Where Is Our Housing Market At Right Now?

According to Capital Economics, the U.S. is currently in recovery mode.  Other reports contend we have not reached the bottom yet.  However, the research firm points to increasing home sales and drop in excess supply, which leads to price gains, as reasons to believe the U.S. is past bottoming out.  Capital Economics said cash buyers and investors are driving improvement in sales, which explains the growth despite tight lending conditions.

Data released on Tuesday from the National Association of Realtors (NAR) backs what Capital Economics is saying. The NAR reported a rise in existing home sales in April after a two-month drop and a rise in prices.  Lawrence Yun, NAR chief economist, too, stated that the housing recovery is underway based on the home sales data, and said it “appears to be extending to home prices.”  According to the NAR, all-cash sales made up 29% of transactions in April and investors purchased 20% of homes.  The NAR also reported a 10.1 percent yearly increase in the median price of existing homes, and a monthly and yearly rise in median prices in all four regions.

Even with positive reports on the housing market, the question of how long this will last still remains.

Patrick Newport of IHS Global Insight called the rise in home prices a a big surprise and said without more information, it impossible to tell what caused prices to rise last month. “Home prices can shoot up, among other reasons, if demand picks up sharply, if the proportion of distressed sales drops sharply, if the proportion of more expensive homes sold rises sharply, or some combination of these,” said Newport.

In a separate report released Monday, Capital Economics pointed to two pressing issues that threaten to shake up the market and derail recovery: the impact of the eurozone crises and the settlement’s effect on foreclosure inventory.  However, Paul Diggle, author of the Capital Economics report think that the US will shrug off a limited euro-zone break up.

Some speculate that the $25 billion robo-signing settlement will result in homes moving from shadow inventory to the visible supply, thereby increasing the high share of distress homes on the market, causing prices to fall further.  Even so, Capital Economics believes the demand from investor and improvement in first-time and repeat buyers should be enough to absorb the increase in supply.

While the research firm believes the housing market will maintain its composure through the hiccups, Capital Economics believes right now, time is probably the best healer, and even the most drastic of government interventions is limited in speeding things up.

Read original article “NAR Data Points to Recovery, But How Long Will It Last?” by Esther Cho at DSNews.com, dated 5/22/12.

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Protect Homeownership, Preserve the “American Dream”

English: Used in wikipedia:Homeownership in th...

English: Used in wikipedia:Homeownership in the United States. Data source – http://www.census.gov/hhes/www/housing/hvs/annual09/ann09t14.xls (Photo credit: Wikipedia)

Tax, legislative, and regulatory policies currently under consideration threatens to scale back or eliminate the mortgage interest deduction and make mortgages, as well as small business loans, unaffordable, and even more difficult to obtain.  This would greatly harm home owners, home buyers, the housing market and the nation’s economy, according to the National Association of Home Builders (NAHB).  To explain some of these threats and documents homeownership’s importance to individual households and to local, state and national economies, NAHB is doing it through an FAQ, poll data, economic analysis and reports on its recently  launched website, ProtectHomesownership.com.

The site also provides various ways for the public to take positive action to protect this very important aspect of American life. These include an online petition urging policymakers to keep housing a national priority, information about how to participate in homeownership rallies that are being held in a number of communities in 2012, and links to social media communities on Facebook.com/ProtectHomeownership and Twitter.com/4Homeownership.

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Loans Past Due And In Foreclosure At 4 Year Low


Delinquencies on US mortgages, totals of 30 da...

According to a Mortgage Bankers Assn.’s delinquency report, home loans in foreclosure or at least one payment past due have gone down to the lowest level since 2008.  The quarterly study, released May 16, said 7.4% of all loans on 1-unit to 4-unit properties were past due at the end of the quarter, seasonal factors considered, down from 7.58% at the end of the fourth quarter and 8.32% a year earlier.


The actual number of homes being repossessed remained high, as lenders continued to work through huge backlogs of distressed properties.  Homes in foreclosure represented 4.39% of all homes, up from 4.38% in the fourth quarter but down from 4.52% a year earlier.


Combining delinquent loans and mortgages in foreclosure proceedings, one of every nine U.S. mortgages was showing at least initial signs of distress. Still, that was down by about a percentage point from a year ago and from the final quarter last year.


“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict,” said Michael Fratantoni, vice president of research at the home lender group. “So delinquencies are clearly continuing to improve.”


As in other recent reports, a higher percentage of homes are in foreclosures in states where foreclosures are handled within the court system than in states in which homes are usually repossessed and sold outside the courts.


In California, a non-judicial foreclosure state, 3.3% of homes were in foreclosure — more than a percentage point below the national average.  Arizona, another state with foreclosures outside the courts, had 3.6% of its homes in foreclosure proceedings.


In contrast, Florida, a judicial state, has 14.3% of homes in foreclosure and New Jersey has 8.4% of homes in foreclosure.


Fratantoni believes these states will have a lingering problem for years.


New foreclosure actions were started on 0.96% of all homes during the first quarter, down from 0.99% last quarter and 1.08% one year ago.


The most problematic loans continue to be those made at the peak of the housing bubble. The Mortgage Bankers Assn.’s category of seriously delinquent loans — those in foreclosure or more than 90 days in arrears — remains three times the long-term average, Fratantoni said, and 60% of these badly distressed loans were made from 2005 through 2007.


A recent report from San Diego researcher DataQuick showed that the number of homes entering foreclosure in California was down 17.6% year over year, at the lowest level since mid-2007.  Santa Ana researcher CoreLogic said greater use of loan modifications, short sales and deeds-in-lieu by lenders had contributed to the foreclosure downturn.

Read the original Los Angeles Times article by E. Scott Reckard here.


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121K Homeowners Request Independent Foreclosure Reviews

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I mentioned in my January 18, 2012 blogpost that homeowners who had a mortgage loan on a primary residence and who believe were financially harmed during the mortgage foreclosure process by GMAC Mortgage, HSBC Finance Corporation, SunTrust Mortgage, or EMC Mortgage in 2009 or 2010 can request an independent review and potentially receive compensation.

The review is to determine if borrowers suffered financial harm directly resulting from errors, misrepresentations, or other deficiencies that may have occurred during the foreclosure process. The servicers will need to compensate borrowers for financial injury resulting from deficiencies in their foreclosure processes.In remarks before the 2012 National Interagency Community Reinvestment Conference in Seattle on Monday, March 26, John Walsh, Acting Comptroller of the Currency offered an update and clarification on the foreclosure reviews taking place at 14 servicers as part of the consent orders established last year.

First, Walsh addressed the impartiality of the consultants conducting the reviews.  He assured his audience at the conference that the consultants are not under the servicers’ supervision. They “have had no previous role in reviewing the practices or issues they are being asked to review,” and their actions are being overseen by the OCC, Walsh stated.  Consultants are identifying borrowers they believe may have suffered financial harm as a result of improper processing, and borrowers themselves may request a review if they believe they were wronged by their servicers.

Consultants are starting with the review of about a quarter-million loans, but they may increase the volume if they feel it is necessary based on their findings.

The OCC is also attempting to reach about 4.3 million borrowers whose loans are eligible for review through direct mail and advertising.  In November and December 2011, the OCC sent 4.3 million letters to these individual borrowers to inform them that their loans are eligible for review and to let them know how to request a review.  According to Walsh, the OCC uses several tracking methods to find displaced borrowers, and about 5.6 percent of the letters were not deliverable.

National advertising campaigns are underway for print and online media in both English and Spanish to reach all eligible borrowers.  The OCC also encourages homeowner counselors to make sure borrowers they work with are aware of the independent foreclosure reviews.

Thus far, the website, IndependentForeclosureReview.com has received about 400,000 visits, and more than 175,000 individuals have called a toll-free number to request information.  The toll-free number and a list of servicers are available on this website.  Assistance is available in English, Spanish, Chinese, Korean, Vietnamese, Tagalog, Hmong and Russian and is free.  Federal bank regulators, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System is monitoring the Independent Foreclosure Review to ensure a fair and impartial process.  You can also visit the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Prevent Loan Scams, or the Loan Scam Alert websites for additional information.

In total, about 121,000 borrowers have requested reviews, expressing grievances such as they received improper fees, their servicer incorrectly calculated their mortgage balance, their payments were improperly processed, or they encountered issues with a loan modification.

When consultants do find that a borrower suffered financial harm because of actions by a  servicer, the servicer will need to provide remediation, which may range from reimbursement of lost equity, repayment for expenses plus interest, or repealing a foreclosure.  “There are no caps or limits to the amount of compensation that will be paid out or remediation actions that will be offered,” Walsh stated.

The OCC will provide a remediation framework to ensure “remediation recommendations are consistent across servicers for similarly situated borrowers.”

For the original article, please click here.

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The Shortcomings of the $25-Billion Foreclosure Settlement

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There is a very good article in the Los Angeles Times on Wednesday, March 7, 2012, by Michael Hiltzik following-up on the $25-billion foreclosure settlement.

Nearly one month after Washington unveiled the deal on Feb. 9, the specific terms of the settlement are still not public.  The latest explanation for the secrecy is that the parties are waiting until the settlement is filed with a federal court in Washington, which could happen this week or next.  Question is: why wasn’t the deal filed in court before or simultaneously with the announcement, as is customary with high-profile legal settlements?

One is how federal regulators are helping the banks meet the costs of the settlement.  The Office of the Comptroller of the Currency, a major bank regulator, said on the very day of the settlement announcement that it was giving the five banks in the deal a pass on $394 million in penalties it would otherwise have assessed them for shoddy, and shady, mortgage and foreclosure practices.

The Federal Reserve Board rolled $766.5 million of penalties it assessed the banks for unsafe and unsound mortgage practices into the foreclosure settlement.  The comptroller’s office and Fed write-downs are predicated on the banks’ meeting their obligations under the foreclosure deal.  The idea is that the banks will have to take actions valued at as least as much as the penalties being waived.  BofA, for example, was assessed $175.5 million in sanctions by the Fed.  If it attains credits of $175.5 million under the foreclosure settlement by modifying borrowers’ loans and taking other steps, it will owe the Fed nothing.  One might think that the banks will be required to amass $1.16 billion in credits to satisfy the bills presented by the Fed and the comptroller’s office.  Not at all.  It’s possible that the banks will be permitted to apply one dollar of performance to both sets of sanctions, which means they may be on the hook for only $766.5 million.

And just last week, the Treasury Department announced that it would pay BofA and JPMorgan Chase some $171 million in incentives it had withheld since June because of the banks’ shortcomings in dealing with homeowners under the government’s Home Affordable Modification Program, or HAMP.  The Treasury has not said what obligations it will impose on BofA and JPMorgan in return, if any.  It does say it will continue to keep an eye on the banks’ compliance with HAMP rules, which Hiltzik thinks does not strike any fear on the bankers, who were consistently flouting them before.

For each variety of mortgage relief, the banks will get a certain credit against their $20-billion target.  For every dollar of balance reduction offered a homeowner who is up to 75% underwater, for example, they get a dollar credit; for principal forgiveness on delinquent home-equity lines, the credit ranges from 10% to 90%.

The settlement’s worst flaw, said Hiltzik, may be it’s lost opportunity.  It could have been used to improve HAMP, say by mandating that the banks offer HAMP-eligible borrowers principal forgiveness, which studies show is the most effective way to keep borrowers out of foreclosure. Under current HAMP rules, such offers are optional. But such a provision would have countered the perverse incentives in the mortgage business that discourage mortgage servicers, including the five banks in the settlement, from helping homeowners avoid foreclosure.  The aspect of the lost opportunity is that the settlement, to the extent it inflicts any pain on the banks, does so entirely at the institutional level. “What’s most discouraging is that you see none of the individuals who were driving these things being held in any way accountable,”  Arthur Wilmarth, a banking expert at George Washington University Law School, says. “The only thing that will actually change behavior going forward is for the individuals who were at the center of this to be held personally responsible and be forced to give up their ill-gotten gains. Then maybe their successors might think twice.”

Despite the secrecy shrouding the overall deal, it does appear that the California-specific provisions in the settlement require BofA, JPMorgan Chase and Wells Fargo to meet a $12-billion target in California homeowner relief.  State officials believe that the provisions will encourage the banks to do more writing down of principal balances on underwater loans than they will in the rest of the country, front-load the relief more into the first year of the agreement, and to focus more on 12 particularly hard-hit counties.

Michael Hiltzik’s full article here.

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Hidden Guarantee Fee Set To Rise


Loans (Photo credit: jferzoco)

According to an article written by Vickie Elmer and published on March 1, 2012 in the New York Times, the hidden guarantee fee of your home mortgage will rise in spring, and other increases will likely take place later this year and next.

What is a guarantee fee?  Inside the interest rate quoted on your home mortgage there is a small hidden fee that does not show up in borrowers’ mortgage documents or good-faith estimates, and it is little known outside the industry.  According to a Fannie Mae spokesman, the fee “gets incorporated into the underlying rate the borrower pays.”  Government-sponsored entities like Fannie Mae and Freddie Mac has been charging this fee for more than three decades.

Congress has mandated an increase in the guarantee fee (included in the two-month extension of the payroll tax reduction last December).  On April 1, the guarantee fee will rise 10 basis points or 0.1% (a basis point is equal to one one-hundredth of 1 percent, or 0.01 percent).

An interest rate is usually made of up three parts: the largest goes to the bank or the investors who buy the loan; the smaller portion is for the mortgage servicers that collect monthly payments; and then there’s the guarantee fee.  Fannie and Freddie charge guarantee fees as a form of insurance against default for the loans they acquire and resell to investors.  The fees also provide a primary source of revenue for Fannie Mae and Freddie Mac.  Both organizations started raising fee rates in 2008 during the housing crisis, as foreclosure costs rose.  Fannie, for instance, made $5.6 billion in single-family guarantee-fee income in the first nine months of 2011, a 4.7 percent increase from the 2010 period, according to its quarterly financial statements.

Based on the most recent period for which data is available, Fannie Mae charged a guarantee fee of 31.1  basis points, on average, in the third quarter of 2011, for new single-family loans it acquired.  That is six points higher than in the third quarter of 2010.  Rates on multifamily loans are 15 to 20 basis points higher than on single-families.

Although set to rise on April 1, loans with interest-rate locks from the last 45 or 60 days already have the higher guarantee fee written into them, according to Tom Kelly, the president of Investors Home Mortgage, a division of Investors Bank in Short Hills, N.J. Lenders say they need the extra lead time because it may take time to close the loan, package it and send it on to Fannie or Freddie.

One way to avoid the guarantee fee is to use a lender that does not sell off its loans – for instance, a community bank or a credit union.

To read the original article, please click here.

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Help for Homeowners Community Events

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Making Home Affordable (MHA) is an important part of the Obama Administration’s comprehensive plan to stabilize the U.S. housing market by helping struggling homeowners to get mortgage relief and avoid foreclosure.  MHA is an official program of the Departments of the Treasury & Housing and Urban Development (HUD).

HOPE NOW is an alliance between counselors, mortgage companies, investors, and other mortgage market participants in outreach efforts to help distress homeowners stay in their homes. The members of this alliance recognize that by working together in a unified, coordinated manner, they will be more effective than by working independently.  Click here to see a full list of Alliance members. The Department of the Treasury HUD and encouraged leaders in the lending industry, investors and non-profits to form this alliance.

On March 22, 2012, Thursday,  MHA and HOPE NOW are holding a Help for Homeowners Community Event at the Los Angeles Convention Center, 1201 South Figueroa Street, (Entrance on Pico Blvd. and Figueroa St.) Los Angeles, CA 90015, from 1:00 p.m. – 8:00 p.m.  Be sure to arrive early so you could be in the front of the line.  At this event, homeowners will attend an informational workshop, after which they will have the opportunity to meet one-on-one with their mortgage company or a HUD-approved housing counselor to find options to avoid foreclosure.  For the face-to-face meeting, you will need the following documents and forms:

  1. Request for Mortgage Assistance form
  2. IRS Form 4506T-EZ and/or the last two years of tax returns
  3. Monthly mortgage statement
  4. Information about other mortgage on your home, if any
  5. Two most recent pay stubs for all household members contributing toward mortgage payment
  6. If self-employed, the most recent quarterly or year-to-date Profit and Loss Statement
  7. Documentation of Income you receive from other sources (alimony, child support, social security, etc.)
  8. Two most recent bank statements
  9. A utility bill showing homeowner name and property address
  10. Unemployment insurance letter, if applicable

For more information, visit MakingHomeAffordable.gov to download forms.  You can call 1-888-995-HOPE (4673) to get free help putting your documents together.  It is very important that you have all your paperwork with you or you will not be able to have your one-on-one meeting.

To get tips to avoid scams, visit LoanScamAlert.org.  For a copy of the flyer for this event, click here.

Free parking is available in the South Hall garage.  Garage entrance is on Venice Boulevard or Pico Boulevard.  If you take the Metro Rail – you would get off at the Pico Station.

MHA has held 65 of these events of date and is looking to do more in the future.  However, the next one for Los Angeles will be 5-6 months away.   So don’t miss this opportunity.  MHA will be asking you to complete an exit survey which will help them improve their future events.

As a side note, a similar event for Sacramento, California will be held on Tuesday, March 20, 2012, at the Sacramento Convention Center, 1400 J Street, Hall D, Sacramento, CA 95814.  Complimentary parking is in the Memorial Garage only.  Garage entrance is on 14th and H Streets.  For Light Rail commuters – exit Cathedral Stop.

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Mortgage Points Losing Favor

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Paying points allows a borrower to “buy down” the interest rate on a mortgage by paying  an upfront fee.   Since interest rates are at or near record lows, many borrowers see no reason to pay points when buying or refinancing a home.  Some are even opting for what’s known as “negative points” — which is also called a lender rebate or points in reverse — agreeing to a slightly higher rate to help pay closing costs.

A point equals 1 percent of the loan amount, so paying one point on a $300,000 refinancing costs an extra $3,000 at closing, not including other mortgage fees, taxes and escrow amounts.  Paying a point usually reduces the interest rate by 0.25 points over its term.  For instance, instead of 4 percent, the rate becomes 3.75 percent.  According to a Freddie Mac survey, the average number of points paid in 2011 was 0.7 percent, less than half the levels people paid the 1990’s.  In 2007 it hit a low of 0.4 percent, while in 1995 it averaged 1.8 percent.

The primary advantages of paying points are a lower rate and monthly payment.  To decide if paying points is worthwhile, borrowers should consider two key decisions: How long they plan to live in the home, and how much they can afford in closing costs.  Many mortgage professionals suggest following this rule:  If the borrower plans to live in the home for at least five years, then paying points will afford the homeowners substantial savings.

You can read the full New York Times article here.

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Minority Group Unveils $1.2 Billion Industry-Led Housing Fix

The National Association of Real Estate Brokers, Inc. (NAREB) announced the launch of a 25-city, $1.2 billion industry-led solution to the nation’s housing crisis called the Homeowner’s Assurance Program (HAP).

NAREB was formed in 1947 by African American real estate professionals and is the oldest minority trade group in the United States, composing of 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 provide the agent infrastructure to manage, market, and dispose of nonperforming loans and REO assets acquired under the program with the aim of selling them to first-time home buyers 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.  Real estate-related small businesses in the targeted markets will also benefit by the jobs and income HAP will generate as a result.

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.

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.

Full article by Carrie Bay of DSNews.com here.

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Mello-Roos Fees Not Tax-Deductible


As the deadline for filing income taxes draw near, here is something  to take note.   , in her column “Handling Hard Times” in the Orange County Register, posted this article on January 9, 2012, “State Targets Property-Tax Payers.”

As many as 5 million California property-tax payers who have been taking the entire amount they pay off their state income taxes could see a major cut in their deductions when they file next year.

Beginning with the 2012 tax bill (the one due in April 2013), the state Franchise Tax Board will require property owners to break down their property taxes into deductible and non-deductible portions.

That means property owners who have been deducting their Mello-Roos fees — often running into thousands of dollars — will no longer be able to deduct those or any other special assessments like vector control or mosquito abatement.

In Orange County, 181,550 of the county’s approximately 900,000 parcels were subject to Mello-Roos in the 2011-2012 tax year, according to the auditor-controller’s office.  They were billed a total of $207.8 million.

The difference between deductible and non-deductible property taxes is not a new rule. Mello-Roos fees, which pay for roads, schools, fire stations and other public facilities in new developments, have not been deductible from state income taxes since the legislature authorized the special assessments 30 years ago.

Many property owners, however, routinely deduct the entire amount of their property tax bill from their state income taxes instead of only the parts that legally are deductible. Others just use the amount on the Form 1098 that their mortgage holder paid to the county tax collector on their behalf.

Until now the Franchise Tax Board didn’t to go after them. A new computer system being installed this year, however, will allow the agency to distinguish the portions of property tax bills that are deductible and non-deductible, said Daniel Tahara, a FTB spokesman.

Click here for the complete story.

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