Saturday, April 21, 2012

Mortgage Rates Inch Up for the Week

After reaching or hovering near all-time lows last week, fixed-rate mortgages edged up slightly during the week, Freddie Mac reports in its weekly mortgage market survey. The 5-year adjustable-rate mortgage, however, hit a new all-time low of 2.78 percent this week.

Here’s a closer look at average mortgage rates from Freddie Mac for the week ending April 19:

30-year fixed-rate mortgages: averaged 3.90 percent, with an average 0.8 point, up slightly from last week’s 3.88 percent average. A year ago at this time, 30-year rates averaged 4.80 percent.
15-year fixed-rate mortgages: averaged 3.13 percent, with an average 0.7 point, rising after last week’s all-time low of 3.11 percent. Last year at this time, 15-year rates averaged 4.02 percent.
5-year ARMs: averaged a new all-time low of 2.78 percent this week, with an average 0.7 point, dropping from last week’s 2.85 percent average. The 5-year ARMs previous record low was 2.80 percent, which was reached during the first week of February. Last year at this time, 5-year ARMs averaged 3.61 percent.
1-year ARMs: averaged 2.81 percent, with an average 0.6 point, rising slightly from last week’s 2.80 percent average. A year ago at this time, 1-year ARMs averaged 3.16 percent.

Source: Freddie Mac

Having Good Schools Nearby Improves Home Values

Living near a high-scoring public school district can raise home values $205,000 higher compared to homes located in neighborhoods with low-scoring school districts, according to a new study by Brookings Institution. Brookings analyzed the nation’s 100 largest metro areas to find the differences between living near a high-scoring public school and a low-performing school.

“We think of public education as being free, and we think of the main divide in education between public and private schools,” Jonathan Rothwell, a senior research analyst at Brookings, told The New York Times. “But it turns out that it’s actually very expensive to enroll your children in a high-scoring public school.” The cost of living in a high-scoring public neighborhood can be higher than paying a private tuition at a school, researchers note.

Housing costs near high-scoring schools — those in the top one-fifth of schools in the area — were 2.4 times higher on average, or $11,000 more per year, than homes located in school districts in the bottom fifth, the study found.

“Some of the areas with the largest differences in housing costs also have the widest gaps in school test scores,” reports CNNMoney about the study’s findings.

Students from low-income families — classified as those who are eligible for free or reduced-price school lunches — were found to be more likely to attend schools that score in the 42nd percentile on state tests, according to Brookings. On the other hand, students from middle- to high-income households, on average, tend to attend schools that score in the 61st percentile.

Source: “Test Scores and Housing Costs,” The New York Times (April 19, 2012) and “Living Near Good Schools will Cost an Extra $200k,” CNNMoney (April 19, 2012)

Short Sales to Reach Record Numbers This Year?

Short sales are surging this year, and if the trend continues, they could reach record levels in 2012, RealtyTrac reports.

Short-sale transactions are starting to outpace foreclosure sales, as more banks see it as a better option to curb high losses from foreclosures. More mortgage servicers are also trying to increase the pace of approving short sales, a process that is generally viewed as drawn-out and lengthy.

Short sales increased 33 percent in the last year, according to January data released this week by RealtyTrac. Thirty-two states saw year-over-year increases in short sales. Lender Processing Services Inc., which also recently released its January housing data, showed that short sales accounted for 23.9 percent of home purchases in January while foreclosures made up 19.7 percent of sales — the first time that short sales have outnumbered foreclosures.

"[We] believe 2012 could be a record year for short sales," says Daren Blomquist, vice president at RealtyTrac.

This week, the Federal Housing Finance Agency, the regulator to mortgage giants Fannie Mae and Freddie Mac, issued new rules to speed up the pace of short sales. Mortgage servicers will be required to respond to a short-sale request within 30 days and make a decision about short-sale offers within 60 days. The new rules go into effect June 1.

Source: “Short Sales Expected to Surge This Year,” CNNMoney (April 19, 2012) and “Short Sales Start to Outpace Foreclosures,” REALTOR® Magazine Daily News (April 19, 2012)

RealtyTrac: Short Sales Up 33% in January, Outpace REO Sales in 12 States

With the number of short sales increasing and even outnumbering REO sales in certain states, experts are speculating short sales might become key to preventing an even greater swelling of foreclosed properties on the market.

Compared to a year ago in January 2012, pre-foreclosure sales, which are typically short sales, increased 33 percent, according to a RealtyTrac report released Thursday.

Short sales even outpaced bank-owned REO sales in 12 states, including Utah, California, Arizona, Florida, Indiana, Colorado, New York and New Jersey.

Also, 32 states saw annual increases in pre-foreclosure sales, with the top five being Georgia (+113 percent), Michigan (+90 percent), Wisconsin (+77 percent), South Carolina (+76 percent) and Utah (+70 percent).

Despite the increase, Daren Blomquist, VP of RealtyTrac and author of the report, points out that short sales have declined on a long-term basis, but January’s report could signal a turning point.

“Short sales have long held great promise as a market-based solution to the nation’s foreclosure problem, but short sales transactions over the past three years have actually declined after peaking in the first quarter of 2009,” said Blomquist. “January foreclosure sales numbers, along with first quarter foreclosure activity, strongly indicate that downward trend is ending, and we believe 2012 could be a record year for short sales.”

Average pre-foreclosure prices saw a decline, according to the report, with the average sales price in January at $174,120, down 10 percent from January 2011. This, RealtyTrac stated, shows that lenders are more willing to approve more aggressively priced short sales.

In January, a home sold via short sale sold at a 21 percent discount on average compared to the average price of a home not in foreclosure, according to RealtyTrac.

The five states with the biggest discounts were Massachusetts (40.86 percent), Missouri (35.5 percent) California (29.93), Indiana (29.82), and Georgia (29.31).

The five metropolitan areas with the greatest discounts were Kansas City (56.53 percent), Louisville/Jefferson County (44.25 percent), Milwaukee-Waukesha-West Allis (43.64 percent), Boston-Cambridge-Quincy (41.57 percent), and Indianapolis-Carmel (37.26 percent).

The time it took to approve of a short sale was a bit lower for the 2012 first quarter, averaging 306 days, down from 308 days in the fourth quarter of 2011 and down from a peak of 318 days in the third quarter of 2011. The short sale timeline begins when a property starts the foreclosure process to when it’s sold as a pre-foreclosure.

However, the average time to sell a pre-foreclosure has actually tripled since the first quarter of 2007, when it took an average of 113 days.

There’s nothing short about short sales. If you can survive that process and make that happen it’s going to be a better outcome for everyone, said RealtyTrac VP Charlie Engel during a broadcast hosted by the Charfen Institute for Certified Distressed Property Experts.

Recently, Bank of America and GSEs Fannie Mae and Freddie Mac announced efforts to streamline the short sale process. BofA’s change requires a decision on a short sale in less than 3 weeks.

Starting in June, the GSEs are requiring servicers to make a decision on a short sale within 30 days of receiving an offer or an application package from a borrower; if more time is needed, a servicer must provide the borrower with a weekly update and come to a decision no later than 60 days.

With foreclosure starts – either default notices or scheduled foreclosure auctions – numbering more than 100,000 in March, this means more opportunities for short sales, according to the report.

Compared to the month before, March foreclosure starts increased 7 percent, but were down 11 percent from a year ago. When looking at individual states, 31 posted monthly gains in foreclosure starts in March.

Other properties with potential to become short sales are delinquent loans, which represented approximately 3.5 million properties, according to a fourth quarter 2011 survey from the Mortgage Bankers Association.

RealtyTrac is an online marketplace of foreclosure properties, with more than 1.3 million default, auction and bank-owned listings from over 2,200 U.S. counties, along with detailed property, loan and home sales data.

By: Esther Cho

Thursday, April 19, 2012

Existing Home Sales Fall In March For 2nd Straight Month, Prices Rise

Existing-home sales fell to 4.48 million (seasonally adjusted annualized rate) in March from an upwardly revised February rate of 4.60 million, the National Association of Realtors (NAR) reported Thursday. Economists had forecast the March sales pace would be 4.62 million. At the same time, the median price of a new home rose to $163,800, its highest level since last November’s $164,000 and up 2.5 percent since March 2011, the first year-year increase in prices since December 2010.

The sales pace was the weakest since November 2011. Sales have slipped in three of the last four months.

The inventory of homes for sale dropped to 2.37 million, the first decline in three months, bringing the months’ supply of homes on the market to 6.3.

March sales – completed transactions – were down 2.6 percent from February but are up 5.2 percent from March 2011. February’s sales pace was originally reported as 4.59 million

As sales fell for two straight months, the median price of an existing-home rose for the second straight month to record the encouraging year-year price increases.

Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 29 percent of March sales —18 percent were foreclosures and 11 percent were short sales —compared with 34 percent in February and 40 percent in March 2011, the NAR said. Foreclosures typically sold for an average 19 percent below market price in March, while short sales were discounted 16 percent.

Total home sales inventory at the end of March fell 1.3 percent to 2.37 million existing homes available for sale, a 6.3-month supply at the current sales matching February. The dip in inventory was the first in three months. The months’ supply of existing homes for sale remains well below the July 2010 cyclical peak of 12.4 which had been the highest level since 1982. Inventories as tracked by the NAR are 21.5 percent below their year ago level however anecdotal evidence though suggests there is still a large “shadow” inventory of homes available for sale, especially bank-owned properties.

Regionally, existing-home sales fell in March in every region of the country except the Midwest where sales were flat. The steepest drop in sales was in in the West, down 110,000 to 1.13 million, below the 1.14 million sales pace in March 2011 Sales in the other regions were all above year-ago sales levels.

The median price of an existing home rose month-month in all four regions and was up year-year in three of the four regions, falling only in the Northeast.

Lawrence Yun, the NAR’s chief economist, characterized the report as signaling a recovery in housing.

“The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” he said. “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year. With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year.”

By: Mark Lieberman, Five Star Institute Economist

Market Trend: Long Island's Office Vacancy Decreases to 8.3%

The Long Island Office market ended the first quarter 2012 with a vacancy rate of 8.3%.

The vacancy rate was down over the previous quarter, with net absorption totaling positive 611,134 square feet in the first quarter. Vacant sublease space increased in the quarter, ending the quarter at 778,429 square feet.

Tenants moving into large blocks of space in 2012 include: General Services Administration (GSA) moving into 120,000 square feet at Two Metrotech Ctr; Suffolk County Department of Health moving into 63,402 square feet at 3500 Sunrise Business Ctr; and Deutsche Bank moving into 54,464 square feet at 4 Metrotech Ctr.

Rental rates ended the first quarter at $26.47, a decrease over the previous quarter.

A total of two buildings delivered to the market in the quarter totaling 146,700 square feet, with 1,024,946 square feet still under construction at the end of the quarter.

This trend is compared to the U.S. national office vacancy rate, which decreased to 12.2% from the previous quarter, with net absorption positive 14.79 million square feet in the first quarter.

California Homeowner Bill of Rights Passes Out of Committees

California Attorney General Kamala Harris announced Tuesday that seven bills in her California Homeowner Bill of Rights passed out of legislative committees.

Harris, who first introduced the bills in February, is pushing for permanent reform in her state since the $25 billion national mortgage settlement expands the course of three years.

Harris first introduced the bills in February. AB 2314 and SB 1472, which aim to fight neighborhood blight and increase fines against owners of blighted properties from $1,000 per day to $5,000, passed the assembly and senate judiciary committees.

AB 2610 and SB 1473 would provide protection for tenants and require buyers of foreclosed homes to honor terms of existing leases and give tenants 90 days before evicting them. The bills passed the assembly and senate judiciary committees on a 7 to 3 and 3 to 2 vote, respectively.

AB 1950 will levy a $25 each time servicers record a notice of default. The funds would go toward a real estate fraud prosecution trust fund to prosecute mortgage-related crimes. The bill passed the Assembly Public Safety committee on a 4 to 2 vote.

AB 1763 and SB 1474 will create a special grand jury to investigate and indict criminals in multiple jurisdictions. The bills passed out of their houses’ public safety committees unanimously.

By: Esther Cho

NFHA Files Complaint Against U.S. Bank for Discrimination

The National Fair Housing Alliance (NFHA) filed a federal housing discrimination complaint against U.S. Bank on Tuesday following an investigation of the bank’s properties.

The NFHA stated that the investigation of 177 foreclosed properties owned by U.S. Bank showed that REO properties in African-American and Latino neighborhoods were not as well maintained and marketed as bank-owned properties in white neighborhoods.

The U.S. Bank investigation evaluated REO properties in seven metropolitan areas – Atlanta, Chicago, Baltimore, Dayton, Miami/Fort Lauderdale, Oakland/Richmond/Concord, and Washington, DC.

“Our findings underscore the obvious: properties that are poorly maintained not only lose value but have a higher likelihood of selling to an investor, rather than to a family,” said Shanna L. Smith, NFHA president and CEO. “U.S. Bank is making it harder for the market to come back in communities of color.”

The NFHA and four member organizations – the Miami Valley Fair Housing Center, Housing Opportunities Project for Excellence, Metro Fair Housing Services, and HOPE Fair Housing Center, evaluated the REO properties for 39 types of maintenance or marketing deficiencies, including overgrown lawns, no “for sale” signs, and trash on the property.

In Dayton, it was found that 94 percent of all U.S. Bank properties in communities of color were missing a for sale sign and about three-fourths in Atlanta , Baltimore, and Washington, D.C. had “substantial” amounts of trash.

NFHA also filed a discrimination complaint against Wells Fargo last week.

The Fair Housing Act makes it illegal to discriminate based on race and applies to housing activities including maintenance, appraisal, listing, marketing, and selling of homes.

By: Esther Cho

Agencies See Measurable Improvements in Consumer Default Rates

Data through March 2012, released this week by S&P Indices and Experian showed that, with the exception of bank cards, all consumer loan types saw a decrease in default rates for the third consecutive month and in March, posted their lowest rates since the end of the recent economic crisis.

The S&P/Experian Consumer Credit Default Indices measure changes in consumer credit defaults by tracking the default experience of consumer balances in four key loan categories: first mortgage lien, second mortgage lien, auto, and bank card. The national composite reading of defaults across all four categories declined to 1.96 percent in March, down from the February rate of 2.09 percent.

The first mortgage default rate decreased from February’s 2.02 percent to 1.88 percent in March, according to the agencies’ report. Second mortgage defaults declined from 1.20 percent to 1.03 percent over the same period.

Overall, the financial health of consumers appears to be strengthening, as S&P and Experian recorded a similar decline for auto loan defaults, which slipped to 1.11 percent. Bank card was the only loan type where default rates increased in March, rising 6 basis points to 4.47 percent.

“The first quarter of 2012 was largely positive for the consumer,” said David M. Blitzer, managing director and

chairman of the index committee for S&P Indices. “Not only have we resumed the downward trend in consumer default rates that began in the spring of 2009, but we appear to be reaching new lows across most loan types.”

Blitzer notes that the first three months of 2012 show broad-based declines in default rates with first and second mortgage, auto, and composite default rates all reaching post-recession lows.

“The first mortgage default rate fell by 14 basis points in March, bringing this rate below the prior August 2011 low,” Blitzer explained. “The second mortgage rate fell by even more during the month, 17 basis points,… also at [its] lowest in the three-plus year history of these data.”

Four of the five cities tracked by the agencies’ study saw their default rates drop in March. For the third consecutive month, Chicago saw a decline. Its rate has fallen from 2.84 percent in December to 2.35 percent in March. That’s almost half a percentage point and one of the two cities to post a new consumer default low.

New York and Miami both fell for the second consecutive month. New York decreased slightly from 2.04 percent in February to 2.01 percent in March. Miami dropped almost a full percentage point, from 4.54 percent to 3.62 percent. While it still remains the highest default rate among the study’s five cities, Miami is the other city to hit a post-recession low in March.

Dallas moved down from 1.61 percent in February to 1.44 percent in March and retains the lowest rate among the five cities the agencies follow. Los Angeles was the only city where default rates marginally rose, from 1.87 percent to 1.88 percent.

The S&P/Experian Indices are calculated based on data extracted from Experian’s consumer credit database, which is populated with individual consumer loan and payment data submitted by lenders, including banks and mortgage companies, every month. Experian’s base of data contributors covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders

By: Carrie Bay

Children Who Lost Homes to Foreclosure: 2.3M, Report Reveals

While the term “foreclosure victim” generally brings to mind images of struggling homeowners, one report released by First Focus addressed the impact of foreclosures on an overlooked segment: children.

Julia B. Isaacs of the Brookings Institution authored the report, which revealed five years into the housing crises, 2.3 million children have lost their homes to foreclosure, and 3 million more are at serious risk of losing their home in the future. In addition, approximately 3 million children were evicted, or may face eviction, from rental properties.

Overall, one in 10 children were found to be affected by foreclosures.

“Children are the often invisible victims of the foreclosure crisis,” said Issacs.

The report discussed four negative ways foreclosures impact children. For one, foreclosed families tend to move, and children who move frequently tend to do worse in school.

Also, research shows financial stress and hardships affect the way parents interact with their children, and more specifically, parents under a lot of stress tend to be less supportive.

Thirdly, foreclosures adversely affect physical as well as mental health, with studies showing higher rates of visits to emergency rooms and hospitals in ZIP codes with the highest foreclosure rates.

Lastly, children living in or near foreclosed homes may be dealing with consequences of foreclosures such as more vacant houses, higher crime rates, lower social cohesion, and a lower tax base.

“Housing disruptions due to foreclosure are just as traumatic for kids as losing their homes to a tornado or hurricane – except this disaster will hit one in ten children,” said First Focus president Bruce Lesley.

The report also stated that children who change schools tend to have lower levels of math and reading achievement compared to their more stable peers. Also, frequent changes in school are associated with higher dropout rates in high school.

The report analyzed the impact of foreclosures in different states and found that Alaska and North Dakota had the lowest rate, with 2 percent of children affected. Nevada led the country at 19 percent. Other states with high rates of affected children were Florida (15 percent), Arizona (14 percent), California (12 percent), and Michigan (10 percent).

The report makes several suggestions to combat the issue and highlighted a program called McKinney-Vento Education for Homeless Children and Youth, which provides schools with tools to help homeless students stay in school. Loan modifications were also stressed, and the report called for bolder steps to improve the performance of modification programs, including national mortgage servicing standards, the resurrection of 2009 legislation that would amend bankruptcy laws to allow judges to modify residential mortgages, and principal reductions for homeowners under certain circumstances.

First Focus is a bipartisan advocacy organization dedicated to making children and families a priority in federal policy and budget decisions.

By: Esther Cho

Investors Eye College Towns for Best Deals

Investors are viewing college towns as offering big opportunities in purchasing homes at bargain prices and finding stable rental returns, regardless of any ups and downs in the economy, CNNMoney reports.

Nearly two-thirds of college markets in a recent survey had average three-bedroom, two-bath homes selling for below $200,000, according to Coldwell Banker’s College Home Listing Report for 2011. In nearly a quarter of college towns, homes sold for less than $150,000.

Mixed with that, rents have been on the rise nationally, rising 5 percent over the last year and projected to rise another 5 percent over the next year.

Investor Sally Linder has found her college-town rentals profitable. She and her husband own 13 single-family homes near Ohio University in Athens, Ohio. Their latest purchase was for a two-bedroom home for less than $90,000. They are then able to charge about $350 to $600 to rent each bedroom, which she says makes their investments profitable from day one.

In a study conducted by the state of Ohio about the recession’s impact on the housing market, researchers found that homes sold in college towns sold in the state experienced the smallest price declines compared to other homes, except for homes in high-income suburban towns.

Source: “Real Estate Investors’ Best Kept Secret: College Towns,” CNNMoney (April 2012)

7 Metros Where List Prices Soared Last Month

Nationwide median list prices rose more than 5 percent in March compared to February, according to housing data of 146 markets. The median list price nationally is now $189,900.

In fact, nearly all of the 146 metro areas saw median list prices rise or hold steady month-over-month except for five metros (Columbia, Mo.; Melbourne-Titusville-Palm Bay, Fla.; Minneapolis-St. Paul, Minn.; Fort Collins-Loveland, Colo.; and Reading, Pa.).

The areas seeing some of the largest month-over-month increases in median list prices are:

1. San Francisco

Month-over-month increase: 6.10%

Median list price: $649,000

2. Washington, D.C.-Md.-Va.-W.Va.

Month-over-month increase: 5.92%

Median list price: $270,000

3. San Jose, Calif.

Month-over-month increase: 5.57%

Median list price: $495,000

4. Oakland, Calif.

Month-over-month increase: 5.04%

Median list price: $336,120

5. Seattle-Bellevue-Everett, Wash.

Month-over-month increase: 4.97%

Median list price: $314,900

6. Toledo, Ohio

Month-over-month increase: 4.90%

Median list price: $104,900

7. New Haven-Bridgeport-Stamford-Danbury-Waterbury, Conn.

Month-over-month increase: 4.29%

Median list price: $365,000

The metro areas that have seen the largest jumps in median list prices over the year include Phoenix-Mesa, Ariz. (a 23.45% increase in list prices compared to March this year to March 2011); Miami (a 22.27% increase), and Boise City, Idaho (a 19.73 percent increase), the data shows.

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

Speed Up Short Sales, FHFA Directs Servicers

The Federal Housing Finance Agency announced a new policy to speed up the process that mortgage servicers use to handle short sales, deeds-in-lieu, and deeds-for-lease for mortgages that are backed by Fannie Mae and Freddie Mac.

The FHFA, the regulator of Fannie and Freddie, says the new policy includes a revised timeline that will require mortgage servicers to respond to a request for a short sale offer within 30 days. Servicers also will be required to make a final decision on the short sale offer within 60 days.

For any short sale offer still under review after 30 days, banks will be required to provide weekly status updates to borrowers regarding the pending short sale offer.

The new policy, which will roll out in stages starting in June, aims to “prevent foreclosures, keep homes occupied, and help maintain stable communities,” says Edward DeMarco, the FHFA’s acting director. “These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”

The FHFA also says that by the end of the year there will be additional announcements from Fannie and Freddie that are aimed at addressing borrower eligibility and evaluation, simplifying documents, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance.

Source: Federal Housing Finance Agency

Wednesday, April 18, 2012

BGC Acquires Grubb & Ellis

BGC Partners Inc. announced it has acquired Grubb & Ellis Co., one of the nation’s largest commercial real estate brokerages. The firm will be integrated with BGC’s Newmark Knight Frank, which BGC acquired in October 2011, and the merged companies will operate as “Newmark Grubb Knight Frank.”

The new commercial company will have more than 100 offices in North America.

Grubb & Ellis was once one of the nation’s largest commercial real estate brokerages. It filed for Chapter 11 bankruptcy in late February, citing the financial crisis and sluggish commercial market as culprits.

BGC was granted approval to acquire Grubb & Ellis for $30 million from a bankruptcy court at the end of March. The sale closed on April 13.

Michael Lehrman, BGC’s global head of real estate, says that the new company is “a game-changing moment in the real estate industry. Newmark Knight Frank and Grubb & Ellis each have consistently ranked among the leading companies in the real estate industry, and now these two great brands have come together as an even more impressive competitive presence in the real estate marketplace."

Source: “BGC Closes on Grubb & Ellis Buy, Forms Newmark Grubb Knight Frank,” San Jose Business Journal (April 16, 2012)

Couple Gets Spooked From House, Sues Landlord

A Toms River, N.J., couple is suing their landlord, claiming the home they are renting is haunted.

Michele Callan and fiance Josue Chincilla say they and Callan’s two children moved out of the house a week after moving in after getting spooked by the paranormal activity they say they witnessed in the home. The couple says they heard voices inside the home (voices that whispered “let it burn”) and that they witnessed flickering lights, clothes flying from closets, doors opening and closing, and “taps on the shoulder,” the couple told ABC News. The couple says they hired paranormal investigators who recorded some of the activity from infrared cameras.

The couple says they are living in a motel and refuse to return to the home, alleging their lives are in “mortal danger” if they return.

The couple is suing their landlord in New Jersey Superior Court, seeking the return of their $2,250 security deposit.

Their landlord, Richard Lopez, is counter-suing the couple, claiming the couple’s reports of paranormal activity home is all a hoax and just a way for them to get out of their yearlong lease and stop making the $1,500 monthly rent payments.

Source: “Couple Sues Landlord Over ‘Haunted’ House,” AOL Real Estate (April 16, 2012) and “Family Flees ‘Haunted House,’ Sues Landlord,” ABC News (April 14, 2012)

Citi Starts Taking Principal Writedowns

In response to guidance from four federal agencies, Citigroup reclassified $840 million in home equity loans as "nonaccruing" in the first quarter because the first mortgages are more than 90 days delinquent.

To get a head start on the national mortgage servicing settlement, the third-biggest U.S. bank also wrote down $370 million worth of mortgages and released about $350 million in loan reserves to account for principal forgiveness.

Source: "Citi Reclassifies Some Mortgages, Starts Taking Principal Writedowns," American Banker (March 17, 2012)

Foreclosure Scams Rise Nearly 60%

Mortgage foreclosure scams — which seek to dupe struggling home owners with offers to save them from financial troubles — have soared nearly 60 percent this year. Scammers are increasingly using federal programs, like refinance programs such as HARP and HAMP, to try to trick home owners, reports the Homeownership Preservation Foundation (HPF), a nonprofit group that helps home owners avoid foreclosure.

“Every new government initiative spawns a slew of foreclosure avoidance scams, often from the same cast of characters doing business under various names to avoid easy detection and identification,” says Colleen Hernandez, CEO of HPF. “Most of these scams involve individuals supposedly offering mortgage foreclosure avoidance assistance that trained HPF counselors provide at no cost. Sadly, with most scams, no meaningful services are ever provided.”

About half of the reported scams to HPF tend to involve claims of specialized “legal services” from attorneys or individuals to help home owners avoid foreclosure.

The HPF warns that scammers also are using the HPF logo and brand to try to dupe home owners in foreclosure rescue scams.

“The only way distressed home owners can be certain they are dealing with a trained HPF counselor is by calling 888-995-HOPE,” Hernandez says.

Source: Homeownership Preservation Foundation

New-Home Building Permits Soar to 2008 Levels

Permits for new-home building — a gauge of future demand — reached its highest level last month since September 2008, the Commerce Department reported Tuesday.

New housing permits rose 4.5 percent in March, reaching an annualized level of 747,000.

But while the future of home building shows signs of picking up, actual construction started last month slowed, the second consecutive month for declines.

Builders broke ground in March on a seasonally adjusted annual rate of 654,000 homes, a 5.8 percent drop from February, the Commerce Department reported. The construction of multifamily homes — those with at least two units — posted a 16.9 percent drop last month while construction of single-family homes dropped slightly at 0.2 percent.

New-home building declined the most in the South — posting a 15.9 percent decline in March — while the Northeast saw a 32.8 percent gain and the Midwest saw a 1 percent increase.

The new-home market continues to struggle to compete against foreclosures and short sales plaguing many markets, which are often sold at big discounts. Coupled with that, new homes tend to be priced about 30 percent higher than previously occupied homes.

While builder confidence has been increasing in recent months, confidence showed a slight decrease in April, the first time it's declined in seven months, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

"Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts," says Barry Rutenberg, NAHB chairman.

Source: “U.S. March Housing Starts -5.8% to 654K,” Dow Jones International News (April 17, 2012) and National Association of Home Builders


Inventory of For-Sale Homes Posts Big Drop

The nationwide inventory of residential homes for-sale dropped 21 percent in March compared to a year ago, according to newly released housing data from, tracking 146 metro markets.

In fact, all 146 markets posted a drop in their inventory, except for two — Hartford, Conn., and Philadelphia.

The nationwide median list price in March also saw improvement, increasing more than 5 percent last month compared to last year at this time.

The housing picture is much different than last year at this time, when inventory was up 26 percent and list prices were down 4.81 percent.

“If the market continues to hold its own, 2012 could well mark the beginning of a broad-based housing recovery,” according to

The metros that posted the biggest drops in listings of for-sale homes in the last year are:

1. Oakland, Calif.: -51.91 percent year-over-year drop in total listings

2. Bakersfield, Calif.: -50.35 percent

3. Phoenix-Mesa, Ariz.: -48 percent

4. Fresno, Calif.: -45.56 percent

5. Miami: -42.34 percent

6. Fort Lauderdale, Fla.: -39.66 percent

7. Seattle-Bellevue-Everett, Wash.: -39.38 percent

8. Atlanta: -39.26 percent

9. Orlando: -39 percent

10. Portland-Vancouver, Ore.-Wash.: -38.79 percent

11. Tampa-St. Petersburg-Clearwater, Fla.: -37.35 percent

12. Stockton-Lodi, Calif.: -36.18 percent

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

Moody's Ranks Subprime Servicers Based on Cash Flow

Based on a metric devised by Moody’s, GMAC, SLS, and American Home Mortgage Servicing performed better compared to other subprime servicers in terms of cash collected relative to losses on delinquent loans. This was mainly due to shorter liquidation timelines that resulted in lower loss severities on foreclosed properties, according to an article in Moody’s ResiLandscape for April.

The article, authored by Moody’s analysts Jiwon Park and Peter McNally, ranked eight servicers – GMAC, American Home Mortgage Servicing, Ocwen, Aurora, Select Portfolio Servicing, Wells Fargo, Chase, and BAC Home Loans Servicing – across a timeline spanning from 2010 to February 2012 for cash flow efficiency.

After weighing how much cash the servicers generate from modifications and liquidations against how much is lost, each major servicer was ranked. GMAC, SLS, and American Home were consistently top ranking, while Ocwen was in the middle, and BAC and Chase ranked near the bottom.

According to the article, GMAC’s high metric is due primarily to shorter liquidation timelines and because the servicer maximizes cash flow on modified loans by keeping the re-default rates in line with the industry average even though it offers relatively low levels of relief in terms of principal and interest.

Ocwen actually had a consistently high cash flow because it actively modifies loans while keeping cash flow coming with fewer delinquent loans. However, the article notes that Ocwen’s success will depend on the re-default rate of the modified loans.

Bottom-ranking BAC was not as efficient due to low volumes of modified loans and liquidated properties, leading to higher loss severities.

The Moody’s article also pointed out that cash flow is much lower in judicial states due to longer foreclosure timelines and greater loss severities. The article stated that since the rank order for servicers in both judicial and non-judicial states patterned after the overall ranking, this suggests that “judicial delays do not unduly affect the less efficient servicers.”

By: Esther Cho

Fitch Comments on JPMorgan's and Wells' Reclassification of 2nd Liens

With their 2012 first quarter earnings, JPMorgan and Wells Fargo revealed the reclassification of $1.6 billion and $1.7 billion, respectively, in second lien mortgages as nonperforming loans even though they are not yet delinquent.

Fitch Ratings said it believes many U.S. banks are likely to follow suit, and that it does “not view this as a material shift in the performance of these loans.”

Both banks cited regulatory guidance as reasons for the reclassification.

The reclassified loans are second liens associated with delinquent first liens. In cases involving delinquent loans, second liens are written off before a first lien takes any losses.

According to a Bloomberg article, of JPMorgan’s $1.6 billion of second liens that were classified as nonperforming, $1.4 billion were still current as of March 31.

“However, increased regulatory scrutiny of second liens may continue to affect the way banks account for potential losses on these portfolios,” Fitch said.

The article from Fitch also noted the recent debate to have principal reductions applied to Fannie Mae and Freddie Mac loans, which Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), has not allowed so far despite mounting pressure.

If principal reductions were allowed, eligible second liens on GSE loans would be written down proportionally, not written off.

According to a note from the Treasury Department, “under HAMP, where a first lien mortgage is modified, then the holder of an eligible second lien must modify that lien proportionately if they are a participant in the Second Lien Modification Program (2MP).”

Almost half, or about 47 percent, of all HAMP modifications during the 2011 fourth quarter were GSE loans, according to the Office of Comptroller of the Currency, and FHFA estimates that roughly half of all HAMP-eligible loans have a second lien associated with them.

“We would likely revisit our loss estimates on second lien loans if there is a sufficient increase in principal modification activity,” Fitch stated.

Fitch also said roughly half of the $850 billion in outstanding second liens are concentrated at the five largest banks, which includes Bank of America, who has one of the largest second lien portfolio in the U.S.

By: Esther Cho

Fannie and Freddie Set Timeline Requirements for Short Sales

Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days.

The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.

Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Finance Agency (FHFA).

Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.

The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.

If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.

According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.

In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.

The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.

Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”

GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.

“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”

Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.

By: Carrie Bay 04/17/2012

Monday, April 16, 2012

95% of REOs Need Rehab, Analysts Say

Investors are buying up foreclosures in bulk, viewing the potential returns from REOs-to-rentals as better than most other investments.

But experts caution investors to be careful that they don’t take on more than they can handle, and make sure they devote some attention — and budget — into the rehabilitation of many of the properties they buy.

Nearly 95 percent of distressed homes are in bad shape and unsuitable for renting out, Morgan Stanley analysts estimate.

"The importance of getting construction — or specifically, re-construction or rehabilitation — right cannot be overstated," according to a recent report sent to Morgan Stanley clients. "The quality and cost of rehabilitation can continue to benefit or haunt the asset far past the initial completion of work. For example, shoddy plumbing or other infrastructure work can result in significantly higher maintenance costs over time, and can also affect eventual exit pricing."

Morgan Stanley provided estimates to investors in the report, citing estimates of renovation work to cost about 25 percent of the purchase price.

Source: “Rehabilitation Vital to REO-to-Rental Success,” HousingWire (April 13, 2012)

NAR Calls for Broad Qualified Mortgage Definition

In a letter sent today to Richard Cordray, director of the Consumer Financial Protection Bureau, NAR joined a broad coalition of lenders, investors, housing professionals, consumer advocates, and civil rights groups to urge for a broadly-defined Qualified Mortgage (QM) that covers a wide range of traditionally safe products and underwriting criteria.

“As the leading advocate for housing and home ownership, NAR supports a QM definition that establishes strong consumer protections, but promotes mortgage liquidity and affordability so that a wide range of creditworthy consumers will be able to find mortgage financing,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “A narrow QM would certainly harm consumers by increasing borrowing costs and further restricting already tight lending conditions, which could curtail the country’s fragile real estate and economic recoveries.”

NAR believes that Congress intended for a broadly-defined QM that establishes strong consumer protection against risky loan products, promotes mortgage liquidity in the market, incorporates important ability-to-repay standards, and offers lenders reduced litigation exposure. NAR is concerned that a narrow QM would force borrowers into a non-QM market where they would be burdened with significantly higher mortgage rates and fees or even be denied access to credit.

“It’s critical for home owners and the housing recovery that there be a balance between inadvertently exposing consumers to risky mortgages and unduly restricting liquidity and denying or delaying creditworthy borrowers from achieving the dream of sustainable home ownership,” said Veissi. “A narrow QM definition that tracks closer with the related and widely opposed Qualified Residential Mortgage definition would deny millions of qualified, creditworthy consumers access to an affordable mortgage or perhaps any mortgage.”

Fading 'Fear Factor' Among Home Buyers?

The real estate market is thawing this spring. Following five years of dismal sales and falling prices, the housing market is starting to see a turnaround, according to housing surveys, agent reports, and economists.

Home buyers are returning to take advantage of record housing affordability while investors are buying up foreclosures in bulk at bargain prices.

"The biggest challenge that we've had over the past four years is fear — fear that the economy is collapsing, that property values are collapsing, that the world is coming to an end," Mark Prather, a broker at ERA Buy America Real Estate in La Palma, Calif., told the Associated Press. "The fear factor is all but gone."

The signs are already there: Home sales prices are starting to edge up, even in hard-hit housing areas like Phoenix and Miami. Also, banks are issuing more mortgages. JPMorgan Chase recently reported an uptick in loan applications recently by 33 percent, and the bank said that it issued 6 percent more mortgages from January through March than last year. Wells Fargo reported an 84 percent increase in loan applications and the issuing of 54 percent more mortgages in the last year.

Still, the housing market has some ways to go, with a surge of foreclosures expected to soon hit the market and the unemployment rate still high in many parts of the country.

"This gradual healing is encouraging, but we must tread carefully as the housing market is still far from a robust recovery," Michelle Meyer, an economist at Bank of America Merrill Lynch, told Reuters News.

Source: “US home-buying season finally signaling a recovery,” The Associated Press (April 15, 2012) and “Close to Bottoming, Home Prices May Rise in 2013,” Reuters (April 12, 2012)

Fitch Says Rules CFPB Is Considering Will Cause Servicers to Pay Up

In response to mortgage servicing rules the Consumer Financial Protection announced it may propose, Fitch Ratings issued a statement and said it believes mortgage servicers will incur increased “operational, compliance, and reporting expenses” if the rules take effect.

To create more transparency, the CFPB said it is considering rules which require clear monthly mortgage statements, a warning before interest rates adjust, options to avoid “force-placed” insurance, and early information to keep customers out of foreclosure.

In addition to the increased costs, Fitch also stated, “it is unclear what impact the agency’s new rules would have on future mortgage performance as a function of a more informed borrower.”

“For example, if mortgage holders were given notice of increased payment amounts, they could begin budgeting for the additional cost sooner or shift to alternative products. Of course, if the borrower is already experiencing financial hardship any advance notice or better disclosure could be deemed irrelevant,” Fitch explained.

The agency also questioned the relevancy, noting the “latest round of regulation appears focused on improving processes with respect to existing mortgages characterized by aggressive underwriting and exotic mortgage products tied to overvalued homes.”

Given that lenders are more focused on a borrower’s credit quality and financial situation and stability of home pries, the ratings agency said, “We believe the proposed set of rules could therefore be less relevant with respect to future underwriting.”

To hold servicers more accountable, the CFPB may propose to have payments immediately credited to avoid late fees for borrowers, up-to-date records that are accessible, quickly corrected errors, and easy, ongoing access to a foreclosure prevention team.

The federal regulator plans to propose the rules this summer and finalize them in January 2013.

By: Esther Cho

Eleven AGs Send Letter Urging DeMarco to Reverse Course

Eleven state attorneys general sent a letter to Edward DeMarco, Acting Director of the FHFA, urging him to allow Fannie Mae and Freddie Mac to move forward with principal reductions.

Headlined by Massachusetts Attorney General Martha Coakley, the letter doubled down on the FHFA to “preserve assets and prevent unnecessary foreclosures by implementing loan modifications that include principal write-downs.”

State attorneys general said that new reductions “should consider all of a borrower’s debts, not just the monthly mortgage debt, be uniform, transparent, and publicly disclosed.”

The letter added that current statistics and analysis are “completely model driven and FHFA’s analysis cautions that the model used may not be appropriate. We encourage the FHFA to use actual results in its analyses where real data are available, including data from HAMP, and the anticipated data from the ‘Multistate Servicing Settlement.’”

When comparing principal reduction versus principal forbearance, the letter stated that principal reduction improves an underwater borrower’s equity position, which “will incent homeowners to maintain loan payments resulting in lower re-default rates.”

Pointing to the Treasury’s recent tripling of incentive payments to mortgage investors who allow principal reduction, the letter stated that this should substantially reduce FHFA’s concerns over the financial impact of principal reduction, noting that the “payouts ranged between six and 21 cents to the investors for each dollar forgiven under HAMP, but that will grow to between 18 and 63 cents.”

FHFA Acting Director Edward DeMarco continues to resist calls by lawmakers and policymakers to implement new loan modifications for homeowners, stressing the agency’s “preserve and conserve” mandate.

Coakley and others were joined this week by International Monetary Fund Director Christine Lagarde, who reportedly leaned on regulators to reduce the mortgage debt owned by U.S. homeowners.
Source: Ryan Schuette