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Novel new ideas
State attorneys general and banking regulators have been working on a plan for more than two years to stem the foreclosure tide and in a plan released yesterday urged the Obama administration and loan servicing firms to step up their efforts. Among their recommendations: 1) Servicers should cut the loan balances of homeowners, in addition to reducing interest rates and extending the terms of the loan. This is especially true in places where property values have plummeted. Reducing principal will make it less likely that homeowners will default on their modified loans; 2) address ARM loans before they fall into foreclosure; 3) Treasury Department officials should reduce the amount of paperwork borrowers are required to file and speed up the debut of a central portal where homeowners can submit the forms. The portal is currently set to launch at the end of March; 4) States should expand their housing counseling and mediation programs, which require homeowners and servicers to meet before the completion of the foreclosure process; 5) Treasury officials should amend the president’s program so that the entire foreclosure process is halted when a borrower applies for the president’s program. Currently, only the sale is stopped; 6) Treasury officials and servicers should do more to assist the unemployed so they do not fall into foreclosure. Two years to come up with the idea that everyone should “do more?”
First-time job claims at a two month high
Labor Department reports that there were 482,000 initial job claims filed in the week ended Jan. 16, up 36,000 from a revised 446,000 the previous week. Economists surveyed by Briefing.com had expected new claims to fall to 440,000. The 4-week moving average of initial claims was 448,250, up 7,000 from the previous week’s revised average of 441,250. 4,599,000 people filed continuing claims in the week ended Jan. 9, the most recent data available. That’s down 18,000 from the preceding week’s revised 4,617,000 claims. The 4-week moving average for ongoing claims fell by 109,750 to 4,750,500 from the previous week’s revised 4,860,250. Unemployment claims in 5 states dropped more than 1,000 for the week ended Jan. 9, the most recent data available. Claims in Oregon fell the most, by 5,784. A total of 30 states said the claims rose by more than 1,000. Claims in California jumped the most, by 16,160, which the state attributed to the return to a five day workweek and layoffs in the construction and service industries.
HAMP still seen as a failure
Bloomberg reports that leading lenders, including Bank of America and Wells Fargo, currently hold a combined $1.05 trillion in home-equity debt, a figure so enormous it threatens to again disrupt housing stability and lead to 3 million foreclosures this year, after contributing to the 2.8 million in 2009. However, the U.S. Treasury Department was unsuccessful in recent negotiations with the country’s largest financial institutions to procure contracts requiring participation in a second mortgage modification program to reduce the number of housing foreclosures this year. According to Meg Reilly, a Treasury Department spokeswoman, the banks pursuing negotiations seem “committed” to joining a second mortgage modification program, though progress is slow. In a statement, Barclays Capital representatives wrote, “The Home Affordable Modification Program (HAMP) is running into issues of too few permanent modifications, and re-default performance is expected to be poor.” Last week the Treasury said that out of about 4 million eligible homeowners, only about 66,000 have been permanently helped by HAMP since it launched last February, the Christian Science Monitor reports.
Big banks brace for another shot
Former Federal Reserve chief Paul Volcker, an economic adviser to Obama, is set to join the president today in announcing measures to narrow the “size and scope” of banks and their investment activities, according to a senior administration official. Obama is expected to propose higher capital requirements for some financial products like derivatives, preventing commercial banks from trading for their accounts and limiting or preventing bank investments and ownership in hedge funds, sources said. The proposals are mostly aimed at the nation’s largest banks. “The political climate for the mega banks is getting worse by the day,” said Concept Capital Washington Research Group analyst Jaret Seiberg, in a report to clients. “For the mega banks, this is a horrible political position and it is a situation that leads to onerous legislation.” The new measures come right on the heels of an administration proposal to impose a special tax on big banks over the next decade to help recoup funds provided for the bailout. The Obama administration’s new offensive is a continuation of his populist grandstanding over performance bonuses at a time the nation is still suffering from double-digit unemployment. Details are sketchy, but the news conference is likely to introduce “broad guidance with the specifics to be worked out later with Congress,” according to the industry source.
Highway robbery in Maryland
The Maryland real estate industry is up in arms about an Anne Arundel County decision to collect taxes on certain types of home sales based not on what the buyers paid, but on what the sellers owed on their mortgages as the deal was struck. What’s at issue are short sales, which are homes that change hands for less – sometimes far less – than the balance due on the loans. The county policy may be unique in the country, according to the American Land Title Association, which represents companies involved with home sale settlements.
“Buyers and sellers are already being squeezed, and this is just an extra tax that nobody saw coming and nobody is prepared to pay,” said Charles Kasky, vice president of legal affairs at the state Realtors association. “It can be thousands of dollars additional in the transaction.” Anne Arundel County said it is charging its recordation tax of $3.50 for every $500 on the sales price plus any forgiven debt. If the lender has indicated that it will go after the seller for the remainder owed, then the county will tax just the contract price, as it does with regular home sales. Richard Drain, the Anne Arundel County controller, said it isn’t a new policy and the county is simply following state law.
But the Maryland Association of Realtors said the county began requiring the extra money last week without warning, putting some settled deals in limbo as title companies and agents scrambled to figure out how much was owed and who would be paying. Other counties aren’t collecting transfer and recordation taxes on forgiven debt, the Maryland Association of Realtors said.
See you at the top!
Chris McLaughlin
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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
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