program will not be impacted by the pricing changes.

Acting FHA Commissioner Carol Galante says the agency’s premium increases will help to encourage the return of

private capital to the housing market, as well as protect FHA’s capital reserves.

FHA’s Mutual Mortgage Insurance Fund slipped below the congressionally mandated threshold in 2009 for the first time in the agency’s history (going back to 1934), and it has fallen farther and farther ever since. The FHA insures lenders against defaults on home mortgages, and this fund pays for any losses the agency may have to cover.

“These modest [premium] increases are one of several measures we are taking towards meeting the congressionally mandated two percent reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers,” Galante said.

FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month.

HUD Secretary Shaun Donovan stood before a Senate subcommittee on Tuesday and presented testimony on deficiencies in the foreclosure process and the recently announced settlement between state and federal officials and the nation’s largest mortgage servicers.

Inevitably, questioning from lawmakers turned to FHA’s financial state and Donovan was asked directly if the federal mortgage insurer would be the next big bailout shouldered by taxpayers.

Donovan assured the senators that the agency was taking steps to avert such action. He said the new premium changes for FHA insured mortgages would allow the agency to increase revenues and contribute more than $1 billion to the depleted Mutual Mortgage Insurance Fund through fiscal year 2013.

©2012 DS News. All Rights Reserved.

Life After Case-Shiller Report: Projecting Trends

While the Case-Shiller indexes reported new lows for house prices for the end of 2011, responses from analysts are mixed when determining what the data means for home values in the long run. Experts representing Capital Economics, IHS Global Insight, and Standard and Poor’s assessed the implications of the data for the future.

Patrick Newport, U.S. economist for IHS Global Insight
“The Case-Shiller indices are slipping-just about everywhere-but they are not in a freefall, as they were in 2007 and 2008. That is one reason not to sound the alarm bells. A second is the reason the indices are declining-they are heavily weighted with homes sold at distressed prices.”
David M. Blitzer, chairman of the Index Committee at S&P Indices
“With this month’s report, we saw all three composite hit new record lows. While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended.”
A continuation of this trend…or an end
Capital Economics
“Although the rate at which house prices are falling accelerated at the end of last year, it may only be a few more months before the decline seen over the last five years comes to an end. We expect prices will be broadly unchanged this year and next.”
“That’s not to say that prices will soon rebound rapidly. With another three million owners likely to succumb to foreclosure and demand severely constrained by over 20 percent of mortgage borrowers having a loan worth more than their home, significant and sustained gains in prices probably won’t be seen until 2014 at the earliest.”
Patrick Newport, U.S. economist for IHS Global Insight
“According to the Mortgage Bankers Association, 12 percent of homeowners with mortgages (i.e., more than 6 million homeowners) were either delinquent on their payments or in foreclosure at the end of the fourth quarter. According to CoreLogic, about 22 percent of residential properties with mortgages were underwater at the end of the third quarter. Add to this the currently high unemployment and underemployment rates, and tight credit conditions, one gets a recipe for further price declines. Our view is that foreclosures, excess supply, and weak demand will drive home prices as measured by the Case-Shiller indices down another 5–10 percent.”
David M. Blitzer, chairman of the Index Committee at S&P Indices
“In general, most of the regions also posted weak data in December….The pick-up in the economy has simply not been strong enough to keep home prices stabilized. If anything, it looks like we might have reentered a period of decline as we begin 2012.”

California AG Requests "Good-Faith Pause" on GSE Foreclosures

Insistent that principal reductions are the best line of defense in loss mitigation, California Attorney General Kamala Harris is calling on Fannie Mae and Freddie Mac to halt foreclosures in her state while the Federal Housing Finance Agency (FHFA) considers whether principal reductions are an appropriate strategy for the GSEs.

In a recent letter to FHFA Acting Director Edward DeMarco, Harris requested a “good-faith pause on foreclosure sales in California” while the FHFA continues to investigate the pros and cons of principal reductions.
California has been particularly hard hit by the housing crisis. About a half million homes in California have been foreclosed, and another half million are either in foreclosure or on the brink of foreclosure, according to Harris.
While the recent national settlement secured $12 billion for principal reductions and short sales, this will not help the 60 percent of California homeowners whose mortgages are owned by Fannie Mae or Freddie Mac.
DeMarco has expressed hesitation toward principal reductions and consistently insisted that he does not have the power to demand the GSEs employ the strategy.
However, he did recently share FHFA’s analysis of the method, which did not determine that “principal reduction never serves the long-term interest of the taxpayer when compared to foreclosure.” DeMarco maintained that forbearance ensures better returns for investors.
Harris urges DeMarco to pursue further analysis and in the meantime to suspend foreclosures in California so GSE borrowers “will have an opportunity to reduce the principal on their homes should your analysis find – as I believe it must – that principal reductions by those enterprises are in the best interest of homeowners and taxpayers,” according to her letter.

Study: Home Owners Spend More on Housing Costs

Nearly one in four working families spend more than half their income on housing costs, which includes utility costs, according to a new study by the Center for Housing Policy.

The organization found that about 23.6 percent of working households devoted more than half of their income to housing costs in 2010, which was an increase of 1.8 percentage points compared to 2008 data. Researchers define “working households” as those that earn less than 120 percent of a region’s median income.

Housing experts generally advise home owners to not devote any more than 30 percent of their pretax income toward housing costs.

"The data show that home owners have been hit hard by the housing crisis in more ways than just lost equity," Jeffrey Lubell, executive director at the Center for Housing Policy, said in a statement. "Many working home owners have been laid off or had their hours cut."

The states with the highest number of households spending more than half their incomes on housing were:

California: 34 percent
Florida: 33 percent
New Jersey: 32 percent
Hawaii: 30 percent
Nevada: 29 percent
Source: “1 in 4 Spend More Than Half of Income on Housing, Study Says,” AOL Real Estate (Feb. 27, 2012)

FHA Hikes Fees on Mortgages

Home buyers with mortgages backed by the Federal Housing Administration will soon see a rise in fees, the agency announced Monday.

The agency is raising its fees in an effort to try to recoup some of its depleted reserves*, which suffered from the rising number of home owners who defaulted on their mortgages. The agency also says it’s raising fees to try to encourage the return of more private capital to the market.

FHA loans allow for smaller down payments, as low as 3.5 percent compared to traditional loans, and they often have less stringent credit requirements, which have made them soar in popularity in recent years. (The agency insures loans but doesn’t issue them.) About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages.

In particular, FHA will increase two fees that borrowers pay. Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500, bringing the total cost from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount, The New York Times reports.

FHA also announced it will raise a fee for the upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount.

The New York Times illustrates the impact of the increase in a recent article: For example, a borrower with a 3.5 percent down payment with a mortgage of $193,000 can expect to pay an upfront mortgage premium alone of $3,377, compared to the prior $1,930. That can be rolled into the mortgage.

The new fees will also apply to home owners who want to refinance their mortgages, the agency announced.

The raise in fees is expected to bring in $1.25 billion in additional revenue to the agency through September 2013.

Read NAR's view of the FHA's decision to raise fees.

Source: “Buyers Face Higher Fees at FHA,” The New York Times (Feb. 27, 2012)

Case-Shiller Indexes End 2011 With New Lows

The Case Shiller Home Price Indexes dropped to new index lows at the end of 2011, Standard & Poor’s, which compiles the indices, reported Tuesday morning. Prices are at their lowest level since before the housing crisis began in 2006.

The 10-city index dipped to 149.89, its lowest level of the year and the lowest level since June 2003. The broader 20-city index fell to 136.71, also a 2011 low and the lowest level since February 2003.
The national index – compiled quarterly – dropped to 125.67, its low for the year and the lowest level since the second quarter of 2002.
Prices in each of the monthly index reports fell for the fourth straight month. The price indexes hit a cyclical peak in mid-2010 coincident with the federal homebuyer tax credit program, but have fallen in 12 of the 17 months since with no gain in home sales. From mid-2010 until December 2011, existing home sales fell 16.7 percent, despite a price plunge
Prices dropped in 18 of the 20 cities sampled in the monthly survey. The only exceptions were Miami and Phoenix, where prices rose 0.2 percent and 0.8 percent, respectively.
The steepest month-month decline was 3.8 percent in Detroit followed by 2.0 percent in Chicago, 1.8 percent in Atlanta and in Minneapolis.
Prices fell year-over-year in every city in the sample except Detroit, where prices in December 2011 were up 0.5 percent from December 2010. Year-over-year, the largest price drops were in Atlanta where prices fell 12.8 percent, followed by Las Vegas, down 8.8 percent and Chicago at 6.5 percent.
Since peaking in June 2006, the 10-city index is down 48.1 percent and the 20-city index, which peaked one month later, is off 47.7 percent.

AGA Seeks to Overturn Fed Ruling

The American Guild of Appraisers (AGA) petitioned the Fed and the Consumer Financial Protection Bureau to overturn a regulation that allows appraisers to be paid a fraction of what can be defined as a “customary and reasonable fee,” a release from the AGA stated.

In 2010, Dodd-Frank rules were enacted to establish certain requirements for appraisals, including one to “ensure that creditors and their agents pay customary and reasonable fees to appraisers,” according to the Dodd-Frank website.
But last year, the Fed introduced a new law that the AGA views as undermining the original Dodd-Frank requirement.
“The Fed adopted a rule that allows appraisal management companies that control up to 80 percent of residential appraisals to pay appraisers a fraction of what a customary and
reasonable fee would be as defined in the law, sometimes as much as 50 percent or more below the prevailing rate,” the AGA stated in a release.
The Dodd-Frank rules were passed by Congress in response to evidence that appraisal management companies (AMCs) were pressuring appraisers in ways that led to inaccurate appraisals, according to the release.
“In addition to paying low fees, appraisal management firms are pressuring appraisers to meet unreasonable deadlines and often condition work on an appraiser’s willingness to cooperate in ways that compromise the integrity of the appraisal process,” said Peter Vidi, president of AGA.
Vidi also explained that the borrower is not actually saving money under the regulation the organization is looking to overturn, and less than half of what the borrower is paying for the appraisal may actually go the appraiser, and the rest goes to the AMC.
The petition to reverse the Fed’s ruling was filed by lawyers Matt Schneider and Ben Lambiotte, who represent Garvey Schubert Barer.
“We believe that the Guild has a strong legal case that the Fed has violated the Dodd Frank law,” said Schneider. “We are hopeful that the Fed and the new Consumer Financial Protection Bureau, which is specifically charged with protecting the interests of consumers in financial transactions will reexamine this rule and make the changes necessary to carry out the intent of the law.”

Pending Home Sales Index Up in January, Reaching 20-Month High

The pending home sales index (PHSI) rose in January to 97.0 from a downwardly revised 95.1 in December. At 97.0, the index is at its highest level since April 2011, the National Association of Realtors reported Monday.

The index rose for the third time in the last four months and the January reading was 8 percent above January 2011 levels, but 26.5 percent below the April 2005 peak. The index began in January 2005.
Pending home sales are counted when sales contracts are signed and are viewed as a leading indicator of existing home sales; recent reports suggest that home re-sales should be a bit stronger over the next couple of months, but at a level that is still fairly subdued.
The PHSI has been trending upward, albeit modestly for most of the past two years. Despite the 20-month high, the index is relatively subdued. At the same time, a substantial number of sales contracts are failing to meet underwriting standards and/or other loan criterion as sales contract cancellations remain elevated.
Although a hopeful trend, home sales still appear to be searching for their fundamentally determined level – a level that is likely to be relatively subdued.
The PHSI in the Northeast rose 7.6 percent to 78.2 in January and is 9.8 percent above a year ago. In the Midwest, the index declined 3.8 percent to 88.1 but is 10.8 percent higher than January 2011. Pending home sales in the South increased 7.7 percent to an index of 109.1 in January and are 10.5 percent above a year ago. In the West, the index fell 4.4 percent in January to 101.9, but is 0.7 percent above January 2011.
The PHSI is based on data from Multiple Listing Services (MLSs) and large brokers.
According to the NAR, the index provides advance information on future home-sales activity and offers more solid information on changes in the direction of the market than any of the indicators currently available. Generally, pending home sales become existing-home sales one-to-two months later suggesting it can be used to predict both mortgage demand and sales activity.
While the volume of mortgage purchase applications edged down in January, suggesting sluggish activity, the purchase index collapsed in February.
Realtors are reporting more contract cancellations, which would cause the pending home sales index (based on initial signings) to overstate existing home sales (based on contract closings).
According to the NAR, 33 percent of existing contracts were cancelled in January – unchanged from December but up from only 9 percent in January 2011. The rise in cancellations reflected declining mortgage applications and failures in loan underwriting from appraisals coming in below the negotiated price.

Real Estate Debt, Delinquencies Decline: Report

Real estate-related debts are on the decline, as are overall delinquencies, according to a quarterly report from the Federal Reserve Bank of New York.

Debt maintained through mortgages and home equity lines of credit (HELOC) declined $146 billion during the fourth quarter of last year. Mortgages made up a majority of the decline – $134 billion – while HELOCs made up the remaining $12 billion.
Mortgage debt is now 11 percent below its peak, while HELOC debt is now 11.7 percent below its peak.
Also in the fourth quarter, the delinquency rate on consumer debt was reduced from 10 percent to 9.8 percent.
About $1.12 trillion of the total $11.53 trillion in consumer debt was delinquent. About $824 billion in debt was seriously delinquent (90 or more days past due).
While overall delinquency declined, about 2.2 percent of mortgage loans became delinquent in the last quarter of the year.
Foreclosures increased 9.5 percent over the quarter as 289,000 homes received foreclosure filings. However, the foreclosure rate is still 35.3 percent below the level recorded in the fourth quarter of 2010.
Also, despite the rise in foreclosure filings, the rate of loans that became seriously delinquent declined, corresponding with a rising cure rate, which reached 27.2 percent at the end of last year.
“Overall it appears that delinquency rates are stabilizing at levels that remain significantly higher than pre-crisis levels,” said Andrew Haughwout, VP and economist at the Federal Reserve Bank of New York.

Fannie Mae's First Bulk Offering of REO-to-Rental Pilot Is Open for Bids

Fannie Mae has put a block of 2,490 REOs up for sale. It’s the first pilot transaction of the federal government’s Real-Estate Owned (REO) Initiative announced in August 2011, which aims to sell homes repossessed by government agencies to private investors for the purpose of turning the properties into rental units.

The properties are concentrated in the hard-hit metropolitan areas of Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix, and parts of Florida. Nearly a quarter are located in L.A., 21 percent in Atlanta, and 15 percent in Southeast Florida.
Of the 2,490 single-family properties up for grabs, only 429 are vacant. The remainder are currently occupied by
tenants, giving the winning bidder an established line of rental income already.
Only investors who have completed the pre-qualification process, as stipulated by the Federal Housing Finance Agency (FHFA) will be able to bid on the portfolio. Interested bidders must submit applications to demonstrate their financial capacity, experience, and specific plans for purchasing pools of Fannie Mae foreclosed properties with the requirement to rent the purchased properties for a specified number of years.
Any investors interested in the pilot program who have not prequalified may still do so by completing the appropriate forms available online through the FHFA REO Initiative page of the agency’s website.
Credit Suisse is Fannie Mae’s financial advisor on the pilot transaction and has issued a high-level prospectus on the assets up for sale. Investors who post a security deposit and sign a confidentiality agreement will be privy to more detailed information about the properties.
“This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,” said Edward DeMarco, FHFA’s acting director.

January Pending Home Sales Rise, Market on Uptrend

Pending home sales are on an upward trend, which has been uneven but meaningful since reaching a cyclical low last April, and are well above a year ago, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2 percent to 97.0 in January from a downwardly revised 95.1 in December and is 8 percent higher than January 2011 when it was 89.8. The data reflects contracts but not closings.

The January index is the highest since April 2010 when it reached 111.3 as buyers were rushing to take advantage of the home buyer tax credit.

Lawrence Yun, NAR chief economist, said this is a hopeful indicator going into the spring home-buying season. “Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year. With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.”

PHSI by region:

Northeast: rose 7.6 percent to 78.2 in January and is 9.8 percent above a year ago.

Midwest: declined 3.8 percent to 88.1 but is 10.8 percent higher than January 2011.

South: increased 7.7 percent to an index of 109.1 in January and are 10.5 percent above a year ago.

West: fell 4.4 percent in January to 101.9 but is 0.7 percent above January 2011.

“Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery,” Yun said. “If and when credit availability conditions return to normal, home sales will likely get a 15 percent boost, speed up the home-price recovery, and thereby significantly reduce the number of homeowners who are underwater.”

Source: NAR

Officials: Fed Is Running Out of Options to Help Housing

The Federal Reserve is running out of options to help the housing market, and it’s time lawmakers step-up and do more, according to a paper by top economists, which was presented Friday at the U.S. Monetary Policy Forum.

Federal Reserve officials, members of foreign central banks, and economists discussed how the housing market continues to hamper overall economic recovery. The Fed has already lowered its key interest rate to near zero and mortgage rates are already at all-time lows, which are helping refinancers and home purchasers lock in big savings. However, the overhang in the housing market "may not be easily addressed by monetary policy," Michael Feroli, chief U.S. economist at JPMorgan Chase, said during the meetings.

Some economists said there’s still more the Fed can do: Lower the interest rates even more. However, some note that with more stringent lending standards those who can qualify for refinancing likely already have, so lowering the rate may not have that much impact.

Source: “Why the Federal Reserve Can’t Fix Housing,” CNNMoney (Feb. 24, 2012)

Which Gender Uses Social Media Smarter?

Women are better at managing their social media pages more responsibly and more securely than men, according to a new study by the Pew Internet & American Life Project, which polled more than 2,000 adults about how they manage their social media profiles.

Researchers found that both genders have made progress in better using privacy controls and managing their reputations on social networks than just a few years ago — but women more so than men.

For example, men tend to have their pages more open to view by anyone than women, who tend to restrict it more. Twenty-six percent of men select public settings for their social network profiles while only 14 percent of women do so, the study found. Two-thirds of women allow only friends to view their Facebook, LinkedIn, or MySpace pages without any restrictions. On the other hand, fewer than half of men allow only friends to view their profiles.

Women also are more choosy about who they keep in their network. Sixty-seven percent of women say they’ve deleted people from their networks, while 58 percent of men say they’ve deleted connections.

What’s more, women also tend to be more careful about what they post. Nearly double the number of men than women reported they had posted something on their social network pages that they later have regretted (15 percent of men verses 8 percent of women), according to the study.

Source: “Study Shows Women Are Smarter Than Men About Social Media,” (Feb. 24, 2012)

New-Home Inventory Shrinks to Record Lows

Inventory of new homes on the market shrank to its lowest point on record in January, marking a 5.6-month supply at the current sales pace, the Commerce Department reports.

With fewer homes available, the price of new homes increased slightly last month. The median price for a new home ticked up slightly at 0.3 percent to $217,100, which is the highest level since October.

However, January sales of single-family homes mostly stayed falt in January, falling less than 1 percent last month compared to the previous month. New-home sales reached a seasonally adjusted annual pace of 321,000 units.

New-home sales were up 3.5 percent compared to the same time last year, the Commerce Department reported.

"This is indicative of the incremental, steady progress that the market is making toward recovery in conjunction with modest economic and job growth,” said David Crowe, the National Association of Home Builders’ chief economist. “Increasingly, potential buyers are feeling better about their financial situation and their ability to buy a home, but the challenges posed by tight credit conditions and appraisal issues continue to slow that process."

Regionally, the Midwest saw the biggest decline in new home sales in January, a 24.5 percent drop in sales followed by a 10.6 percent drop in sales in the West. On the other hand, the Northeast posted an 11.1 percent gain in new home sales in January, and the South saw a 9.3 percent increase.

Source: National Association of Home Builders

Metros Likely to Have Biggest Job Gains by 2020

Employment nationwide is expected to rise about 14 percent by 2020, according to Bureau of Labor Statistics. Some metro areas are expected to see bigger growths in the job market than others, which could prove well for growing their housing markets too.

The following metro areas are forecast to have the biggest job growth in the next decade, according to the Bureau of Labor Statistics:

1. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
2. Bethesda-Rockville-Frederick, Md.
3. Colorado Springs, Colo.
4. New York-White Plains-Wayne, N.Y.-N.J.
5. El Paso, Texas
6. Springfield, Mass.
7. Baton Rouge, La.
8. Tacoma, Wash.

Meanwhile, the metro areas expected to have the slowest job growth in the next decade are: Greensboro-High Point, N.C.; Gary, Ind.; and Los Angeles-Long Beach-Glendale, Calif.

Source: “Top 10 Metros for Job Growth Through 2020,” Inman News (Feb. 23, 2012)

Wednesday, February 29, 2012

I would like to thank all my past clients for their testimonials

I would like to thank all my past clients for their testimonials. I appreciate the support you all have given me over the past decade and I am looking forward to working with each and everyone of you again. Thank You!

Monday, February 27, 2012

Watch Brian Jeacoma and Learn about what is really going on in the Real Estate Market

Moody's Analytics Outlines Settlement Impact for Banks and Borrowers

After more than a year of intense negotiations, 49 state attorneys general and the nation’s five largest mortgage servicers reached a $25 billion settlement on February 9. While the agreement allotted specific amounts to go towards certain areas of relief for borrowers, including $10 million to write down principal on underwater mortgages, many are wondering how the decision between federal and state officials and the nation’s top servicers will impact the housing market.

Moody’s Analytics released a report with an analysis of the settlement’s expected impact on banks and borrowers.
Impact on banks
As for the servicers included in the settlement – Bank of America, Wells Fargo, J.P. Morgan and Citigroup, and Ally Financial – the report stated, “the settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing.”
More specifically, the report stated, “Bank of America, Wells Fargo, J.P. Morgan, and Citigroup have each publicly disclosed that the settlement will have little to no additional financial effect on the banks, outside of a modest reduction in interest income over the life of any modified loans.”
This is in part due to the fact that “existing litigation and loan-loss reserves mostly cover the related costs” for the banks.
The banks are still vulnerable to other lawsuits outside of the settlement from individuals or through a class action suit.
The settlement also includes new standards for how banks service loans and practice foreclosure proceedings, including a ban on robo-signing.
Impact on borrowers
The report projects that foreclosure timelines will be lengthened due to the requirement for servicers to review loans for principal forgiveness, causing a delay for servicers when referring loans to foreclosure. According to the report, Florida and California should be more significantly affected since they were awarded the highest proportion of funds from the settlement.
Borrowers will have greater protection since servicers and insurance providers will not be able to charge high premiums when force placing insurance and must instead charge commercially reasonably prices. A third-party review process will also be set in place offering more protection to borrowers since it will hold servicers accountable for meeting certain goals and deadlines.
The Mood Analytics stated that “the reviews will likely assess whether or not servicers are making reasonable and timely modification decisions on behalf of both borrowers and investors and are implementing the key operation provisions of the settlement.”
Out of the $25 billion, the settlement allocates $10 billion for principal reduction; $7 billion in relief for other types of support including forbearance and short sales; $3 billion for refinancing underwater homes; $1.5 billion for those wrongfully foreclosed on between 2008 and 2011; and $3.5 billion for state housing programs.
While the settlement proved to be a disappointment to some since it does not include Fannie Mae and Freddie Mac loans, Moody’s Analytics stated that the settlement is still significant.
“The number of distressed homeowners helped is modest in the context of the estimated 14.6 million underwater homeowners, a sore point for many critics of the settlement. Nonetheless, the number is significant,” stated Moody’s Analytics in the written report. “Keeping even half a million households out of foreclosure or a short sale would be enough to curb the flow of foreclosed, vacant properties into the market, and thus relieve downward pressure on house prices nationwide and allowing prices to stabilize this year.”
The Moody’s Analytics also expects to see Nevada, Arizona, California, Florida, Ohio, and Michigan to benefit the most since those states experienced the worse price declines and have the highest share of homes underwater.

Nearly 1 in 4 Households Use Over 1/2 of Income for Housing Costs

Even with falling home prices, a study from the Center for Housing Policy found that affordability is still becoming increasingly out of reach for homeowners and renters. According to the 2012 Housing Landscape report released by the Center, the share of working households paying more than half their income for housing between 2008 and 2010 went up from 21.8 percent to 23.6 percent.

Source: Center for Housing Policy
As home prices dropped between 2008 and 2010, working homeowners also dealt with shrinking paychecks. For working homeowners over the two-year period, incomes dropped twice as much as housing costs, according to the study.
Jeffrey Lubell, executive director of the Whington-based Center, said this was primarily due to a drop in average hours worked among moderate-income homeowners.
“The data show that homeowners have been hit hard by the housing crisis in more ways than just lost equity,” Lubell explained. “Many working homeowners have been laid off or had their hours cut.”
According to the study, the monthly median income for working homeowners’ fell from $43,570 in 2008 to $41,413 in 2010, which is about a 5 percent decrease. The median number of hours worked per week dropped from 50 to 48 between the two years, which partly explains the decrease in income.
For renters, the monthly median income fell 4 percent from $31,570 to $30,229 between the two years. Housing costs for renters also increased, up by 4 percent over the same period.
Laura Williams, author of the report, said rent rose because of increased demand for rental housing, which was partly encouraged by the housing market crises.
“More and more people are interested in renting,” Williams said. “Some prefer it because it allows them to be more mobile in a tough job market. Others are postponing purchasing a home or facing difficulties obtaining a mortgage. Given the long lead times involved in responding to increased demand with increased supply, the rental market has tightened somewhat and rents increased.”
The five states with highest share of working households with a severe housing cost burden in 2010 were California (34%), Florida (33%), New Jersey (32%), Hawaii (30%), and Nevada (29%).
The five metropolitan areas with the highest share of working households with a severe housing cost burden in 2010 were Miami-Fort Lauderdale-Pompano Beach, Florida (43%); Los Angeles-Long Beach-Santa Ana, California (38%); San Diego-Carlsbad-San Marcos, California (37%); Riverside-San Bernardino-Ontario, California (35%); and New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania (35%).

Short Sales Bring 24% Greater Returns than Foreclosures

The real estate professionals at Massachusetts-based McGeough Lamacchia Realty have been proponents of short sales for quite some time, insisting that everyone comes out ahead when a short sale is achieved as opposed to a foreclosure. Now they’re sharing the facts that back up their claim.

On average a home sold through short sale brings a 24 percent greater return than a foreclosed property, according to recent findings from McGeough Lamacchia Realty.
“This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale,” said a blog post on the company’s website.
The firm reviewed prices for short sale and foreclosure sale properties in 2010 and 2011 in Boston, Phoenix, Tuscon, Southern California, and Southwest Florida.
While banks often offer incentives to homeowners who pursue a short sale, “more needs to be done to promote short sales,” McGeough Lamacchia said.
Specifically, the firm points out that Fannie Mae and Freddie Mac are not offering the cash incentives for short sales that are now standard through the Home Affordable Foreclosure Alternatives program.
“Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure,” McGeough Lamacchia said in their blog post.

Housing Fix: Minority Group Unveils $1.2 Billion Industry-Led Program

The National Association of Real Estate Brokers, Inc. (NAREB) announced the launch of a 25-city, $1.2 billion REO and foreclosure mitigation initiative called the Homeowner’s Assurance Program (HAP).

The program is designed to address the devastating effects of foreclosures on communities across America. HAP is a non-governmental, industry-led solution to the nation’s housing crisis.
NAREB was formed in 1947 by African American real estate professionals and is the oldest minority trade group in the United States. The organization has a vast network of industry professionals including: Realtists, sales agents, appraisers, mortgage brokers, and loan officers as well as practical experts in pre- and post-counseling, loss mitigation, foreclosure, property management, housing construction, and development.
NAREB and its professional network will serve as the “boots on the ground” for HAP, providing the agent infrastructure to manage, market, and dispose of nonperforming loans and REO assets acquired under the program. Targeted buyers include first-time homebuyers and others who are caught in the credit crunch and having trouble purchasing a home.
Private and Wall Street investors are providing the $1.2 billion in initial capital for the program roll-out in 25 markets. HAP’s deployment of capital to purchase, renovate, and sell REO properties will also generate jobs and income for real estate-related small businesses in the targeted markets.
A beta test is already taking place in the Atlanta metropolitan area. The official roll-out of the program in the second quarter of this year will expand HAP to the Los Angeles, Houston, Miami, and Baltimore markets.
“The goal of HAP is to bring back the American Dream to millions of people throughout the nation,” said Julius Cartwright, president of NAREB.
“We’re seeing a wholesale eviction of families, and tens of thousands of vacant and blighted properties in cities that have been historically stable homeownership communities,” Cartwright said. “We have the experience, expertise, and tools to provide a ‘boots on the ground’ effort to identify and screen qualified buyers for these properties, and help sustain or rebuild impacted neighborhoods.”
The program will be spearheaded by a new national nonprofit organization bearing the same name, Homeowner’s Assurance Program LLC. Its board members will include representatives from minority real estate, education, and business communities. The principals of NAREB and SRP Development, one of the private investment companies directly involved in the project, will serve as the managing members of Homeowner’s Assurance Program LLC.
Also part of the initiative are MST Investment Advisory Services and 24 Asset Management Corporation, which have been selected as the platform managers to oversee all asset management activities for HAP, provide capital audit controls, and manage day-to-day operations.
SRP Development, MST Investment Advisory Services, and 24 Asset Management are all minority-owned companies.
HAP will seek to acquire properties from banks as well as government agencies, including HUD, the FDIC, and the government-run GSEs Fannie Mae and Freddie Mac.
“We welcome NAREB’s initiative,” commented Ed Jennings Jr., HUD southeast regional administrator.
HUD’s REOs are initially offered to owner-occupants. Following the priority period for these buyers, listings of unsold properties are opened up to investors.
“We are pleased to hear NAREB’s interest in buying HUD properties that have been on the market for more than four months, and their comprehensive approach of partnering with other entities to get them back into move-in condition,” Jennings said.
He also noted that HAP plans to use HUD-approved counselors to prepare buyers for homeownership.
NAREB announced the launch of HAP on Friday at its 65th Annual Mid-Winter Conference, which kicked off February 21 and runs through February 25.