More mortgages behind on payments, but increase rate has slowed

Smart Real Estate News & Commentary by Chris McLaughlin August 17, 2010

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More mortgages behind on payments, but increase rate has slowed

Credit reporting agency TransUnion said today that in the three months ended June 30, the number of mortgage holders 60 days or more behind on their payments was 6.67%, Tuesday. That’s a big jump from 5.81% in the second quarter of last year, and well above the historical norm of 1.5% to 2%.  One positive sign is that the statistic reveals a slower rate of increase from the pace seen a year ago.  What’s more, it marks a marginal improvement from the rate of 6.77% recorded during the first three months of the year. It’s also below the 6.89% record reached in the fourth quarter of 2009. “We’re seeing signs of recovering in terms of delinquency,” said FJ Guarrera, vice president in TransUnion’s financial services unit. 

The data comes days after foreclosure listing firm RealtyTrac Inc. said the number of U.S. homes lost to foreclosure in July surged 6% from last year. That jump indicates that more banks stepped up repossessions to clear out their backlog of bad loans.  “A lot of foreclosures continue to work their way through the system,” Guarrera said. Although the delinquency data does look back a few months, it shows a slight improvement that could indicate foreclosures will start to slow, he said.  Witness to that there were 12 states that showed increased delinquency rates in the second quarter, whereas a year ago the figure worsened in nearly every state, Guarrera said.  Driving up the national rate are the four states hardest hit by the foreclosure crisis: Nevada, Florida, Arizona and California. In each of these, the rate is above 10%, with Nevada leading at 15.86%, compared to 13.8% a year ago. In Florida, the delinquency rate rose to 15%, from 12.3% last year.  The rates in Georgia, New Jersey, Maryland and Illinois are also above the national average.  North and South Dakota remain at the low end for the nation, at 1.61% and 2.23%, respectively.  Some states, however, have more trouble ahead, including Arizona, California, Florida, Georgia, and Nevada: The rate is expected to start falling by the end of this year, but remain above 10% through 2012.

New home construction rises as demand weakens

The Commerce Department says housing starts rose 1.7% from June to a seasonally adjusted annual rate of 546,000 last month.  Economists were expecting housing starts to rise to 555,000, according to a consensus estimate from Briefing.com.  On a year-over-year basis, starts fell 7% from July 2009.  Applications for building permits, a gauge of future construction activity, fell over the month. Single-family starts in July fell 4.2 percent in July, the lowest level in more than one year. 

Permits for new construction, a leading indicator of future building activity, fell 3.1% to 565,000 from 583,000 one month earlier — reaching the lowest level since May 2009. Economists had expected permits to post a figure of 580,000 for July.  “Starts are still well below the 630,000 plus level we were seeing right before the homebuyer tax credit expired at the end of April,” said Paul Ashworth, senior economist at Capital Economics.  “The bad news is that activity in the housing market is likely to remain depressed for several years,” he said in an email. “The ‘good’ news, however, is that housing is so depressed it is hard to see activity falling much further from such a severely depressed level.”  Meshing with the new home sales data, the National Association of Home Builders on Monday said that its index of home builder sentiment fell to a 17-month low amid growing concerns about the nation’s economy.

Big banks loaning to small business again

According to the Federal Reserve’s quarterly survey of senior bank loan officers, demand for business and consumer loans was unchanged, but large banks — those with assets greater than $20 billion — are easing their lending conditions.  But the July survey showed the first sign that credit was loosening for small businesses, a sector especially hard-hit during the recession.  Over the last quarter, small companies — those with sales of less than $50 million a year — found loan standards relaxing for the first time since 2006. 

Lending generally eased for consumers, but credit card loans were the exception, the Fed report said.  Changes in standards for credit card loans varied widely. Big banks — and a few other card issuers — generally eased up, while others said they tightened conditions.  In addition, a small fraction of banks said they had reduced the size of credit lines for existing customers. Still, the report said, “that fraction has decreased noticeably over the past few surveys.”

Olick – Reform Fannie and Freddie now?

“Financial industry leaders, academics, economists and dozens of TV cameras will meet in a room at the Treasury Department for the first public forum on reforming the two mortgage giants which have been bleeding cash while still controlling 70 percent of today’s mortgage market.  No question these two entities, Fannie Mae and Freddie Mac, which have cost the taxpayers at the very least $148 billion on paper, not to mention irreparable, continuing and costly damage to consumer confidence in housing, must not exist in their current state for the long term.  I just wonder if now, or even January, 2011, when the Treasury Secretary has promised to deliver a reform proposal to Congress, is the right time to take this on? The housing market is still in deep hangover from the home buyer tax credit, job losses and lack of improvement in the job market are pushing foreclosures back up, and consumer confidence is so low right now that even in economically healthy local markets, potential home buyers are sitting tight on the fence.  Granted, much of Tuesday’s motivation is political.

The administration, heading into the fall elections, has to look like it’s on top of the one big remaining issue in the financial collapse.  But politics have a funny way of wreaking havoc on the markets, and I don’t just mean the stock market, I mean the housing market as well. What we need now, above any more money thrown at housing, is a return of consumer confidence.  Americans need to believe in housing and in the ability of our economy to support housing. Taking down the only secure bastions of liquidity in today’s mortgage market, immensely flawed as they are, or at least having big public forums that generate headlines that make Wall Street traders think these two behemoths are coming down imminently, is, I believe, dangerous. Yes, government needs a plan for Fannie and Freddie, and no they should not exist as they are in the future. But is now really the time?

Producer prices rise

The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate rose 0.2 percent, in line with Wall Street analyst expectations, after dipping 0.5 percent in June.  In the 12 months to July, producer prices increased 4.2 percent after rising 2.8 percent in May. The year-on-year increase was also in line with forecasts.  Separately, the Federal Reserve reports that output at the nation’s factories, mines and utilities increased 1.0 percent last month.

But it says June’s results were revised to a loss of 0.1 percent, reflecting the economy’s sluggishness.  Factory output grew by a robust 1.1 percent in July, helped by auto plants that kept operating when they normally shutter for summer renovations. Factories are the largest single component of industrial production.  The strong manufacturing growth should ease fears that the economy could begin to shrink again. The nation emerged a year ago from its deepest recession since the Great Depression.

Now for our real estate education section…

How to Access & Use the LIHTC

Never heard of the LITHTC? Don’t worry…even many seasoned real estate professional rank as mere novice users when it comes to the Low Income Housing Tax Credit data. However, not only is this a robust resource but also a potentially valuable one for those investors or professionals interested in applying for low income tax credits.

How to Access the LIHTC Database

To access the Low Income Housing Tax Credit database or learn more about the various programs, visit http://litch.huduser.org

Users can select from a variety of variables including a specific city, range, dates or other pertinent search queries.

Research

The LITHTC database contains over 31,250 different projects with over 1,840,000 units. Available research information includes project location, census tract, longitude/latitude, geo codes, county, state, zip, contact information for each project sponsor, total number of units and form of credit eligibility, unit distribution by rooms, type of construction, for profit or non-profit status, tax exemption plus much more.

Who may be interested in this? Obviously researchers interested in social service needs as well as small business owners, developers and even investors searching for historic norms that compare to their own area.

Other Cool Features

Take a few minutes to look around while on the site because there is a lot of terrific information available. For those interested in building or rehabilitating real estate in accordance to low income tax credits, find out if your building is eligible or to apply visit http://www.hud.gov/offices/cpd/affordablehousing/training/web/lihtc/basics/

To learn more about income and rent limits in your area, visit:

http://www.danter.com/TAXCREDIT/getrents.HTML

See you at the top!

Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
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