Nationwide housing affordability hit a new record high for a second consecutive quarter in the first three months of this year, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), released today. Yet tight lending conditions continue to pose a major obstacle to many prospective home buyers.  The latest HOI data reveal that 77.5% of all new and existing homes that were sold in this year’s first quarter were affordable to families earning the national median income of $65,000.  This beats the previous record set in the final quarter of 2011, when 75.9% of homes sold were affordable to median-income earners.  The most affordable major housing market in this year’s first quarter was Indianapolis-Carmel, Ind., where 95.8% of homes sold during the period were affordable to households earning the area’s median family income of $66,900.

Also ranking among the  most affordable major housing markets in respective order were Dayton, Ohio; Lakeland-Winter Haven, Fla.; Modesto, Calif.; Grand Rapids-Wyoming, Mich.; and Buffalo-Niagara Falls, N.Y.; the latter two of which tied for fifth place.  Among smaller housing markets, Cumberland, Md.-W.Va. topped the affordability chart for the first time in this year’s first quarter. There, 99% of homes sold during the first quarter were affordable to families earning the area’s median income of $53,000. Other smaller housing markets at the top of the index include Fairbanks, Alaska; Wheeling, W.Va.; Kokomo, Ind.; and Davenport-Moline-Rock Island, Iowa-Ill., respectively.  In New York-White Plains-Wayne, N.Y.-N.J., which retained the title of the least affordable major housing market for a 16th consecutive quarter, just 31.5% of homes sold in the first three months of this year were affordable to those earning the area’s median income of $68,200. 

Other major metros at the bottom of the affordability chart included San Francisco-San Mateo-Redwood City, Calif.; Honolulu; Los Angeles-Long Beach-Glendale, Calif.; and Santa Ana-Anaheim-Irvine, Calif., respectively.  Ocean City, N.J., was the least affordable smaller housing market on the list, with 45.9% of homes sold in the first quarter affordable to families earning the median income of $71,100. Other small metros at the bottom of the list included Santa Cruz-Watsonville, Calif.; San Luis Obispo-Paso Robles, Calif.; Santa Barbara-Santa Maria-Goleta, Calif.; and Laredo, Texas.

HP ponders 25,000 job cuts

Hewlett-Packard is considering cutting its workforce by 8 to 10%, or a minimum of 25,000 jobs, sources familiar with the matter told Reuters, as newly installed CEO Meg Whitman strives to return the storied Silicon Valley institution to growth.  The job cuts, which could include retirements, are under discussion but have not yet been finalized, several people familiar with the situation told Reuters. The sources did not elaborate on a time frame or other details.  HP, which employs more than 300,000 people across the globe, could announce the layoffs as soon as next week when it unveils quarterly results, said the sources, who asked to remain anonymous because the plan has not been made public.  Analysts have been expecting job cuts in the wake of Whitman’s plan to merge the company’s personal computer and printer divisions.

NAR – need more short sales

In a letter sent today to the US Department of Housing and Urban Development, the Federal Housing Finance Agency, and the US Department of the Treasury, National Association of Realtors (NAR) responded to the agencies’ recent request for input and offered its recommendations for selling REO properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration.  In its letter, NAR urged the agencies to create an advisory board as they explore new options for selling foreclosed properties to ensure that efficiently disposing of agency REO properties will minimize taxpayer losses and reduce the negative effects that distressed properties have on local real estate markets. 

To prevent further REO inventory increases, NAR recommended that the agencies take more aggressive steps to modify loans and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure. NAR President Ron Phipps said that while federal programs have been put into place to help keep families in their homes, many of these have fallen short of expectations, and advocated that those resources be applied toward modifying loans and expediting short sales, which are typically less costly than foreclosure.  “Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.”

Greece dissolves Parliament, gold down

Greece’s Parliament is to be dissolved so new elections can be held June 17.  The move Friday comes after an inconclusive election left squabbling politicians unable to form government, deepening the country’s political crisis and jeopardizing its membership in Europe’s joint currency.  In a symbolic move Thursday, the 300 legislators elected May 6 were sworn in for just one day. A caretaker government has been appointed to lead Greece until the new election but it can’t make any binding decisions.  The political turmoil comes at a critical time. Greece must make more cutbacks next month to get new funds from its international bailout, which has kept the country afloat since May 2010.  Greece’s credit rating was reduced one level on concerns the country won’t be able to muster the political support needed to sustain its membership in the euro area as leaders began campaigning ahead of a second national vote in six weeks. Moody’s Investors Service lowered debt ratings at 16 Spanish banks, citing economic weakness and the government’s mounting budget strain. It follows Moody’s May 14 downgrade of 26 Italian banks and its Feb. 13 cut of Spain’s sovereign debt.

Gold dropped, headed for its third weekly decline, on signs that Europe’s crisis is worsening as concern grew about the health of Spanish banks and Fitch Ratings downgraded Greece’s credit rating, curbing demand for the metal.

Gold for immediate delivery fell as much as 0.4% to $1,568.03 an ounce and was at $1,570.68 at 2:49 p.m. in Singapore. The metal climbed 2.3% yesterday, paring this week’s loss to 0.5%. June-delivery bullion declined as much as 0.5% to $1,567.80 on the Comex in New York.  “The fact that people are worried about European banks again is likely to have a broader, more depressing effect across all markets,” said Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “Even though it broke away from other assets yesterday, gold is still very much traded in line with risk.”

Housing bottom in 2013?

US home prices could drop another 7.8% before reaching bottom next year, Fitch Ratings said in a report released Thursday.   A Fitch report from director Stefan Hilts forecasts steady economic growth and inflation levels that are close to 3% annually. The combination of the two could cause prices to reach bottom by next year, leading the market into a slow recovery, analysts with the firm said.  “The economy continues to grow with economic indicators on a positive trajectory and pointing to a recovery,” Fitch said. “But struggles remain. High unemployment, a declining labor force, stagnant wages, and a large delinquent inventory across many parts of the country are slowing the recovery’s momentum.”  States like Arizona and Michigan, which were hit with hefty price declines, are starting to see a turnaround, Fitch asserted.

Arizona saw small quarterly gains for the first time in two years in the most recent report and Michigan is beginning to stabilize, the study suggested.  While those markets stabilize, prices are falling in the Northeast as inventory backlog starts to move onto the market. Fitch says New Jersey and New York alone have watched prices drop 10% and 7%, respectively, over the past five quarters. The ratings giant expects further drops in those states in the coming months.  The state of Georgia also became an interesting case study for Fitch, with the ratings giant reporting that home prices in the state are now 32% lower than 2000 levels. However, Georgia is very much a divided state with the affluent northern suburbs of Atlanta and central city area holding onto their values and the overall economy collapsing to the city’s south.

The rise of short sales in Metro Detroit is helping keep the number of foreclosures down, according to an analyst for a foreclosure tracking company.  Half of the states in the nation saw foreclosure activity rise in April, but Michigan continued to rack up double-digit losses — experiencing a 28% decline from a year ago, according to Irvine, Calif.-based RealtyTrac. In April, Metro Detroit saw a 32% plunge in default notices, sheriff’s auctions and lender repossessions from a year ago, though activity increased 4% from the previous month.  The total number of April foreclosure filings for Macomb, Oakland and Wayne counties amounted to 4,791, compared with 7,081 in April 2011. It was the 18th consecutive month that foreclosure activity dropped in the region. 

RealtyTrac earlier this year predicted an increase of at least 20% in foreclosure filings for the first half of this year because of a nationwide settlement of faulty practices in mortgage signings. Analysts expected that to unleash a backlog of foreclosed properties.  Instead, short sales have nearly doubled. In Metro Detroit, short sales in January jumped 69% over the same time the year before, said RealtyTrac analyst Daren Blomquist.  In April, short sales made up 12% of all residential real estate sales in Metro Detroit, according to the monthly report by residential listing service Realcomp II Ltd., a Farmington Hills multiple listing service.  Another reason foreclosure filings may not have risen as expected is because lenders worry about flooding the market with distressed property and driving down prices, according to Clear Capital, a California-based housing consulting firm.

Jobs static

Initial claims for state unemployment benefits held steady at a seasonally adjusted 370,000, the Labor Department said.  The prior week’s figure was revised up to 370,000 from the previously reported 367,000.  Economists polled by Reuters had forecast claims falling to 365,000 last week. The four-week moving average for new claims, considered a better measure of labor market trends, fell 4,750 to 375,000.  “We are really not showing much momentum in the labor market at this time,” said Sean Incremona, an economist at 4Cast in New York.  The data comes on the heels of three straight months of slowing employment gains. Companies added 115,000 new jobs to their payrolls in April, the fewest in six months.  Thursday’s report on claims covered the week for May’s payrolls survey. The four-week average of new applications fell marginally between the April and May survey periods, suggesting not much change in labor market conditions.

Olick – foreclosures move east

Foreclosure activity in April fell nationally to the lowest level since the summer of 2007, but government intervention and the recent $25 billion mortgage servicing settlement are now changing the face of the crisis.  Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, fell 5% in April from March, according to a new report from RealtyTrac, and are down 14% from April of 2011. One in every 698 US housing units had a foreclosure filing during the month.  “Rising foreclosure activity in many state and local markets in April was masked at the national level by sizable decreases in hard-hit foreclosure states like California, Arizona and Nevada,” said Brandon Moore, CEO of RealtyTrac in a release. “Those three states, and several other non-judicial foreclosure states like them, more efficiently processed foreclosures last year, resulting in fewer catch-up foreclosures this year.”

Major banks are also suspending foreclosure actions, as they comply with the mortgage servicing settlement that was the result of so-called “robo-signing” in foreclosure document processing. Bank of America recently announced that it was beginning a summer-long campaign to contact 200,000 borrowers, and offer them principal reduction, as part of the settlement; foreclosure actions, bank representatives said, would be suspended until the bank had reached them all and determined if they were eligible for new loan modifications.  Lenders are also responding more efficiently to requests for short sales, which is when the home is sold for less than the value of the mortgage. New financial incentives from the government and new streamlined programs at Fannie Mae and Freddie Mac are behind much of that.  “Our preliminary first quarter sales data show that pre-foreclosure sales, typically short sales, are on pace to outnumber sales of bank-owned properties during the quarter in California, Arizona and 10 other states,” adds Moore.

As also reported today by the Mortgage Bankers Association, there is a big discrepancy between foreclosure activity in states that require a judge in the process (judicial) and states that do not (non-judicial). The MBA reported a rising number of loans in the foreclosure process in judicial states, but a falling number in non-judicial states during the first three months of the year. For April, RealtyTrac reports foreclosure activity down 7% from March and down 29% from a year ago. In judicial states, activity was down just 3% month to month but still up 15% from a year ago.  The judicial/non-judicial split is pushing the foreclosure crisis east, as some of the worst-hit states like California, Arizona and Nevada are able to clear through the backlog more quickly. The 11 cities with annual increases in foreclosure activity were all in the Midwest, South or on the East Coast, while six of the nine cities with annual decreases were out West in California, Arizona and Washington, according to RealtyTrac. California and Nevada, however, still post the top foreclosure rates, along with judicial Florida.

The supply of bank-owned properties in non-judicial states is also falling, as a growing cadre of investors sweeps in to buy distressed properties at the courthouse steps. One California Realtor speaking at the National Association of Realtors’ midyear conference this week told the conservator of Fannie Mae and Freddie Mac, “We don’t need a bulk REO sale program, we have no inventory!”  Bank repossessions (REO) are down for the third straight month, according to RealtyTrac. Lenders took back 51,415 properties in April.

Ryan on debt woes

Asked what he would be willing to give up to address the US debt crisis, Rep. Paul Ryan stood his ground Tuesday and insisted it was Democrats who needed to cede ground.  “I’m not interested in negotiating with myself on television. It’s futile, in my opinion,” he said on CNBC’s “The Kudlow Report.”  Ryan said,  “The Senate has chosen not to pass a budget in three years.  The president has chosen to disavow the fiscal commission, to not put a budget that attempts to deal with any of these issues. We have passed solutions.”  Ryan, R-Wis., who chairs the House Budget Committee, backed the idea of tax reform that would lower rates and eliminate or reduce deductions to “broaden the base,” which would lead to increased revenues.  “We think that is a good offer,” he said.  “We have yet to see any movement on the other side on fundamental entitlement reform,” he said.  “If you simply chase higher spending with higher revenues, you’ll end up shutting down the economy and not solving the debt crisis. The debt crisis is a spending-driven crisis, and there’s never been a moment where the other side has been willing to do fundamental entitlement reform that is necessary to preventing a debt crisis in the first place.”

MBA – delinquencies down

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 7.40% of all loans outstanding as of the end of the first quarter of 2012, a decrease of 18 basis points from the fourth quarter of 2011, and a decrease of 92 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 121 basis points to 6.94% this quarter from 8.15% last quarter.  The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.96%, down three basis points from last quarter and down 12 basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.39%, up one basis point from the first quarter and 13 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.44%, a decrease of 29 basis points from last quarter, and a decrease of 66 basis points from the first quarter of last year.  The combined percentage of loans in foreclosure or at least one payment past due was 11.33% on a non-seasonally adjusted basis, a 120 basis point decrease from last quarter and was 98 basis points lower than a year ago. This was the lowest that this measure has been since 2008.

On a seasonally adjusted basis, the overall delinquency rate decreased for all loan types except VA loans for the fourth quarter of 2011. The seasonally adjusted delinquency rate decreased five basis points to 4.07% for prime fixed loans and decreased 17 basis points to 9.05% for prime ARM loans. The delinquency rate decreased 34 basis points to 19.33% for subprime fixed loans and decreased 24 basis points to 22.16% for subprime ARM loans. FHA loans also saw a decline, with the delinquency rate decreasing 36 basis points to 12.00, while the delinquency rate for VA loans increased two basis points to 6.57.  The% of loans in foreclosure, also known as the foreclosure inventory rate, increased overall from last quarter to 4.39%. Broken down, the foreclosure inventory rate for prime fixed loans increased seven basis points to 2.59% and the rate for prime ARM loans increased four basis points from last quarter to 8.76%. The rate for subprime ARM loans decreased 62 basis points to 21.55% and the rate for subprime fixed loans decreased 17 basis points to 10.48.  The foreclosure inventory rate for FHA loans increased 29 basis points to 3.83 while the rate for VA loans increased nine basis points to 2.46.  The non-seasonally adjusted foreclosure starts rate remained unchanged for prime fixed loans at 0.62%, decreased eight basis points for prime ARM loans to 1.75%, decreased 20 basis points for subprime fixed to 2.13% and 57 basis points for subprime ARMs to 3.22%. The foreclosure starts rate increased eight basis points for FHA loans to 0.96% and five basis points for VA loans to 0.65%.

Compared with the first quarter of 2011, the foreclosure inventory rate: decreased 77 basis points for prime ARM loans, remained unchanged prime fixed loans, decreased five basis points for subprime fixed, decreased 71 basis points for subprime ARM loans, increased 48 basis points for FHA loans and increased seven basis points for VA loans.  Over the past year, the non-seasonally adjusted foreclosure starts rate: decreased six basis points for prime fixed loans, decreased 21 basis points for prime ARM loans, decreased 43 basis points for subprime fixed, decreased 45 basis points for subprime ARM loans, increased three basis points for FHA loans and decreased eight basis points for VA loans.

Banks have to raise $566 billion

The world’s largest banks must raise a combined $566 billion to satisfy new capital requirements, Fitch Ratings said on Thursday, as the authorities demand that banks hold more cash in reserve to protect against future financial shocks.  The figure represents a 23% increase on what the banks currently hold in reserve and will most likely reduce return on equity, a critical figure used to gauge a firm’s profitability, Fitch said.  The banks affected are the 29 “systemically important financial institutions” as designated by the global Financial Stability Board. They include the likes of Goldman Sachs, JPMorgan Chase, HSBC of Britain and the Mizuho Financial Group of Japan. In total, the firms hold roughly $47 trillion in combined assets.  Under new regulatory rules, known as Basel III, the firms must have a Tier 1 common equity ratio, a measure of a bank’s ability to weather financial shocks, of roughly 9.5% by 2019, though officials are eager for banks to meet the targets as soon as possible.  To meet the deadline, Fitch says the 29 banks will probably hold onto future earnings and cut shareholder dividends, wind down exposure to risky investments like underperforming real estate portfolios, and tap investors for new cash.

NAHB – housing starts up

Nationwide housing production gained 2.6% from an upwardly revised pace in March to hit a seasonally adjusted annual rate of 717,000 units in April, according to newly released figures from the US Census Bureau and HUD. This modest gain was seen in both the single- and multifamily sectors, which registered growth of 2.3% and 3.2%, respectively.  “April’s increase in housing production comes on top of strong upward revisions to the previous month’s data, and is an encouraging sign that we are returning to a gradual, upward trend that should continue in the year ahead as builders respond to improving demand for new homes in certain markets,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “Unfortunately, overly restrictive lending conditions for builders and buyers are slowing the pace of this trend considerably.”  “While still less than half the pace of what we would expect in a fully healthy market, the rate of housing production in April was very solid for this point of the recovery and in keeping with the findings of our latest builder surveys that have registered modest improvements in buyer traffic and near-term sales expectations for single-family homes,” said NAHB Chief Economist David Crowe.

The 2.6% gain in housing production this April was due to a 2.3% increase on the single-family side to a seasonally adjusted, annual rate of 492,000 units and a 3.2% increase on the multifamily side to a 225,000-unit rate.  Regionally, starts were mixed in April, with the Midwest and South posting gains of 6.7% and 11.6%, respectively, and the Northeast and West posting respective declines of 20.7% and 8.1%.  Permit issuance – which can be an indicator of future building activity – fell 7.0% to a seasonally adjusted annual rate of 715,000 units in April following an unsustainably large gain in the previous month. The decline was entirely on the more volatile multifamily side, where permits fell 20.8% to a 240,000-unit rate that is essentially back to trend. Single-family permits gained 1.9% to 475,000 units.  Regionally in April, permit activity held unchanged in the Northeast while declining 12.3% in the Midwest, 3.2% in the South and 13.9% in the West, respectively.

The Commerce Department said yesterday that construction spending ticked up 0.1 per cent.  The small March gain left construction spending at a seasonally adjusted annual rate of $808.1 billion. That’s 6 per cent above a 12-year low of $762.6 billion hit last March. Still, the level of spending is roughly half of what economists consider to be healthy.  “The weakness in construction spending in March was entirely in public spending,” said John Ryding, an analyst at RDQ Economics, in a note to clients.  Still, even with the increase in private construction spending, the trend over the last three months is weak, Ryding noted.  “We look for some gradual improvement in private construction spending in 2012, but structures investment is not a material factor in our growth forecast for this year,” he said. 

Government construction activity fell 1.1 per cent to the slowest pace since February 2007, the report said. Spending by state and local governments dropped to the weakest level since November 2006, while spending by the federal government rose 3.8 per cent to a rate of $28.9 billion.  Spending on private nonresidential projects rose 0.7 per cent. Work on office buildings, hotels and transportation projects rose. Spending in the category that includes shopping centres fell.  Private residential activity rose 0.7 per cent. The increase was driven by more construction of single-family homes.  Even with the gains, home construction continues to slump five years after the housing bubble burst. Sales of new homes fell 7.1 per cent in March, the largest decline in more than a year.  Though new-home sales represent less than 10 per cent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.  Business spending on construction projects, such as office buildings and shopping centres, is also sluggish. The government reported last week that it fell in the January-March quarter, the second consecutive quarterly decline.  The economy grew at an annual rate of 2.2 per cent in first quarter. Stronger consumer spending offset slower business investment and less growth in government spending.  Economists expect construction spending to remain sluggish this year. Tighter credit could keep businesses from receiving loans for building projects. And lawmakers are likely to keep pressure on government spending, which could hamper public works projects.

Private sector employment sluggish

Private-sector employment increased by just 119,000 in April, according a report from ADP that puts a dent into the notion that the jobs market is on the path to a solid recovery.  The report was well below forecasts of 170,000 and comes after a string of stronger numbers.  ADP said service-sector jobs rose by 123,000, but construction fell by 5,000, falling for the first time since September 2011. Manufacturing also lost 5,000, while goods-producing dropped 4,000. Financial services added 13,000 jobs.  Employment additions again were strongest in small businesses, which added 58,000 positions, and weakest in big business, which saw a net of just 4,000 new jobs.  The March number was revised downward from 209,000 to 201,000, according to the report, which is done in conjunction with Macroeconomic Advisors.

MBA – mortgage applications up

Mortgage applications increased 0.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 27, 2012.  The Market Composite Index, a measure of mortgage loan application volume, increased 0.1% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 0.4% compared with the previous week.  The Refinance Index decreased 0.7% from the previous week.  The seasonally adjusted Purchase Index increased 2.9% from one week earlier. The unadjusted Purchase Index increased 3.7% compared with the previous week and was 3.0% higher than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 0.09%.  The four week moving average is down 1.77% for the seasonally adjusted Purchase Index, while this average is up 0.75% for the Refinance Index.  The refinance share of mortgage activity decreased to 72.6% of total applications from 73.4% the previous week. The government share of purchase applications remained steady at 37.0%, a slight increase from a couple of weeks ago when the share was 36.4%. The government share of purchase applications over the last three weeks has been at the lowest level since 2009.  During the month of March, the investor share of applications for home purchase was at 5.7%, a slight decrease from 6.1% in February.  This change was led by a decline in the West South Central region.  In addition, the share of purchase mortgages for second homes remained constant at 5.8%.

US has to deleverage

The US government will have to follow its citizens and corporates in deleveraging its balance sheet, Bob Baur, chief global economist, Principal Global Investors, said today.  “It’s no question that we’re going to see more deleveraging. Households are in much better shape and companies have improved their balance sheets dramatically. It’s the government that needs to deleverage,” he said.  He added that some deleveraging had begun at the state level, but had yet to reach central government.  The US government, which pumped trillions of dollars into bailouts of the banking and automobile sector and buying mortgage-backed securities to help lenders Fannie Mae and Freddie Mac, has more than $15 trillion in debt – the ceiling for borrowing is set at $16.4 trillion.  It is also facing demographic problems such as an aging population and subsequent rising Medicare bill, which might handicap the speed at which it can reduce its debt.

Olick – where are the foreclosures?

“The number of homes entering the foreclosure process rose in March, up 8.1%, according to a new report from lender Processing Services, but the volume is down more than 30% from a year ago.  Analysts had expected this number to skyrocket immediately following the $25 billion settlement between banks and state governments over fraudulent mortgage servicing.  Foreclosures sales, which are the final stage of the foreclosure process, not sales of bank-owned homes, dropped precipitously in March to their lowest point in over two years. They dropped most sharply — 14% month-to-month — in states where a judge is not required in the foreclosure process (so-called non-judicial states).  Again, that is contrary to expectations, but could be yet another stall in the system, as banks try to modify more loans to meet some of the terms of the servicing settlement. The foreclosure sales decline also appears to be exclusively in private and portfolio loans, which again points to the settlement.  That low pace of foreclosure sales is keeping foreclosure inventory, or loans in the foreclosure process, at near historic highs, according to LPS. That number may be heading lower, however, as banks ramp up the short sale process.

Short sales, when the bank allows the home to be sold for less than the value of the mortgage, are in fact now outpacing sales of bank-owned homes in many markets, according to a new report from RealtyTrac.  Short sales rose by 15% in the fourth quarter of 2011 from the previous year, while sales of REO’s (bank-owned homes) dropped 12%. Short sales outpaced REO sales in several markets, including Los Angeles, Miami, and Phoenix, according to RealtyTrac. Georgia, where foreclosure inventories are surging, saw a 113% jump in short sales. The process, once avoided widely due to its lengthy lag time, is already speeding up, and Fannie Mae and Freddie Mac both recently announced new guidelines to reduce short sale timelines.  ‘Lenders are increasingly recognizing that short sales may be a better alternative for them than foreclosure,’ notes RealtyTrac’s Daren Blomquist. ‘This trend began in markets with stronger demand and where the distressed inventory tends to be newer homes (Phoenix, Los Angeles, Las Vegas), but the trend appears to be spreading to other markets like Atlanta and Detroit.’  Look for a special report on the Atlanta housing market on CNBC and CNBC.com Thursday.”

People renouncing US citizenship to escape taxes

About 1,780 expatriates gave up their nationality at US embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva’s Overseas American Academy, citing figures from the government’s Federal Register. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports.  The US, the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a US passport.  Renunciations are higher in Switzerland because American expatriates expect extra scrutiny of their affairs after the UBS case and as the US probes 11 other Swiss financial firms for aiding offshore tax evasion, said Martin Naville, head of the Swiss-American Chamber of Commerce in Zurich.

“Every dollar you save, you lose to the US tax man,” said tax lawyer Ledvina. “That’s one reason why people give up citizenship.”  The 2010 Fatca law requires banks to withhold 30% from “certain US-connected payments” to some accounts of American clients who don’t disclose enough information to the IRS.  “There is incredible frustration at the audacity and imperial overreach of this law,” said David Kuenzi, a tax adviser at Thun Financial Advisors in Madison, Wisconsin, referring to Fatca.  Failure to file the 8938 form can result in a fine of as much as $50,000. Clients can also be penalized half the amount in an undeclared foreign bank account under the Banks Secrecy Act of 1970.  “It’s a big brother concept,” said Brent Lipschultz, a partner at New York-based accounting firm EisnerAmper.  The implementation of Fatca from next year comes after UBS, Switzerland’s largest bank, paid a $780 million penalty in 2009 and handed over data on about 4,700 accounts to settle a tax- evasion dispute with the US Whistle-blower Birkenfeld was sentenced to 40 months in a US prison in 2009 after informing the government and Senate about his American clients at the Geneva branch of Zurich-based UBS.

Pushback against ideology in principal reduction debate

Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco pushed back against Democratic lawmakers yesterday, claiming the agency decision on principal reduction will be based on analytics not ideology.  Reps. Elijah Cummings, D-Md., and John Tierney, D-Mass., sent a letter earlier in the morning to DeMarco. They pointed to internal documents at Fannie Mae showing the government-sponsored enterprise and its regulator approved but then quickly closed a pilot principal forgiveness program in 2010 that could have saved the firm $410 million.  DeMarco expressed disappointment in the letter and said since 2009, the FHFA approved multiple pilot programs for principal forgiveness, but the approvals did not indicate a “pre-determined view.”

“The fact that FHFA continues to consider principal-forgiveness alternatives, including recent HAMP program changes initiated by the Treasury Department, belies any ideological tilt on our part, but rather a strict analytical-based approach to gathering and evaluating data to determine what options best fit within the legal constraints that fall upon this agency as conservator for the enterprises,” DeMarco said in the letter.  DeMarco said while many pilot programs were developed, “there was not full agreement to proceed at the enterprises or their counterparties,” which in this instance was Citigroup.  The pilot program in question involves 1,200 mortgages originated by Citi for shared appreciation and 1,000 Fannie-guaranteed loans for principal forgiveness, according to the internal documents reviewed by HousingWire. The program would have been partly rolled out in the second quarter of 2011, according to several of the internal emails. 

In an early April speech, DeMarco showed preliminary FHFA analysis on new principal-reduction incentives. The expanded HAMP effort could save Fannie and Freddie Mac $1.7 billion but would cost taxpayers a net $2.8 billion. He also outlined how principal forbearance was a substitute for a shared-appreciation program.  The FHFA delayed its decision on approving the GSEs to do principal reductions, but DeMarco said in the letter that this is a decision meant for Congress.  “Such a policy question, especially as it has to do with public funds being taken from one group of citizens to provide a benefit to another group of citizens, should be determined by Congress,” DeMarco wrote. “In the absence of clear legislative direction, however, FHFA will continue to make determinations in how best to accomplish both of these goals after careful analysis of the facts and other information available to us and the multiple legal responsibilities placed upon us.”

Banks that made reckless home loans in south Florida have been tiptoeing away from foreclosures in a tactic designed to cut their losses. The result: Orphaned, dilapidated homes dot the landscape from Kendall to Lake Worth.  There are no owners willing to claim and care for them.  A months-long Sun Sentinel investigation of property code violations involving abandoned homes uncovered case after case in which banks launched foreclosure lawsuits but then stalled or avoided taking ownership. In effect, the banks legally sidestepped responsibility for the empty homes, causing great harm to neighborhoods.  The real estate industry calls such properties “bank walkaways.” They are no longer maintained by their legal owners, whether they were investors bailing out of unwise deals or families in financial ruin who decamped.  Nor are they being tended to by lenders, which have halted foreclosure proceedings because the remaining equity in the properties is deemed inadequate to cover the banks’ costs to reclaim title and maintain, refurbish and sell them.  The practice has contributed to South Florida’s foreclosure “limbo” problem in which thousands of vacant homes are stuck in unsettled court proceedings for years.

Spending down, income up

A Commerce Department report showed that personal spending increased 0.3% in the month, well down from the 0.9% jump in spending the month before. That was much weaker than the 0.5% gain in spending forecast by economists surveyed by Briefing.com.  Income increased a little faster, rising 0.4%, which was an improvement from the 0.2% rising the previous month. It was the first time since December that income growth outpaced spending increases, as consumers dipped into savings the previous two months in order to deal with rising prices, such as increases in gasoline prices.  But inflation moderated in March, and it allowed consumers to increase their savings again. The report showed that the savings rate, which compares after-tax income to the level of spending, edged up to 3.8% from 3.7% in February. That means the average family was saving $38 out of every $1,000 in take-home pay in the month.

ResCap bankruptcy could cost $1.2 billion

A bankruptcy filing on the ResCap mortgage unit could cost parent company Ally Financial between $400 million and $1.25 billion, according to a financial disclosure by the bank Friday.  “If a ResCap bankruptcy were to occur, we could incur significant charges, substantial litigation could result, and repayment of our credit exposure to ResCap could be at risk,” according to the filing.  On April 17, Ally disclosed the troubled mortgage unit missed an interest payment on its debt and would be considered in default if it wasn’t made within 30 days. More than $473 million on the debt is outstanding.  The unit actually forged a $191 million profit in the first quarter. But according to the filing Friday, Ally estimates the losses from litigation matters and repurchase obligations could reach as high as $4 billion over time.  Barclays Capital analysts predicted the unit could be placed into bankruptcy within one to two months, and outlined why selling the servicing rights would be critical for investors in ResCap issued mortgage-backed securities.  The unit has stopped lending to real estate developers and homebuilders in the US, according to the Ally filing Friday.

Student loans are a hot potato

In the political campaigns still taking shape, President Barack Obama, Republican challenger Mitt Romney and lawmakers of both parties say they want to protect college students from a sharp increase in interest rates on federally subsidized loans.  Agree, they might, and act they surely will. But first, they settled effortlessly into a rollicking good political brawl.  In less than 72 hours, what might have looked like a relatively simple matter mushroomed into a politically charged veto showdown that touched on the economy and health care, tax cuts and policies affecting women. Accusatory campaign commercials to follow, no doubt.  “This is beneath us. This is beneath the dignity of this House and the dignity of the public trust that we enjoy,” protested House Speaker John Boehner, R-Ohio as Democrats maneuvered for position on the student loan bill.

“It shouldn’t be a Republican or a Democratic issue. This is an American issue,” Obama said in North Carolina last week as he broached the topic of legislation in a move to gain support students in the fall election. He urged his listeners to tweet their lawmakers and urge them to block an increase in interest rates on federally subsidized loans issued beginning July 1.  There was partisan pop behind Obama’s message, though.  Over two days of campaign-style appearances on college campuses, he quoted one unnamed Republican lawmaker as saying she had “very little tolerance for people who tell me they graduate with debt because there’s no reason for that.” Another GOP lawmaker likened student loans to “stage three cancer of socialism,” he said. Both Republicans quickly said they had been quoted out of context. 

Within a day, Romney told reporters he agreed on the need to prevent the rate increase, while conceding nothing to Obama in the search for political advantage. “I support extending the temporary relief on interest rates for students,” he said, and cited “extraordinarily poor conditions in the job market” in a jab at the president’s handling of the economy.  Congressional Democrats announced they would write legislation to prevent a doubling of the current 3.4% interest rate, and cover the $6 billion cost by requiring more wealthy individuals to pay Social Security and Medicare payroll tax.  It was a not-so-subtle reprise of a campaign perennial, the allegation that Republicans want to cut programs benefiting those who aren’t rich to protect tax cuts for those who are.  “Let’s be honest,” said Senate Republican leader Mitch McConnell of Kentucky. “The only reason Democrats have proposed this particular solution to the problem is to get Republicans to oppose it, to make us cast a vote they think will make us look bad to the voters they need to win the next election.”  He then accused Democrats of wanting to pay for the legislation “by raiding Social Security and Medicare, and by making it even harder for small businesses to hire.”

TARP exec pleads guilty to fraud

Reginald Harper, former CEO of First Community Bank of Hammond, La., pleaded guilty to defrauding the firm out of millions of dollars in phony mortgages.  Harper faces up to five years in prison and a $250,000 fine. His sentencing is scheduled for Sept. 13. First Community applied for and was approved for $3.3 million in Troubled Asset Relief Program bailouts in 2008 but withdrew its application afterward.  Four years prior, Harper loaned $2 million to real estate developer Troy Foquet in 2004 to build out parcels of real estate, according to the charges.  Once it became difficult to find qualified homebuyers, Harper would loan potential buyers money to make it appear to the mortgage lender the borrower had more cash than they actually did. He also used “straw” buyers to obtain mortgages, which were used to pay off the original loans to Foquet.  Foquet also paid Harper with insufficient checks, which were credited as a loan payment in order to avoid reporting the delinquency.  Foquet pleaded guilty to the charges in March.  Executives had the choice of writing off losses on bad loans or covering up those losses through fraud,” said Special Inspector General for TARP Director Christy Romero. “Harper chose the latter and concealed the status of the loans from others at First Community Bank, from the bank’s regulators and in the bank’s TARP application.”

In an effort to make the short sale process more transparent, Freddie Mac and Fannie Mae are updating their timelines and also requiring servicers to provide weekly updates when decisions take more than 30 days after the receipt of a complete application for a short sale under the Obama Administration’s Home Affordable Foreclosure Alternative (HAFA) initiative or Freddie Mac’s traditional requirements. All decisions must be made within 60 days.  Today’s announcement marks the newest part of the Servicing Alignment Initiative (SAI) Freddie Mac and Fannie Mae launched in 2011 at the direction of their regulator, the Federal Housing Finance Agency, to set consistent servicing and delinquency management requirements. Last year Freddie Mac completed 45,623 short sales, a 140% increase since the housing crisis began.

Facts:

-  Freddie Mac and Fannie Mae’s new short sale timelines require servicers to make a decision within 30 days of receiving either 1) an offer on a property  under Freddie Mac and Fannie Mae’s traditional short sale program or 2) a completed Borrower Response Package (BRP) requesting consideration for a short sale under HAFA or Freddie Mac and Fannie Mae’s traditional short sale program.  (BRPs are standardized assistance applications developed as part of the Servicing Alignment Initiative.)

-  If more than 30 days are needed, borrowers must receive weekly status updates and a decision no later than 60 days from the date the complete BRP is received.  This will help servicers who may need more time to obtain a broker price opinion or a private mortgage insurer’s approval on a BRP or property offer.

-  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.

-  Freddie Mac and Fannie Mae will use the new timelines to evaluate servicer compliance with the SAI and its own servicing requirements.

-  Freddie Mac completed 45,623 short sales in 2011, a 140% increase since 2009.  Overall, Freddie Mac has also helped more than 615,000 distressed borrowers avoid foreclosure since the housing crisis began.

Whitney reverses call on Citigroup

Meredith Whitney, who made the prescient call in 2007 that Citigroup would cut its dividend, has now upgraded the very stock that brought her celebrity status among equity analysts during the credit crisis.  Shares of Citigroup yesterday rallied as news of the upgrade to a “hold” from “underperform” spread beyond Whitney’s direct clients. The stock is up 34% so far on the year.  “C shares continue to trade well below tangible book value (70%), despite relatively lower mortgage and European exposures than its large-cap bank brethren,” wrote Whitney, who founded Meredith Whitney Advisory Group in 2009. “On the capital question, we believe C will handily make its capital target of +8% by the end of 2012.”  Whitney had a “Sell” or “Underperform” rating on Citigroup since starting coverage on the stock at her new firm in April 2009.  At the end of October 2007, while working for Oppenheimer & Co., Whitney made waves by predicting that Citigroup might have to cut its dividend payout to raise capital.  The call drew the scorn of the company and fellow analysts, but turned out to be right after Citigroup cut its dividend in January of 2008 as more of the subprime mortgage securities that Whitney had warned about went sour on the company.

Mortgage applications up

Mortgage applications increased 6.9% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 13, 2012.   The Market Composite Index, a measure of mortgage loan application volume, increased 6.9% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 6.5% compared with the previous week.  The Refinance Index increased 13.5% from the previous week.  The seasonally adjusted Purchase Index decreased 11.2% from one week earlier. The unadjusted Purchase Index decreased 10.4% compared with the previous week and was 13.9% lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 1.60%.  The four week moving average is down 0.52% for the seasonally adjusted Purchase Index, while this average is up 2.36% for the Refinance Index.  The refinance share of mortgage activity increased to 75.2% of total applications from 70.5% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3% from 5.5% of total applications from the previous week.

“Renewed concerns about sovereign debt in Europe led to a drop in rates last week, with the 30-year rate tying our survey low, reached in early February.  Refinance activity picked up in response, increasing 13.5% for the week.  Participants in our survey indicated that about 32% of this refinance volume was for HARP loans,” said Jay Brinkmann, MBA’s Chief Economist and SVP of Research and Education.  “While purchase activity declined sharply for the week, this was mostly due to a 23% drop in applications for FHA purchase loans.  This drop follows big increases in the demand for FHA loans over several weeks in anticipation of the FHA mortgage insurance premium increases that went into effect last week.  This was the largest weekly drop in the government purchase index since the expiration of the first-time homebuyer tax credit in May 2010.  The demand for conventional purchase loans was down only slightly.”  The average loan size of all loans for home purchase in the US was $233,381 in March 2012, up from $225,463 in February 2012. The average loan size for a refinance was $214,593, down from $222,048 in February.  The largest purchase loans were made in the Pacific region at $ 337,227. The largest refinance loans were also made in the Pacific region at $ 290,711.

Spain bail-out; not if – when

Economic experts watching Spain don’t know how much money will be needed or precisely when, but some are near certain that Madrid will eventually seek a multi-billion euro bailout for its banks, and perhaps even for the state itself.  Prime Minister Mariano Rajoy has repeatedly said Spain doesn’t need or want an international bailout, and the European Union, which along with the IMF has already rescued Greece, Ireland and Portugal, also dismisses such talk.  But economists believe that Spanish banks will have to turn to the euro zone’s rescue fund, the European Financial Stability Facility (EFSF), for help in covering losses caused by a property market crash which has yet to end.  Madrid is likely to hold out for some time. “The underlying picture in Spain is dramatic, but is it dramatic in the way that it needs a bailout package tomorrow? No,” Brzeski said. “But if you look ahead, let’s say the next six months, I would not be surprised if they (the banks) have to get some kind of European support.”  Market concerns about the euro zone’s fourth largest economy have deepened in the past week. Yields on the government’s 10-year bonds, which reflect the risk investors attach to owning Spanish debt, have risen above 6%, a level that has proved a trigger point for other troubled euro zone countries.  At the moment the EU is backing Madrid. Jean-Claude Juncker, who chairs the Eurogroup of euro zone finance ministers, said Spain was taking the necessary steps to get its economy back on track, despite a recession and unemployment at 24%.

“As I look at my screen and Spain 10-year yields are up at 6% – things are starting to get worrying again,” said Peter Westaway, chief economist for Europe at Vanguard, an investment management firm overseeing $1.8 trillion in assets.  “If they go up to 6.5 to 7%, that could become very problematic, and if Italy started to go back above Spain again, then that would be really serious.”  Spain has one thing on its side. It has already raised nearly half the 86 billion euros it needs to borrow from financial markets this year, sucking up some of the 1 trillion euros of cheap three-year loans that the European Central Bank has pumped into the euro zone banking sector.  This means the government could hang on for months before having to turn to the EU for help with its own funding needs.  However, that still leaves the banks. One of the critical “unknowables’ for Spain is just how bad a situation its banks are in. The Spanish housing market, once a driver of the economy, has been in turmoil for more than four years, but prices still haven’t fallen as much as economists think is needed to squeeze the air out of the bubble.  Only when prices have bottomed will assessors be able to calculate how just much bad mortgage debt is sitting on the banks’ balance sheets, and therefore how much extra capital the sector requires to return it to health.

Olick – a tale of two housing markets

The numbers are in, the analysts are out, and given the volatility of this particular economic indicator, the spin is at full speed:  “Good News on Housing Permits More Than Offsets the Bad News on Starts”— HIS Global Insight;  “Housing Starts Decline Again” – Capital Economics;  “March Multifamily Starts Down; Permits Continue Upward Trend”— KBW;  “March Construction Numbers Aren’t As Bad as They Look”— Trulia.com;  “Housing Starts Lacking Consumer Confidence” — Sageworks Inc.  Here’s the problem: We are living a tale of two housing markets, single and multi-family. Depending on what kind of builder or investor you are, you’re going to see the housing starts numbers differently. Let’s weed through it first:  Total starts fell 5.8%, driven by a nearly 20% drop in multi-family. Single family was essentially flat month-to-month. But remember, multi-family is a very volatile number and can swing 20-30% monthly due to large local projects. Yes, they are both ahead from last year, but 2011 was the worst year in the history of US home building.  “The further fall in housing starts in March means that about a third of the past year’s improvement in homebuilding has now been undone. But the continued rise in building permits is an encouraging sign which suggests that housing starts will improve again later this year,” writes Paul Diggle at Capital Economics.

Building permits are always seen as a better indicator of construction, or at least more dependable and less influenced by weather. Single family permits dropped 3.5% month to month, but multi-family surged ahead 24% to the highest level in four years.  “The pickup in multifamily construction is taking place most noticeably in the South and West—again, not a big surprise—since 46 of the 50 fastest-growing metro-area populations from 2010 to 2011 were in the South or West, according to the Census Bureau,” writes IHS Global Insight’s Patrick Newport.  Clearly we’re still seeing big demand in the multi-family sector, but single family is still faltering.  “Single family is more of a restocking issue,” said Morgan Stanley’s Oliver Chang on CNBC. “In order to meet baseline demand, they [builders] have to build.”  Chang says real growth in single family demand just isn’t there, due to a still tightening credit market. On the flip side, he claims that distressed housing has stabilized and distressed home prices have bottomed; that’s because investors largely use cash. 

So if there’s all this demand for single family rentals, and investors are rushing to get in, is there still enough demand for all this multi-family construction?  “Bottom line, with the secular decline in home ownership, multi-family construction will be where it’s at for a few years but still only make up about 30% of total starts. Single family starts still have the intense competition with foreclosures and now rent seekers,” writes Peter Boockvar of Miller Tabak.  So why, as we asked yesterday after the disappointing builder sentiment report, did single family starts, permits and sentiment rise through the fall and the winter only to slam on the breaks? Newport calls that one a “head scratcher,” and adds, “If the builders have gotten ahead of the game, single-family construction will go through a demoralizing slowdown later this year.”

Is gold headed down?

For the past decade, gold has been an incredible investment, rising from under $300 per ounce to as high as $1,900 per ounce before retreating to around $1,650 in recent trading.  For the bulls, gold’s recent drop is nothing more than a temporary setback on its inexorable march toward $2,000 and beyond. The case for gold rests primarily on factors familiar to anyone who’s even remotely familiar with the metal: easy money from central banks around the world and rising demand from emerging economies, notably China and India. But all good things must come to an end and Yoni Jacobs, chief investment strategist at Chart Prophet, believes gold’s best days are behind it. In fact, Yoni believes there’s a bubble in precious metals that’s about to collapse as detailed in his book, Gold Bubble: Profiting from Gold’s Impending Collapse.  While tipping his hat to the bullish arguments and sympathetic to reasons why people own gold, Jacobs says the metal’s inability to rally despite Europe’s ongoing crisis and renewed tensions in the Middle East are negative signs. “The froth is coming off,” he says.

Technically, the strategist cites heavy volume during gold’s sell-off last September and the negative divergence between gold and gold miners as warning signs. In the past six months, the Market Vectors Gold Miners ETF (GDX) is down 20% while the Gold ETF (GLD) is essentially flat.  Furthermore, gold is vulnerable to the global economic slowdown, he says, noting China just reported its slowest quarter in three years.   Finally, Jacobs cites “over-speculation” in gold, its “parabolic increase” in recent years, the “mass publicity” the metal has received, and the extreme emotions of its advocates as signs of it being in bubble territory.  Based on historical trends and technical patterns, Jacobs predicts gold will fall below the key $1,000 per ounce level on its way to the $700 area. He recommends shorting the GLD or GDX or buying out-of-the-money puts on gold as a way to profit from gold’s demise.

WSJ – GOP Senators say no to write-downs

Two US Senate Republicans are urging the Treasury Department to cancel its plans to subsidize debt forgiveness for troubled homeowners, saying the money would be better off reducing the federal debt.  In a letter sent Tuesday to Treasury Secretary Timothy Geithner, Sens. David Vitter (R., La.) and Jim DeMint (R., S.C.) criticized an Obama administration plan to encourage mortgage giants Fannie Mae and Freddie Mac to reduce borrowers’ loan balances. Earlier this year, the administration announced it would use money from the 2008 financial industry rescue to encourage those write-downs.  The letter adds further heat to an intense political debate over whether the two government-controlled companies should reverse their policy and allow loan write-downs.  The two companies, which buy up loans and package them into investments, and their federal regulator have been facing pressure from Democrats and the Obama administration, which want to see write-downs. Republicans, however, are concerned that doing so will encourage borrowers to intentionally default.  In their letter, Messrs. Vitter and DeMint also argue that big banks that hold second mortgages such as home equity loans will benefit from write-downs. The plan “will pay off the mega banks with taxpayer cash in exchange for reducing the principal balance on some mortgages,” the lawmakers wrote. “We write to urge you, on behalf of the taxpayers, to reconsider and, instead, return this money to the Treasury to pay down the national debt.”

Bank of America (BOA) says it’s making changes to its short-sale procedures that will shorten decision times on short sale offers to 20 days, down from 45 days or longer.  The new task flow in BOA’s short-sale management platform, Equator, will enable short-sale specialists to conduct tasks like document collection, valuations and underwriting simultaneously. When buyers walk, agents will have five days instead of 14 days to submit a backup offer.  Bank of America is requiring a new third-party authorization form for short sales initiated beginning April 14.  When the changes to Equator take effect Saturday, five documents will be required to process short sales initiated with an offer:

-  A purchase contract including buyer’s acknowledgment and disclosure.

-  HUD-1.

-  IRS Form 4506-T.

-  Bank of America short-sale addendum.

-  Bank of America third-party authorization form.

The Equator platform will be offline the night of Friday, April 13, and into early Saturday, April 14, to implement changes. Offer documents and supporting documents for all short sales submitted with an offer must be uploaded before Friday, April 13, or files may be declined.

Import prices up

Overall import prices rose 1.3% in March, the Labor Department said today. That was the biggest gain since April 2011.  Economists polled by Reuters had expected import prices to rise 0.8% last month. February’s data was revised to show a 0.1% decline instead of the previously reported 0.4% increase.  Stripping out petroleum, import prices increased 0.3% after falling 0.1% in February.  Higher costs for energy have fueled inflation in recent months but a still-weak jobs market has made it harder for businesses to raise other prices.  Data on Thursday is expected to show tame price pressures at a wholesale level, with producer prices seen rising 0.2% in March when stripping out food and energy.  But today’s report underscores the size of the price shock that is stinging Americans when they refuel their cars.  Last month, imported petroleum prices increased 4.3%, the biggest gain since April 2011.  Elsewhere, imported capital goods prices edged 0.2% higher after being flat in February. Imported motor vehicle prices climbed 0.3% after being unchanged in February.  The Labor Department report also showed export prices rose 0.8% last month, above analysts’ expectations for a 0.4% gain. Export prices increased 0.4% in February.

MBA – mortgage applications down

Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2012.  The Market Composite Index, a measure of mortgage loan application volume, decreased 2.4% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 2.1% compared with the previous week.  The Refinance Index decreased 3.1% from the previous week.  The seasonally adjusted Purchase Index decreased 0.5% from one week earlier. The unadjusted Purchase Index increased 0.1% compared with the previous week and was 5.5% higher than the same week one year ago.  There was no adjustment made for Good Friday.  The four week moving average for the seasonally adjusted Market Index is down 2.08%.  The four week moving average is up 2.19% for the seasonally adjusted Purchase Index, while this average is down 3.45% for the Refinance Index.  The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5% of total applications from 71.2% the previous week.  This is the lowest refinance share since July 29, 2011.  The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5% of total applications from the previous week.

In March 2012, the share of applications for investment properties increased to 8.3% from 7.4% in February 2012.  However, the increase in investor share was driven by refinance applications for investment properties (which increased to 9.2% in March 2012 from 7.7% in February 2012), as the share of purchase applications for investment homes decreased over the month, from 6.1% in February 2012 to 5.7% in March 2012.  The investor share of purchase applications also decreased on a year over year basis, falling from 5.8% in March 2011 to its current level of 5.7% in March 2012.  While MBA tracks applications for second homes and investment properties separately, giving them the ability to distinguish between the two, the combined share of investment and second home applications for home purchase had the same directional components for the month of March 2012 – up on the whole and up for refinance applications last month, but down for home purchase activity.

Credit eases

Credit card lenders gave out 1.1 million new cards to borrowers with damaged credit in December, up 12.3% from the same month a year earlier, according to Equifax’s credit trends report released in March. These borrowers accounted for 23% of new auto loans in the fourth quarter of 2011, up from 17% in the same period of 2009, Experian, a credit scoring firm, said.  The banks are looking to make up the billions in fee income wiped out by regulations enacted after the financial crisis by focusing on two parts of their business — the high and the low ends — industry consultants say. Subprime borrowers typically pay high interest rates, up to 29%, and often rack up fees for late payments.  Some former banking regulators said they worried that this kind of lending, even in its early stages, signaled a potentially dangerous return to the same risky lending that helped fuel the credit crisis.  The lenders argue that they have learned their lesson and are distinguishing between chronic deadbeats and what some in the industry call “fallen angels,” those who had good payment histories before falling behind as the economy foundered.  Regulators with the Office of the Comptroller of the Currency, which oversees the nation’s largest banks, said that as long as lenders adhered to strict underwriting standards and monitored risk, there was nothing inherently dangerous about extending credit to a wider swath of people.

Olick – debate over principal forgiveness

“The man at the center of the controversy over writing down mortgage principal on Fannie Mae and Freddie Mac loans isn’t wavering. He may be reconsidering previous loss formulas, factoring in new government subsidies for principal write-down, but his opinion seems largely unchanged.  After beginning a speech this morning about all the so-called ‘Enterprises’ (Fannie and Freddie) have done to help millions of borrowers behind on their mortgage payments, and reminding listeners of his agency’s mandate to, ‘preserve and conserve the assets of the Enterprises,’ FHFA Acting Director Ed DeMarco took a left turn.  ‘There is another human element in this story that does not seem to receive much attention,’ DeMarco continued. ‘Clearly, many households got over-extended financially. Some accumulated debts they couldn’t afford when hours or wages were cut or jobs were lost. Others withdrew equity from their homes as house prices soared. Others bought houses at the peak of the market, often with little money down, perhaps in the belief house prices would continue to climb. Yet there are other Americans who did not do this thing.’ 

That last part really clinches what may eventually be his decision not to allow principal forgiveness, or to do it in an extremely narrow way. Yes, there are all kinds of formulas, and ‘net present value’ analyses that have been and continue to be run. There will be Enterprise gains offset by taxpayer losses, and there will be estimates of operational costs to implement a wide-ranging and necessarily transparent program. But in the end, less than one million borrowers would be helped, and for DeMarco, as for many others, it will come down to fairness and cheating.  ‘One factor that needs to be considered is the borrower incentive effects. That means, will some percentage of borrowers who are current on their loans, be encouraged to either claim a hardship or actually go delinquent to capture the benefits of principal forgiveness?’ asks DeMarco.  ‘This is a particular concern for the Enterprises because unlike other mortgage market participants that can pick and choose where principal forgiveness makes sense, the Enterprises must develop the program to be implemented by more than one thousand seller/servicers. In addition, the Enterprises will have to publicly announce this program and borrower awareness of the possibility of receiving a principal reduction modification will be heightened among Enterprise borrowers,’ he explains.

In other words, this opens the flood gates to cheating. The fact is that there are 11 million borrowers who currently owe more on their mortgages than their homes are worth and yet the vast majority of them are still making monthly payments. Those who haven’t been paying have been delinquent, in some cases, for many years. The concern is that borrowers who are current on their loans might think it’s unfair that those who are not current are being rewarded and they are not. It would take a relatively small group of them strategically defaulting to offset the gains of any principal reduction program and turn it into a massive debacle.  ‘The far larger group of underwater borrowers who today have remained faithful to paying their mortgage obligations are the much greater contingent risk to housing markets and to taxpayers. Encouraging their continued success could have a greater impact on the ultimate recovery of housing markets and cost to the taxpayers than the debate over which modification approach offered to troubled borrowers is preferable,’ concludes DeMarco.  He is expected to announce a decision on principal reduction this month, but the analysts are already out:  ‘We see this as a strong political attack against principal reduction,’ says Jaret Seiberg of Guggenheim partners.  The Obama administration is clearly pushing for it, with Treasury Secretary Timothy Geithner recently telling a Senate panel that there is a, ‘very strong economic case’ for principal write-down. He suggested DeMarco, ‘take another look at the math,’ which DeMarco is obviously doing. The trouble is, when it comes to today’s housing market and today’s borrowers, paying your mortgage, whatever it’s worth, is not always a simple equation.”

Oil to sink below $100?

Sandy Jadeja, Chief Technical Analyst at City Index, said the charts suggest US futures may drop to $98 a barrel, and if that level is broken, momentum could accelerate taking the crude to as low as $87.  Oil prices contained below $100 would help alleviate the strain on the US consumer, offering some relief to the broader economy. A gallon of gasoline cost $3.94 at the pump last week, two cents higher than the previous week and 5.9% more expensive than a year earlier, MasterCard said in its weekly Spending Pulse report on Tuesday.  The catalyst for the move lower in oil prices may come later Wednesday when the US Department of Energy’s Energy Information Administration releases weekly stockpiles data at 10:30 am ET.  The report is expected to show a 1.8 million barrels build in commercial crude oil inventories for the week ending April 6, driven by higher US imports of Saudi crude, according to analysts polled by Platts.

CoreLogic – April MarketPulse Report

CoreLogic today released its April CoreLogic MarketPulse report. The monthly economic publication provides insight into the current and future health of the US economic climate with particular focus on housing and mortgage metrics. Chief Economist Mark Fleming and Senior Economist Sam Khater authored the articles and commentary.  The April MarketPulse report:

-  Indicates “now is a good time to buy,” with housing affordability at its highest level ever (as of February 2012), and shows many of the key housing metrics are holding steady through the typically slow winter season.

-  Reports the single-family rental market is strong and vibrant with high and stable rents, low months’ supply and a healthy pace of signed rental leases. The report reveals what markets offer the best return for single-family rental investors. “The potential size of the rental market for REOs this year (and annually over the next few years) is over $100 billion dollars,” said Khater in the report.

-  Shows capitalization rates for single-family rental properties in 26 geographically diverse markets. Capitalization rates are the most common metric for determining the profitability of an investment property.

-  Provides a chart of the rent-to-mortgage ratio for Miami, Fla. The chart indicates the point in time when it became cheaper to buy than to rent, providing insight to investors buying and holding rental properties, as well as to new first-time home buyers.

For a complete copy of the April CoreLogic MarketPulse report, including a complete set of data and charts, visit http://www.corelogic.com/downloadable-docs/MarketPulse_2012-April.pdf.

 Mortgage servicing provider Lender Processing Services reported in early March that US foreclosure starts jumped 28% in January.  More conclusive national data is not yet available. But watchdog group, 4closurefraud.org which helped uncover the “robo-signing” scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash.  Although foreclosure starts were 50% or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47% from 2011. Those of Wells Fargo’s rose 68% and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment. 

Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.  Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64%), Chicago (43%) and Miami (53%).  RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it’s mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.  “The subprime stuff is long gone,” said Michael Redman, founder of 4closurefraud.org. “Now the folks being affected are hardworking, everyday Americans struggling because of the economy.”

Crackdown on tax havens

As regulators clamp down on money flows around the globe, governments, even those that prided themselves on the strength of their secrecy laws, like Switzerland, are facing pressure to share banking information and change their policies.  Now, private banks and wealth managers are scrambling to convert so-called black money — assets that have not been disclosed — into accounts that are above board.  The shift may provide opportunities for the industry. As more funds become legitimate, analysts say financial institutions will be able to sell extra wealth management products to affluent people and enter markets that had previously been off limits.  “There’s much less black money now than three years ago,” said Jean Schaffner, head of the Luxembourg tax practice at the law firm Allen & Overy. “It’s in the banks’ interests for clients to come forward with their money.”  For decades, Western governments tolerated offshore tax havens, places where the wealthy could park millions away from the gaze of their domestic authorities. Switzerland, in particular, developed a reputation as a place where the wealthy could rely on secrecy laws.  But the tide began to turn in 2008, particularly after the financial crisis prompted many governments to act in concert.  As Switzerland and other locales tightened their financial controls, many people initially flocked to other tax havens like Singapore and Hong Kong, which still offer some of the world’s most secret accounts. But these places, too, are facing new pressures.

NAHB – 101 improving housing markets

The list of housing markets showing measurable improvement expanded slightly to include 101 metropolitan areas in April, according to the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI), released today. Thirty-five states (including the District of Columbia) are now represented by at least one market on the list. The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. The 101 markets on the April IMI represent a net gain of two from March, with 13 metros being added and 11 markets slipping from the list while 88 markets retained their places on it. Among the new entrants, areas as diverse as Rome, Ga.; Coeur d’Alene, Idaho; Greenville, N.C.; Brownsville, Texas; St. George, Utah; and Huntington, W.Va., are now represented on the IMI.  The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas.

The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the US Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.  A complete list of all 101 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in April, is available at: www.nahb.org/imi.

Job improvement slows

US payrolls rose far less than expected in March, keeping the door open for further monetary policy support from the Federal Reserve, even as the unemployment rate fell to a three-year low of 8.2%.  Employers added 120,000 jobs last month, the Labor Department said on Friday, the smallest increase since October.  Economists polled by Reuters had expected nonfarm employment to increase 203,000 and the unemployment rate to hold at 8.3%.  The slowdown in employment growth last month likely reflected the fading boost from unseasonably warm winter weather. It supported the caution on the labor market from Fed Chairman Ben Bernanke last week.  Bernanke expressed doubts the recent job gains could be sustained, and March’s weak report was in line with expectations that economic growth slowed to an annual pace of 2% in the first quarter from the 3% rate in the October-December period. 

The weakness in hiring last month was concentrated in the vast private services sector, which added only 90,000 after increasing payrolls by 204,000 in February. Retail employment fell dropped 33,800 after falling 28,600 the prior month.  Construction hiring fell 7,000, the second straight monthly decline. Temporary help fell 7,500 after rising 54,900 in February.  However, manufacturing enjoyed another month of strong job gains, with factories adding 37,000 new positions, helped by carmakers trying to meet pent-up demand for motor vehicles. Factory jobs increased by 31,000 in February.  Government employment edged down 1,000 after rising 7,000 in February. Despite the weak employment gains last month, average hourly earnings rose 5 cents.  The workweek dipped to 34.5 hours from 34.6 hours in February.

WSJ – Fed in favor of the banks’ foreclosure-rental approach

Last month, Bank of America Corp. announced a plan to allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate.  In addition, Fannie Mae is selling 2,500 homes in eight metropolitan areas around the country. The government-controlled mortgage firm is selling the $320 million portfolio to investors, who would be required to turn them into rental properties.  The Federal Reserve set out new polices for banks that decide to rent out foreclosed homes, endorsing a strategy for managing the huge number of distressed properties that have piled up during the housing bust. The central bank said in a six-page policy statement Thursday that the Fed’s regulations permit the rental of foreclosed properties to tenants “in light of the extraordinary market conditions that currently prevail.” The policy clarified that banks that would otherwise be required to sell off the properties more quickly can turn to rental as a strategy. 

Federal Reserve Chairman Ben Bernanke and other central bank officials have spoken publicly about the need to encourage banks to rent out foreclosures. “With home prices falling and rents rising, it could make sense in some markets to turn some of the foreclosed homes into rental properties,” Mr. Bernanke said in a February speech.  The central bank said that banks holding large numbers of foreclosures should establish detailed policies for renting foreclosures, including a process to determine whether the properties are safe to occupy and meet local building code requirements.  The Fed said banks should set up criteria by which properties are picked to be rental properties. The banks should establish plans that “describe the general conditions under which the organization believes a rental approach is likely to be successful,” the central bank said.

A consumer-advocate group said in a report Wednesday that a study of foreclosed properties found that banks have higher standards for properties they own in wealthy, predominantly white, neighborhoods than low-income ones, raising a new civil-rights challenge against the mortgage industry.  The report by the National Fair Housing Alliance examined more than 1,000 foreclosed properties in nine cities: Atlanta; Baltimore; Dallas; Dayton, Ohio; Miami; Oakland, Calif., Philadelphia; Phoenix and Washington, D.C.  “This report offers evidence that banks responsible for peddling unsustainable loans to communities of color and triggering our current foreclosure crisis are continuing to damage those communities by failing to properly maintain and market the properties they own,” Shanna L. Smith, the housing alliance’s chief executive, said in a statement. The group said it is planning legal action against two banks, which it didn’t name.  The group and four of its members scrutinized foreclosed properties for problems like broken windows, trash, water damage and unkempt lawns.  The report found that properties in minority neighborhoods were 42% more likely to have shoddy maintenance than those in majority-white neighborhoods. Trash and other debris were 34% more likely to be found in foreclosures in minority neighborhoods than in white ones.

Jobless claims down this week

Initial claims for state unemployment benefits fell 6,000 to a seasonally adjusted 357,000, the lowest level since April 2008, the Labor Department said today.  The prior week’s figure was revised up to 363,000 from the previously reported 359,000. Economists polled by Reuters had forecast a claims reading of 355,000 for last week.  The four-week moving average for new claims, a measure of labor market trends, declined 4,250 to 361,750.  The number of people still receiving benefits under regular state programs after an initial week of aid fell 16,000 to 3.338 million in the week ended March 24, the lowest since August 2008.  A total of 7.05 million people were claiming unemployment benefits during the week ended March 17 under all programs, down 107,760 from the prior week.

WSJ – ownership gains appeal

Climbing rents for apartments are combining with a continued decline in home prices to push once-reluctant home buyers into finally taking the plunge, say economists and real-estate agents, helping what appears to be a good start to the housing industry’s all-important spring selling season.  Average apartment rents rose by 2.7% last year while the national vacancy rate dropped below 5% for the first time since 2001, according to a quarterly survey to be released Wednesday by Reis Inc., a real-estate research firm.  The broad and sustained growth of the apartment market contrasts sharply with an uneven and tentative housing recovery. During the first quarter, average apartment rents rose and vacancy rates fell in all 82 metropolitan areas tracked by Reis, when compared with a year ago.  The largest rent increases came in San Francisco and San Jose, Calif., which saw increases of 5.9% and 4.9%, respectively. Even boom-to-bust Las Vegas, which has struggled with falling rents in previous quarters, saw average rent rise 1.8% from a year earlier.  Such increases are one reason why analysts at Zelman & Associates believe 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year. “The equation of renting versus owning is becoming much more favorable for owning,” said Ivy Zelman, the firm’s chief executive. Unless the economy worsens, there is little sign that rent growth will slow until hundreds of thousands of new apartment units currently under construction hit the market over the next few years.

Easier to pay down debt

Timely repayments improved on all 11 of the consumer loan categories tracked by the American Bankers Association (ABA) in the final quarter of last year, the first time that has happened since 2004, according to the organization’s chief economist.  The ABA said delinquency rates still remain high as the economy slowly recovers but the fourth quarter showed a marked improvement from the prior quarter in consumers’ ability to make payments on auto loans, credit cards and other debts.  It does not, however, track delinquency rates for traditional mortgage payments.  The broad delinquency category that tracks eight types of loans fell to 2.49% from 2.59%.  Delinquencies on payments for credit cards provided by a bank fell to 3.17% from 3.25%.  The delinquency rate for home equity loans fell to 4.08% from 4.12%.

FHFA to decide on write downs in April

Federal Housing Finance Agency (FHFA) head Edward DeMarco said the agency will likely make a decision regarding mortgage principal forgiveness sometime in April.  DeMarco, in a speech Wednesday before the Boston Security Analysts Society, said the FHFA continues to evaluate added incentives from the Treasury Department to write down loan principal under the Home Affordable Modification Program.  The Treasury announced in January that it would triple those incentive payments for mortgage investors, and Freddie Mac CEO Charles “Ed” Haldeman signaled the change could push the government-sponsored enterprises to cut mortgage principal.  But DeMarco continued his wary stance toward write-downs Wednesday, and said principal forbearance “produces the same, lower monthly payment.” That’s the main reason to modify a loan, he said.  More than three in four “deeply underwater” borrowers on the GSEs’ books are current on their loans, DeMarco said.  “Indeed, we have found that payment reduction, not loan-to-value, is the key indicator of success in loan modification,” DeMarco said in prepared remarks. “If the borrower remains successful in this modified loan, this approach preserves for taxpayers an ultimate recovery on the debt.”

Others, including many House and Senate Democrats, want DeMarco to go forward with write-downs, while the less patient have called for his ouster.  Thirty senators, in a letter Wednesday, asked DeMarco to revise how the FHFA conducts its principal reduction analysis. The FHFA’s previous report, which said write-downs would cost the GSEs $100 billion, had “several critical flaws,” they said.  “We seek an accurate analysis, but not a particular result,” the senators said in the letter. “Conducting an accurate analysis of this issue is not only part of your responsibility as conservator to conserve taxpayer assets, but also part of your statutory responsibility to maximize assistance for homeowners to minimize foreclosures.”  Sen. Richard Shelby, R-Ala., who is the ranking member of the Senate Banking Committee, came out in defense of DeMarco, questioning Democrats’ own efforts.  “Democrats should stop blaming FHFA for their failure to craft bipartisan legislation to address the housing crisis,” Shelby said in an emailed statement. “FHFA has refinanced over 10 million mortgages since 2009. What have the Senate Democrats accomplished during that same time frame?”

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Fed to fine banks

The Federal Reserve says that it plans to fine eight additional US bank holding companies for improperly foreclosing on homeowners. The financial firms — EverBank, Goldman Sachs Group, HSBC Holdings PLC, PNC Financial Services Group, MetLife, OneWest Bank, SunTrust Banks and US Bancorp — were not part of last month’s settlement over alleged foreclosure abuses. Suzanne G. Killian, a senior associate director at the Federal Reserve, called the fines “appropriate” during a congressional hearing in Brooklyn, New York. Killian offered few details about the size of the fines or when they will be levied. The nation’s five biggest lenders — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial — last month agreed to a $25 billion settlement with state and federal government agencies last month after a 16-month probe. As part of that settlement, the five banks agreed to reduce mortgages for about 1 million homeowners. They also will pay into a fund that will send $2,000 to 750,000 homeowners who were improperly foreclosed upon. Separately, government regulators last April ordered 14 mortgage lenders and servicers to reimburse homeowners who were improperly foreclosed upon. Since then, letters have been sent to 4.3 million borrowers who were at risk of foreclosure during 2009 and 2010. The deadline for borrowers to seek money under the orders is July 31. So far, nearly 122,000 homeowners have asked for an auditor to review their foreclosures.

North America the next middle east for oil?

Increased production of energy from a number of sources including deepwater drilling, natural gas exploration and Canada’s oil sands could make North America the next Middle East, according to a new report from Citigroup. The bank estimates that total North American energy production will rise from 15.4 million barrels per day in 2011 to almost 26.6 million barrels per day by 2020, boosting gross domestic product (GDP) and creating ripple effects throughout the economy. Citigroup analysts say the US will see large gains in oil production from deepwater drilling, while Mexico will begin to reverse recent declines in output. Production of shale gas liquids will increase by 3.8 million barrels per day by 2020. The report says this new production would amount to about 7% of additional global production, “a higher growth rate than OPEC can sustain.” That increase in energy supply will also be accompanied with a decline in demand. US consumption of oil products has fallen by 2 million barrels per day since its peak in 2005, and the Citi report says demand will fall by another 2 million barrels per day over the next decade.

Citgroup expects the shift in energy supply and demand to increase real GDP by between 2 and 3.3%. It also estimates that some 550,000 new jobs will be created directly in the oil and gas extraction sector by 2020. An additional 2.2 to 2.3 million new jobs will be created from the resulting economic stimulus effects of new production by 2020. In its analysis, Citigroup acknowledges infrastructure bottlenecks and legislation that blocks exports of crude oil of US origin. It also points out that new environmental regulations could prevent the scenario from playing out. But the analysts point out the surge in energy production could be game-changing. “It would not only improve incomes and create jobs, but also improve national energy security and reverse perennial current account deficits.”

MBA – mortgage applications down

Mortgage applications decreased 7.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 16, 2012. The Market Composite Index, a measure of mortgage loan application volume, decreased 7.4% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7.1% compared with the previous week. The Refinance Index decreased 9.3% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The unadjusted Purchase Index decreased 0.6% compared with the previous week and was 1.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.79%. The four week moving average is up 3.25% for the seasonally adjusted Purchase Index, while this average is down 4.31% for the Refinance Index.

The refinance share of mortgage activity decreased to 73.4% of total applications, the lowest since July 2011, from 75.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 5.8% of total applications from the previous week. “With the rate increase last week, refinances are obviously slowing, and the refinance share at 73% is down to its lowest level since last July. With rate/term refinances falling as we go forward, HARP will be a bigger percentage of refinances but will be more concentrated in certain states,” said Jay Brinkmann, MBA’s Senior Vice President of Research and Education. Brinkmann continued, “Some of the largest institutions are reporting that the HARP share of their refinances remained at about 30% last week, but HARP volume is not equal across the country. The states that I started referring to years ago as the sand states that had the worst delinquencies we now should start calling the HARP states for mortgage refinances. We saw big state-level differences in refinance applications for February over January: Florida was up 49%, Arizona was up 61%, and Nevada was up 71%. Refinances in the rest of the country were generally flat or even down. For example, Texas had no change, Colorado was down 3%, Connecticut was up only 2%, and Virginia was up 1%. HARP clearly is a driving force in those states that saw the most defaults and the biggest drops in home equity.”

The average loan size of all loans for home purchase in the US was $225,463 in February 2012, up from $216,888 in January. The average loan size for a refinance was $222,048, down from $227,563 in January. The largest purchase loans were made in the Pacific region at $ 324,606. The largest refinance loans were also made in the Pacific region at $ 305,949.

US exempts EU from sanctions

The United States on Tuesday exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian crude oil, but left Iran’s top customers China and India exposed to the possibility of such steps. The decision is a victory for the 11 countries, whose banks have been given a six-month reprieve from the threat of being cut off from the US financial system under new sanctions designed to pressure Iran over its nuclear program. The list did not, however, include China and India, Iran’s top two crude oil importers, nor US allies South Korea and Turkey, which are among the top-10 consumers of Iranian oil. A US official held up Japan’s estimated 15-22% cut in oil purchases from Iran in the second half of last year as an example for other nations, saying it did so after the “tragedy” of the earthquake that caused the Fukushima nuclear disaster. “Japan was a model,” State Department Special Envoy and Coordinator for International Energy Affairs Carlos Pascual told lawmakers. “If Japan was able to do what it did … that should be an example to others that they could potentially do more.”

Olick – rising rates may not hurt housing

“It was barely a few weeks ago that mortgage rates were sitting at record lows. The idea of rates over 4% on the 30-year fixed seemed a distant memory. And here they are now at 4.05% on the Bankrate.com overnight, thanks to the recent rise in Treasury yields. The housing market, it seems, just can’t catch a break. Or can it? As the economy improves, the job market improves, and that is a key driver for housing. But on the flip side, as the economy improves, investors finally crawl out of the Treasury bunkers, driving yields higher, and mortgage rates generally follow the 10-year Treasury. ‘We will definitely see a freeze up in refi’s immediately but the decision on a purchase still won’t be impacted until rates get at least to 4.5% I believe,’ says Peter Boockvar at Miller Tabak. ‘Assuming a $200k mortgage, going from 4 to 4.5% in mortgage rate adds about $60 per month to one’s payments, and while an extra $700 per year matters, I’m not sure if it’s a deal breaker.’

While rates have moved a good quarter of a% in the past few weeks, most analysts don’t think they’ll go much higher. ‘Mortgage rates were too high anyway, relative to the 10-year Treasury, so I don’t think you will see a parallel shift,’ says FBR’s Paul Miller, who spoke to several bankers today. They told him mortgage volume is good, which helps keep rates competitive. ‘But it does take time for this stuff to flow through the markets,’ he adds. And then there could be one other phenomenon, as described by Freddie Mac’s chief economist Frank Nothaft: ‘When rates tick up, you may see some potential home buyers who have been sitting on the sidelines, suddenly they may get up, as they are concerned that maybe this is the beginning of a trend, and they don’t want to miss out on these 60-year low mortgage rates. In the near term it can encourage buyers.’”

Oil up to $107 per barrel

Oil prices rose to near $107 a barrel Wednesday after a report showed US crude supplies fell unexpectedly, a sign demand may be improving in the world’s largest economy. By early afternoon in Europe, benchmark oil for May delivery was up 49 cents to $106.56 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.49 to settle at $106.07 per barrel in New York on Tuesday after Saudi Arabia said it could pump more oil to cover any shortages. In London, Brent crude for May delivery was up 27 cents at $124.39 a barrel on the ICE Futures exchange. The American Petroleum Institute said late Tuesday that crude inventories fell 1.4 million barrels last week, breaking a two-month trend of growing supplies. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.1 million barrels. Inventories of gasoline fell 1.4 million barrels last week while distillates rose 600,000 barrels, the API said.

LPS – first look report
Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology, data and analytics to the mortgage and real estate industries, reports the following “first look” at February 2012 month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.

Total US loan delinquency rate:7.57%
Month-over-month change in delinquency rate: -5.0%
Year-over-year change in delinquency rate: -14.0%
Total U.S foreclosure pre-sale inventory rate: 4.13%
Month-over-month change in foreclosure presale inventory rate: -0.5%
Year-over-year change in foreclosure presale inventory rate: -0.3%
Number of properties that are 30 or more days past due, but not in foreclosure: (A) 3,781,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:1,722,000
Number of properties in foreclosure pre-sale inventory: (B) 2,065,000
Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 5,846,000
States with highest percentage of non-current* loans: FL, MS, NV, NJ, IL
States with the lowest percentage of non-current* loans: MT, AK, WY, SD, ND

*Non-current totals combine foreclosures and delinquencies as a% of active loans in that state.
Notes:
(1) Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets
(2) All whole numbers are rounded to the nearest thousand
The company will provide a more in-depth review of this data in its monthly Mortgage Monitor report, which includes an analysis of data supplemented by in-depth charts and graphs that reflect trend and point-in-time observations.

Money printing going out of style

The era of quantitative easing—a process by which central banks buy assets such as government bonds to inject funds in the markets—may be coming to an end, according to a survey of fund managers. According to a March survey by Bank of America Merrill Lynch, investors are more upbeat about the future and the prospects for growth and they no longer expect further quantitative easing measures to be taken by the Federal Reserve or the European Central Bank. In the survey, 28% of fund managers said they expected the global economy to strengthen in the next 12 months, up from 11% in February. This was the highest reading since March last year. But the report did find that fund managers still see sovereign debt as the biggest tail risk to the global recovery. Investors do foresee higher inflation, with a net 13% expecting it to rise in the coming year.

WSJ – housing mixed

US home building fell in February, but permits for new construction reached their highest levels in nearly 3½ years, reflecting housing’s uneven and protracted recovery. Home construction decreased 1.1% from January to a seasonally adjusted annual rate of 698,000, the Commerce Department said yesterday. Construction of single-family homes, which makes up more than 70% of housing starts, fell by 9.9% – the largest drop in a year. Meanwhile, multifamily homes with at least two units, a volatile part of the market, posted a 21.1% gain. Still, January’s figures were raised to 706,000 starts overall, a 3.7% improvement from December and the highest level since October 2008.

In a positive sign for future construction, the February data showed new building permits rose by 5.1% from a month earlier to an annual rate of 717,000 – also the highest level since October 2008. The housing sector has been healing slowly after prices collapsed more than five years ago. A National Association of Home Builders (NAHB) report on Monday showed that US home builders’ confidence in the market held steady in March at the highest level since 2007. “The level of activity still remains far short of the pace implied by the NAHB index so we look for further gains over the next few months in both sales and starts,” said Ian Shepherdson, chief US economist at High Frequency Economics. “Housing will add to growth all year, and beyond.”

But Joshua Shapiro, chief US economist at MFR Inc., said that so far, the home builders association’s level of confidence hasn’t been matched by actual construction. “Our view remains that single-family housing starts are in a long-term bottoming process but that an enormous overhang of existing single-family home supply will prevent sharp gains in single-family starts in the near to medium term,” Mr. Shapiro said. NAHB said Monday that its members continue to face obstacles, including tight credit for both builders and buyers and a large inventory of inexpensive, foreclosed homes in many markets. The Commerce Department data showed that housing starts were mixed across four US regions. The Northeast posted a 12.3% decline, while starts in the West dropped 5.9% last month. Starts rose 3% in the Midwest and 1.5% in the South. Actual housing starts, calculated without seasonal adjustments, grew to 48,100 in February from 46,500 in January. Lumber and commodities markets watch those numbers closely to gauge demand.
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Christian Science Monitor – ten best cities to buy short sales

10. Seattle-Tacoma-Bellevue, Wash. (average short sale discount – 24.5%)

Short sales took off in the Seattle area in the fourth quarter of 2011: 925 pre-foreclosure homes were sold. That’s a whopping 46% increase from the same period a year earlier and represented 7.4% of all home sales in the area, at an average price of $245,403. Buyers of short sale homes reaped a nearly 25% discount off non-foreclosure homes. Seattle is also among the top metros to buy foreclosure properties generally, at an average discount of 43%.

9. Phoenix-Mesa-Scottsdale, Ariz. (24.7%)

Phoenix is the sixth-most populous city in the United States. Known as the Valley of the Sun, the Phoenix metropolitan area had the second-highest number of pre-foreclosure home sales on the list, with 7,112 (up 43% from the fourth quarter of 2010). Short sales made up 20.3% of all homes sold in the area, at an average price of $122,212. As a state, Arizona saw one of the largest year-over-year increases in pre-foreclosure sales, up 48%.

8. Portland-Vancouver-Beaverton, Ore./Wash. (26.1%)

The Pacific Northwest is a pricier housing market that Phoenix, with fewer homes available. The area sold only 679 pre-foreclosure homes in the fourth quarter, which is the third-lowest number on the list (the minimum for inclusion is 500 homes). Still, that’s up 37.2% from 2010, and a willing buyer can get a short sale home for an average price of $190,042, which represents an average discount of 26.1% below market value.

7. Los Angeles-Long Beach-Santa Ana, Calif. (28.0%)

The most populous state in the country, California saw short sales increase in the fourth quarter. Los Angeles led the charge, with the most short sale houses sold of any metro in the country, let alone the state, at an average sale price of $342,668. In terms of total home sales, Los Angeles also boasts the highest percentage of short sales on the list, at 22%.

6. Jacksonville, Fla.(28.8%)

Situated on the St. Johns river at the top of Florida’s Atlantic coast, Jacksonville is the largest metropolitan area in the country from a geographical standpoint. It’s cheap, too – 677 short sale homes were sold in the area in 2011′s fourth quarter, at an average sale price of $116,447. Jacksonville saw a 41.34% increase in short sales from 2010, with pre-foreclosures making up 12.4% of all home sales in the area.

5. St. Louis (29.6%)

The St. Louis area has by far the cheapest housing market of the short sale metros on the Top 10 list. Nearly 600 pre-foreclosure homes were sold there in the fourth quarter of 2011, at an average price tag of $96,131. Short sales made up only 5.7% of home sales in St. Louis (the lowest proportion on the list), but short sales increased 19.9% from 2010.

4. Atlanta-Sandy Springs-Marietta, Ga. (32.9%)

Georgia’s foreclosure problem has continued to worsen in recent years. Foreclosure sales made up 39% of total home sales for the state in the fourth quarter of 2011, the third-highest of any state. As a result, the Atlanta area ranks high in both short sales and foreclosure sales.  The area saw the biggest surge in short sales of all the cities on the Top 10 list, with 3,387 homes sold, up 63% since the same period in 2010. Short sales made up 14% of all home sales in the quarter, with an average price tag of $123,271.

3. Chicago-Naperville-Joliet Ill./Ind./Wis. (33.5%)

In addition to a deep average discount on short sales, the Chicago metro is one of the top places to buy foreclosed homes, with an average discount of 49.1%. Chicago sold 2,409 pre-foreclosure homes in the fourth quarter of 2011, at an average sale price of $156,349. That’s a 28.9% increase from the fourth quarter of 2010.

2. San Jose-Sunnyvale-Santa Clara, Calif. (37.3%)

Home to Silicon Valley, the San Jose metro area is located just south of San Francisco and is the third largest metro in the state. In the fourth quarter of 2011, 1,169 homes were sold in short sales at an average price of $398,413. That’s the highest price among the cities on the Top 10 list, even with one of the biggest discounts in the US. Short sales increased 34.1% from the end of 2010 and made up 18.6% of all home sales in the San Jose area.

1. San Francisco-Oakland-Freemont, Calif. (41.0%)

Discounts for short sale homes don’t come any bigger than this in major metropolitan areas: more than 40% in San Francisco. Such sales surged 50% in the San Francisco metropolitan area from the fourth quarter of 2010: Nearly 3,000 homes in pre-foreclosure were sold in 2011′s fourth quarter, at an average price of $330,733. Short sales made up 19.2% of all home sales. The city is not among the top markets  for deeply discounted foreclosure homes, indicating that lenders are taking measures to help homeowners avoid foreclosure.

Goldman Sachs cut jobs

Goldman Sachs has begun a new round of staff cuts in its trading and investment banking divisions, three sources familiar with the matter said, a sign of continued cutbacks on Wall Street.  The job cuts follow 2,400 positions Goldman eliminated last year, and further reductions are possible as the company continues to reduce costs to raise profitability, the sources said.  The latest round of cuts is part of Goldman’s annual employee review process.  The new job cuts are taking place in all of Goldman’s four main divisions, including sales and trading, investment banking, wealth management and investing and lending, according to one source familiar with the matter.  Many of the cuts are aimed at traders who can be replaced with new technology, or back-office, technology and operations staff who can be replaced with less expensive employees, the source said. The bank has been pushing aggressively to replace staff in high-cost areas like New York and New Jersey with less costly workers in Salt Lake City, where the company is building a sizable workforce.

Housing starts down

The Commerce Department said housing starts slipped 1.1% to a seasonally adjusted annual rate of 698,000 units. January’s starts were revised up to a 706,000-unit pace from a previously reported 699,000 unit rate.  Economists polled by Reuters had forecast housing starts little changed at a 700,000-unit rate. Compared to February last year, residential construction was up 34.7%, the biggest year-on-year rise since April 2010.  New building permits surged 5.1% to a 717,000-unit pace last month, far exceeding economists’ expectations for an advance to a 690,000-unit pace from January’s 682,000-unit rate.  Housing starts last month were pulled down by a 9.9% drop in the construction of single-family homes — which account for a large portion of the market.  Groundbreaking for multifamily housing projects soared 21.1%. This segment is benefiting from rising demand for rental apartments, as falling house prices discourage some Americans from owning a home.  Housing starts in the South rose to their highest level since October 2008.  Permits to build single-family homes jumped 4.9% to a 472,000-unit pace — the highest since April 2010. Permits for multifamily homes increased 5.6% to a 245,000-unit rate.

Small cars costing more

Across the board, prices for these cars are moving up along with gas prices.  KBB tracks used car prices week to week. For the week ending March 2nd, it found used car prices jumped 1.3% to $12,286. That should not come as a surprise given the way auction prices have shot up. Used car auction house Adesa says the average compact car sold for $6,942 (up 4.4%) on the wholesale market in February.  While automakers are moving as quickly as possible to ramp-up production of small cars or at least the small fuel-efficient engines to put in those cars, it won’t happen overnight. So expect the tight inventories for many small cars to continue for some time. Eventually, that could play out with small cars selling with a minimal discount to the sticker price. Perhaps even at a premium to the MSRP.  One thing is certain, we won’t see increased incentives or rebates for new cars anytime soon. Automakers don’t need to grease a market where buyers are coming into the showroom.

Olick – did a warm winter steal spring housing?

“As if we really needed a reminder that today’s housing market is still very fragile, the first installment in a slew of housing data to be released this week came in below expectations.  Home builder sentiment, as measured by the National Association of Home Builders’ monthly sentiment survey, was unchanged in March, and February’s reading was revised down.  This after five straight months of gains in builder confidence.  ‘Many of our members continue to cite obstacles on the road to recovery, including persistently tight builder and buyer credit and the ongoing inventory of distressed properties in some markets,’ said NAHB chief economist David Crowe in a release.

Most troubling was a big drop in sentiment out West, which is where the bulk of the nation’s foreclosures and distressed properties are. Banks are really ramping up the foreclosure process now that the so-called ‘Robo-signing’ settlement is behind them and new guidelines are in place. That means more foreclosed properties will be hitting the housing market, as the still-swelled pipeline finally begins to empty.  While the all-important South region, most meaningful for the builders, saw an increase in sentiment, it is still below the national average, and overall current sales were down and buyer traffic was flat. Only sales expectations over the next six months rose. That could have a lot to do with unseasonably warm weather.  With temperatures in most of the country hitting near record highs in January and February, it begs the question, did much of the Spring market start early, and did it steal from the historically strong months of March and April?  ‘We think it has pulled forward a useful amount,’ says analyst Stephen East of ISI Group. ‘It definitely helps breaking ground and has been a big help on the jobs front.’

In fact ISI studied weather in all four regions and reported that while favorable economic trends and specifically job growth are the primary driver of renewed housing activity, ‘We believe some demand was pulled forward from the later Spring months, implying the first quarter could be above investor expectations, while the second quarter could be below expectations.’  Weather cannot be discounted in home sales, especially sales of new construction, since builders can offer potentially faster turnarounds for new orders if they’re not hampered by frozen earth. February saw a big spike in the ‘current sales’ component of the home builder sentiment index. Buyer traffic in March was unchanged.”

House GOP wants to overhaul tax code

House Republicans will call for overhauling the US tax code by reducing rates as well as the number of income tax brackets as part of their 2013 budget proposal.  House Budget Committee Chairman Paul Ryan of Wisconsin is slated to unveil today a tax and spending plan that would shrink the number of brackets to two from six with rates set at 25% and 10%. The top rate now is 35%.  Ryan’s proposal would also eliminate the alternative minimum tax while reducing the corporate tax rate from 35% now to 25%, according to documents provided by his office.  The plan may revive Republicans’ call last year for overhauling Medicare, though with a compromise Ryan has since written with Oregon Democratic Senator Ron Wyden on the health program for the elderly and disabled. It may also spur a reprise of proposals to carve big savings from other safety net programs to drive down the government’s $1.2 trillion deficit.  Though the proposals probably won’t become law anytime soon, they are certain to inflame an election year debate over what to do about government red ink.  “We’re back with a budget that offers real solutions,” Ryan said in a video posted yesterday on his website. “Americans have a choice to make — a choice that’s going to determine our country’s future.”

Fast foreclosure bill may return

Florida’s quickie foreclosure bill died quietly in the Senate on the last day of the 2012 legislative session, and although homeowner advocates fear it will reappear next year, sponsor Kathleen Passidomo said it may not be her pushing it.  The Naples Republican is confident the controversial bill, dubbed the Florida Fair Foreclosure Act, would have passed if it had come up for a vote by the full membership. Instead, she said it got lost in the last minute hustle to hear dozens of proposals before the end of the session March 9.  The Florida Bankers Association agrees there were enough votes in the Senate to pass the nationally watched proposal, which flew through the House in a 94-17 vote on Feb. 29.  But Anthony DiMarco, executive vice president of government affairs for the association, said it’s too early to tell what kind of expedited foreclosure plan may materialize in 2013.

The association said in its end-of-session newsletter that it believes “internal Senate politics” led to the bill’s demise and that it will push for similar foreclosure legislation next year.  “I think there will be a foreclosure bill filed next year if the prediction of a huge glut of foreclosures in the courts holds true, but whether I file it or not, I don’t know,” said Passidomo, noting that she has other interests and that this was the second time she tried and failed to streamline the state’s foreclosure logjam with legislation. “This was a missed opportunity.”  Still, it was the furthest a bill aimed at reducing Florida’s mounting foreclosure backlog has made it since the real estate crash. An estimated 368,000 foreclosure cases are in the courts statewide, with more on the way.  February foreclosure statistics released last week by the research group RealtyTrac showed a nearly 53% increase in South Florida filings compared with the same time in 2011. The spike was 40% statewide.  “I would be very surprised if the bill does not come back,” Boca Raton attorney Margery Golant said. “The industry is pushing everywhere it can to be able to move faster on foreclosures.”

WSJ – Wall Street keys on rentals

Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae.  The idea is that the new owners would rent out the homes at first rather than reselling – potentially aiding a housing-market recovery by reducing the number of properties clogging the market. The fact that big-name investors are interested also suggests they anticipate sizable future profits in housing.  Currently, banks selling through regular real-estate listings are getting more than 90 cents on the dollar of their asking price, according to industry analysts. They could be reluctant to unload properties in bulk if it means selling for much less.  Firms considering bids include Austin, Texas-based broker-dealer Amherst Securities Group and a fund run by mortgage-bond pioneer Lewis Ranieri. Hedge-fund manager Paulson & Co. and private-equity investors Colony Capital LLC are also considering bids, according to people familiar with the process.  The sale consists of 2,500 homes divided into eight regional pools, ranging from 572 properties in Atlanta to 99 in Chicago. The total current market value is $320 million, according to an offering document prepared by Credit Suisse, which is advising Fannie.

Bulk sales, however, pose a trade-off. While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties in bulk to large investors could require Fannie Mae to sell at a big discount, leading to larger initial costs. It is unclear which would be least costly ultimately to taxpayers, who are responsible for the big mortgage-finance company’s losses.  Purely in dollar terms, the sale would be small by Wall Street standards. But it could offer clues about whether investors are willing to pay prices high enough to entice Fannie Mae – along with its sibling Freddie Mac, federal agencies and banks-to do more bulk-sale deals in the future.

Bernanke justifies Fed

Federal Reserve Chairman Ben S. Bernanke returns to his roots as a university professor today, seeking to explain and justify the existence of the central bank ahead of the 100th anniversary of its founding next year.  Bernanke will deliver the first of four hour-long lectures on the history of the Fed as part of what public relations specialist Richard Dukas called a “P.R. offensive” to buff the central bank’s tarnished image. The Fed is being attacked from both the left and the right, with liberals criticizing it for not doing enough to bring down unemployment, and conservatives blaming it for doing too much and risking faster inflation.  Bernanke’s return to the milieu where he spent more than two decades will give the Fed’s top policy maker an opportunity to “set the narrative” on the central bank’s role during and after the financial meltdown, said Princeton University professor and former Fed Vice Chairman Alan Blinder. “The question of who gets to write the history is an important one.”  If Americans lose faith in the Fed’s ability to manage the economy and contain inflation, that will rob monetary policy of some of its potency, according to Dana Saporta, director of US economics research for Credit Suisse Securities in New York. Policy has “less effect the less confidence the public has in the Fed,” she said.

HARP still a massive failure

Fewer underwater homeowners worked through the Home Affordable Refinance Program (HARP) in December than in any other month in more than a year, despite changes that removed previous barriers.  About 2,700 mortgages with a loan-to-value ratio between 105% and 125% received a HARP refinancing in December, down 47% from November and the lowest since October 2010. All HARP refis fell 36% monthly to 23,000 in December, hitting a low not seen since November 2009.  Total refinancings at Fannie Mae and Freddie Mac rose 5% to 376,000.  The data released by the Federal Housing Finance Agency (FHFA) included no loans with LTV ratios above 125% — now considered eligible. Those changes, dubbed HARP 2.0, took effect at the beginning of December.  Corinne Russell, a spokeswoman for the FHFA, said the agency’s data likely won’t reflect the changes until it releases numbers for the first quarter of this year. She said it typically takes 60 days to originate and close a loan and another 90 days from closing to loan delivery to Fannie and Freddie.

But with the changes, Russell said the agency is hearing that more lenders are refinancing loans with LTV ratios above 105%.  “Anecdotally, we know that lenders are embracing HARP 2.0, originating loans under the new terms,” Russell said in an email.  Analysts reviously predicted effects if the changes might not surface until February’s data.  HARP refinancings totaled 93,000 in the fourth quarter, bumping up the cumulative total 10% to 1.02 million over the life of the program.  Mortgage servicers closed 19,500 trials through the Home Affordable Modification Program in the fourth quarter, bringing the cumulative total to roughly 400,000. Active HAMP trials ended the fourth quarter at 36,391, down from 42,279 as of Sept. 30.  Short sales and deed-in-lieu deals increased 13% to roughly 35,000 in the fourth quarter, the highest total since the government placed Fannie and Freddie into conservatorship.  Julia Gordon, FHFA manager of single-family policy, said the agency is working to streamline policies in those programs.  “It’s not as if there’s some enormous gulf between the policies,” Gordon said. “Even small differences in policy can create frictions that are not necessary.”  Foreclosure starts at the government-sponsored enterprises declined to 218,000 from 224,000 in the third quarter, and mortgages 90-plus days delinquent dipped slight to 3.78% from 3.81% of Fannie and Freddie’s portfolio. Florida led states in those delinquencies at 11.5%, followed by Nevada and New Jersey at 8.3% and 6.3%, respectively.

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 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
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