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Fannie and Freddie Servicer Response Timelines on Preforeclosure Sales

by admin on April 27, 2012

Fannie and Freddie Servicer Response Timelines on Preforeclosure Sales

When evaluating a borrower’s request for Fannie Mae’s Home Affordable Foreclosure Alternatives (HAFA) program or the non-HAFA program for Fannie Mae preforeclosure sales, servicers must comply within the response times described in Servicing Guide Announcement SVC-2012-07,  Changes to Servicer Response Times and the Preforeclosure Sale Process  and outlined in the table below.  Servicers must document the mortgage servicing loan file for validation of compliance with these response timelines.

Fannie Mae HAFA – Servicer Evaluation of Borrower Response Package (BRP)

-  Within 3 business days of receipt of the BRP – The servicer must acknowledge receipt of the BRP to the borrower either verbally or in writing.

-  Within 5 business days of receipt of the BRP – If the servicer determines that documentation is missing, the servicer must send an Incomplete Information Notice to the borrower.

- Within 5 business days of a decision but in no event more than 30 calendar days after receipt of a complete BRP – The servicer must send an Evaluation Notice to the borrower.  If the servicer determines a HAFA Short Sale is the most appropriate foreclosure alternative, the HAFA Short Sale Agreement (Form 184) and the HAFA Request for Approval of Short Sale without Short Sale Agreement (Form 185) should be included with the Evaluation Notice.

Within 30 calendar days after receipt of the complete BRP but in no event more than 60 days after receipt of the complete BRP – If the servicer is unable to fully evaluate the

borrower for a HAFA, including preparation of the Form 184 and Form 185, an extension of 30 calendar days is permitted as long as the servicer provides weekly verbal or written status updates to the borrower. All communication must be documented in the mortgage loan servicing file.  The servicer must send the Evaluation Notice no later than 60 days after receipt of the complete BRP. 

- Within 14 calendar days after return of a fully executed Form 184 – The servicer must allow the borrower 14 calendar days to return a fully-executed Form 184 with required documentation.

- Within 10 calendar day extension of return of fully executed Form 184 – If necessary, the servicer may allow the borrower up to 10 additional calendar days to complete the Form 184 submission.

-  Within 10 business days of receipt of the Form 185 – The servicer must respond with a decision of approval or denial. 

*If the offer results in net proceeds equal to or greater than the minimum acceptable net proceeds (MANP), the servicer must approve the short sale.  

*If the offer does not result in net proceeds equal to or greater than MANP, the servicer must provide a counteroffer with the denial.  

* The MANP should not be disclosed to the borrower. 

- 5 business days after communicating a counteroffer – The servicer must request a response from the borrower on the purchaser’s decision of a counteroffer.

- Within 10 business days after receipt of revised offer – The servicer must respond with a decision on a revised offer from the borrower. 

*If the offer results in net proceeds equal to or greater than the MANP, the servicer must approve the short sale.  

*If the offer does not result in net proceeds equal to or greater than the MANP, the servicer may provide a counteroffer with the denial.  

*The MANP should not be disclosed to the borrower.

Fannie Mae’s Non-HAFA Preforeclosure Sale – Prior to Receipt of a Preforeclosure Sale Offer

-  Within 3 business days of receipt of the BRP – The servicer must acknowledge receipt of the BRP to the borrower either verbally or in writing.

-  Within 5 business days of receipt of the BRP – If the servicer determines that documentation is missing, the servicer must send an Incomplete Information Notice to the borrower.

-  Within 5 business days of a decision but in no event more than 30 calendar days after receipt of a complete BRP – The servicer must send an Evaluation Notice to the borrower. The Evaluation Notice should include the approved model language provided on eFannieMae.com.

Fannie Mae’s Non-HAFA Preforeclosure Sale – Preforeclosure Sale Offer Received with a BRP

-  Within 3 business days of receipt of the offer  The servicer must acknowledge receipt of a short sale offer. 

-  Within 5 business days of receipt of the offer  If the servicer determines that documentation is missing, the servicer must send an Incomplete Information Notice to the borrower.

-  Within 5 business days of a decision but in no event more than 30 calendar days after receipt of a complete BRP – The servicer must respond to the short sale offer with approve, approve with conditions, deny with counteroffer, or “still under review.”

-  5 business days after communicating a counteroffer If the response is “deny with counteroffer,” the servicer must request a response from the borrower on the purchaser’s decision of a counteroffer.

-  Within 10 business days after receipt of revised offer  The servicer must ensure that revised offers are evaluated within time frames that enable a decision to be communicated to the borrower within 10 business days after receipt of the revised offer.

-  30 calendar days after receipt of the BRP  If the servicer responds with “still under review,” an extension of 30 calendar days is permitted as long as the servicer provides weekly verbal or written status updates.   All communication must be documented in the mortgage loan servicing file.

-  Within 60 calendar days of receipt of the BRP and offer – The servicer must respond with a final decision.

Economic growth flat

Gross domestic product (GDP) expanded at a 2.2 percent annual rate, the Commerce Department said on Friday in its advance estimate, moderating from the fourth quarter’s 3 percent rate.  While that was below economists’ expectations for a 2.5 percent pace, a surge in consumer spending took some of the sting from the report. However, growth was still stronger than analysts’ predictions early in the quarter for an expansion below 1.5 percent. Although the details were mixed, the GDP report offered a somewhat better picture of growth compared with the fourth quarter, when inventory building accounted for nearly two thirds of the economy’s growth. In the first quarter, demand from consumers took up the slack.  Consumer spending which accounts for about 70 percent of U.S. economic activity, increased at a 2.9 percent rate – the fastest pace since the fourth quarter of 2010. That compared to a 2.1 percent rise in the fourth quarter.  Business spending fell at a 2.1 percent pace after rising 5.2 percent in the fourth quarter.

Excluding inventories, GDP is rose at a 1.6 percent rate. In the fourth quarter, the comparable figure was just 1.1 percent.  Elsewhere, growth in the first quarter was held back by a another drop in government defense spending, which confounded expectations for a strong rebound. An increase in exports was offset by a rise imports, causing trade to have virtually no impact on growth. Separately, civilian employment costs rose more modestly by 0.4 percent during the first quarter, primarily because growth in benefits slowed after a sharp rise in last year’s fourth quarter, Labor Department data showed on Friday.  The gain in employee costs was slightly lower than the 0.5 percent rise forecast by analysts surveyed by Reuters. Costs had increased 0.5 percent in the final three months of 2011.  Benefit costs, which account for 30 percent of compensation, grew by 0.5 percent in the first quarter after a sharp 0.7 percent rise in last year’s fourth quarter.  Wages and salaries – the other 70 percent of costs – were up 0.5 percent in the first three months this year, a pickup from the 0.3 percent gain posted in last year’s closing quarter.

Olick – foreclosures return

“Big jumps in foreclosure activity in cities like Pittsburgh, Indianapolis, New York and Raleigh pushed the national numbers higher in the first three months of this year, according to a new report from RealtyTrac, an online foreclosure sales and data company.  A majority of U.S. housing markets posted a quarterly increase in foreclosure activity, although the numbers are still down from a year ago.  ‘First quarter metro foreclosure trends were a mixed bag,’ said Brandon Moore, chief executive officer of RealtyTrac, adding that the increase in the number of cities seeing a quarterly jump is, ‘an early sign that long-dormant foreclosures are coming out of hibernation in many local markets.’ Tracking foreclosure activity is a tricky business right now, as the system has been roiled with problems left over from the so-called ‘robo-signing’ foreclosure paperwork scandal.  The five largest banks signed a $25 billion settlement agreement earlier this year, requiring them to do more modifications and write down principal on some troubled loans. While some expected foreclosure numbers to surge, as states that require a judge in the foreclosure process finally start pushing the documents through again, but more recent data has shown the opposite. As banks work on saving more loans or doing foreclosure alternatives, like short sales, deeds in lieu of foreclosure, or deeds for rent programs, the final foreclosure numbers are falling. New mortgage delinquencies are also falling, thanks to a slowly improving jobs picture.

Still, inventories of properties in the foreclosure process are still abnormally high, and some of the usual markets are the culprits. Stockton and Modesto, California still have the highest foreclosure rates in the nation, while Las Vegas dropped to the eighth spot, with foreclosure activity down 61 percent from a year ago. The Phoenix market is also improving, although still in the top ten list of foreclosure rates.  Just over 7 percent of U.S. loans were in some stage of delinquency in March, and 4.14 percent were in the foreclosure process, according to a new report from Lender Processing Services. The delinquency number is down almost 9 percent from a year ago, but the foreclosure inventory is fairly flat, down 1.6 percent from a year ago, but up slightly from the previous month. 5.6 million properties are still in some stage of delinquency or foreclosure. These numbers, negative home equity, and still-tight credit are the largest impediments to a robust recovery in the housing market.”

Treasury Secretary wants to open markets to China

Treasury Secretary Timothy Geithner said Thursday the United States was willing to open up its markets to China and give it more access to U.S. technologies if Beijing made progress on issues that concern the United States.  Also Thursday, a top GOP lawmaker pressed the Obama administration to increase pressure on China to make currency and trade reforms.  The comments came ahead of the U.S.-China Strategic and Economic Dialogue meetings in Beijing next week. “We are willing to continue to make progress on these issues, but our ability to do so will depend in part on how much progress we see from China on issues that are important to us,” Geithner said. He repeated that China’s currency, the yuan, needed to appreciate more rapidly and pledged that the United States would continue to push aggressively for fair treatment of U.S. companies doing business with China.  Rep. Dave Camp, chairman of the House of Representatives Ways and Means Committee, urged the administration to negotiate an investment treaty with China and to press the world’s second-largest economy to make reforms.  “Plain and simple, we cannot allow China to continue its unacceptable trade practices,” the Michigan Republican said in a speech, referring to longstanding barriers to U.S. exports and the widespread piracy and counterfeiting of U.S. goods.  “The litany of China’s trade distorting policies is deeply troubling and cannot be allowed to stand,” Camp said. “In addition, we should pursue a Bilateral Investment Treaty (BIT) with China.”  Camp’s call for the United States to begin talks with China on a treaty comes one week before Geithner and Secretary of State Hillary Clinton travel to Beijing for high-level talks.

Remodelling Market Index (RMI) flat

Due to a recently discovered computer coding error, the National Association of Home Builders (NAHB) has revised the RMI going back to 2006. The error had slightly reduced the true values of the overall index, as well as its two major components. The revisions generally show a one point or less quarterly increase, with quarter-to-quarter patterns remaining relatively unchanged. Some of the subcomponents experienced larger revisions but in a counteracting fashion, so that the impact on the primary indicators was muted.  Remodeling activity remained relatively flat in the first quarter of 2012, as the Remodeling Market Index (RMI) compiled by the National Association of Home Builders decreased one point to 47 from the upwardly revised 48 in the previous quarter.  The overall RMI combines ratings of current remodeling activity with indicators of future activity. An RMI below 50 indicates that more remodelers report market activity is lower (compared to the prior quarter) than report it is higher.

In the first quarter, the RMI component measuring current market conditions dropped one point to 49, while the component measuring future indicators of remodeling business fell two points to 44.  “We are seeing that the demand for remodeling work has been pulled forward because of a mild winter,” said NAHB Remodelers Chairman George “Geep” Moore Jr., GMB, CAPS, GMR and owner/president of Moore-Built Construction & Restoration Inc. in Elm Grove, La. “That is why many remodelers reported lower numbers for future activity.”  The three components measuring current market conditions moved in different directions in the first quarter: major additions remained even at 44; minor additions rose one point to 52; and maintenance and repair dropped four points to 51. Two of the four components measuring future market indicators decreased: backlog of remodeling jobs dropped four points to 43 and appointments for proposals fell five points to 45. Meanwhile, calls for bids rose one point to 47 and amount of work committed for the next three months remained even at 42.  Regionally, remodeling market conditions in the West increased three points to 47, while the other three regions showed declines: the Northeast to 48 (from 55), the Midwest to 50 (from 52) and the South to 46 (from 49).

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California Bay area sales up

by admin on April 23, 2012

Illinois prices turn around

Median home prices in Illinois snapped a 20-month streak of price declines in March, a turnaround coinciding with the start of the spring selling season.  The statewide median price in March came in at $130,000, even with March 2011, according to the Illinois Association of Realtors. It’s the first time the state’s median price hasn’t decreased since June 2010.  “There’s no doubt that these are strong numbers to open the spring selling season,” said IAR President Loretta Alonzo. “To see such good sales numbers, coupled with a measure of price stability is encouraging news no matter what side of a real estate transaction you happen to be on.”  Illinois home sales posted the best March sales numbers since 2007. Home sales (including single-family homes and condominiums) in the month totaled 9,575, expanding 21.1% from 7,904 home sales a year earlier.  In the nine-county Chicago Primary Metropolitan Statistical Area, 6,590 homes were sold in March, up 23.8% from March 2011 sales of 5,323 homes. The median price in March was $151,850 in the Chicago PMSA, down 3.9% compared to a year earlier when it was $158,000.  “Sales volumes are up, time-on-the-market levels are down significantly from a year ago and prices appear to be stabilizing in Illinois although continuing to fall in Chicago,” said Geoffrey Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois.  “Further, in the last month there was a more even spread of sales prices compared to previous months where homes sold for less than $200,000 dominated the market,” Hewings added.

Hiring going up?

The National Association of Business Economics’ (NABE) industry survey found that 39 percent of respondents expect hiring will pick up in their companies and industries during the next six months, up from 27 percent in January.  Some 48 percent of respondents expect hiring will hold steady. While that is down from 64 percent in January, it still underscores the slow pace of recovery in the labor market following the 2007-2009 recession.  The survey was conducted between March 20 and April 10.  The NABE surveyed 55 members from companies and trade organizations. Not all responded to every question.  The uptick in demand for labor could be leading companies to offer bigger paychecks. Some 44 percent of respondents said wages and salaries were rising, up from 26 percent in January.  The poll also showed 63 percent of respondents expected U.S. gross domestic product to grow between 2.1 and 3 percent in the fourth quarter from a year earlier.  In the NABE’s previous poll released in January, 60 percent of respondents expected growth in that range.

Olick – Phoenix turns around

“Mike Ripson hasn’t built a home in three years, but he is about to. He has been sitting on one hundred sixty acres of land just outside Phoenix, Arizona, which he intends to divide into 121 one-acre lots.  ‘Now’s the time because we’ve been studying the marketplace, and we noticed beginning late last summer, early fall, that for homes priced less than $100,000, the market was becoming very tight,’ says Ripson, whose company is celebrating its ten year anniversary this week.  ‘Over the last several months that price point has increased such that today, homes priced less than 300,000 dollars, there’s less than a thirty-day supply in the marketplace,’ Ripson adds.  The supply of homes for sale in the Phoenix area is down 42 percent from a year ago, and foreclosures are down 52 percent, according to Michael Orr, of the Real Estate Center at ASU. That is bringing demand back to the builders.  Ripson is building about 40 miles outside of Phoenix in Wittmann, where there is less competition from foreclosures.  ‘To give you an example, within a five mile radius of where we sit here at Sonoran Acres, two months ago there were 18 homes on the market. Today there’s only one,’ says Ripson.  That’s why he re-opened his model home two weeks ago, and immediately saw high buyer traffic. He filed permits for two new homes, which he expects to sell in the next few weeks, thanks to his low, $200,000 price point. 

Closer in to Phoenix, prices are a bit lower, thanks to a higher supply of distressed properties, but those properties are selling fast as well, as large scale and institutional investors flood the market.  ‘I really think we’re at the top of the first inning in terms of this opportunity, and there will be ebbs and flows, ups and downs, people will come in and come out,’ says Justin Chang, principal at Colony Capital, which intends to invest over a billion dollars in distressed properties this year.  ‘But if you’re looking to build a business over the next five to seven years, this is the first inning, and we’re pretty excited about it,’ Chang goes on to say.  Colony has a history of investing in commercial real estate, but about a year ago they saw the potential as well in the single family rental market. They began building an infrastructure, and started buying homes last month from banks, the government and at auction.  They own 170 homes in three states so far and intend to close on fifty more this week. They spend $3,000 to $5,000 rehabbing each home and readying it to rent. Their team is entirely internal, which they say saves them extra costs.  ‘We’ve got our internal team doing acquisitions, we’ve got our internal team doing the rehab and we’ve got an internal team doing the property management. These are employees,’ explains Jay McKee, COO of Colony American Homes.  ‘We have 120 people on our payroll, W-2 employees, right now doing this work. A lot of other folks are doing it by outsourcing to third parties,’ says McKee. ‘We think by doing it in house, we can do it without markups.’

At a Colony home in Laveen, AZ, a suburb of Phoenix, workers were installing new appliances into a former foreclosure, as the old ones had been stolen. Nearby, a large development from Pulte Homes advertised new construction starting at $100,000. McKee is not concerned.  ‘There are people who cannot buy those homes, and those are our clients. The people that lost their home to foreclosure, are repairing their credit, or just decided they don’t want to be owners of properties anymore, they’re our client,’ confirms McKee.  Colony is considering a program to help their renters become buyers, much like some rent-to-own programs being considered by banks and the government. Colony has also been pre-approved to bid on Fannie Mae foreclosures through a new pilot program by the Federal Housing Finance Agency (FHFA).  ‘We really understand what they want to accomplish, and we think we can be good partners,’ says Chang. ‘The pilot programs that are out there now are very smart, and I hope they are the first of many.  Colony is just one of a growing cadre of investment teams buying distressed real estate to rent. Chang expects to see returns of anywhere from 15 to 25 percent on his investment. Cash flow is almost immediate. He says he can rehab a home in three days and have it rented in less than a month. 85 percent of Colony’s homes are already rented.  As for competition in the space, which Chang calls a pioneering asset class, he’s not concerned.  ‘The opportunity is so vast that there’s room for a lot of companies,’ Chang says. ‘Eight to ten million homes will be foreclosed over next 3-5 years. That’s $800 billion in capital required. Fifty other firms could do it, and it still would be a drop in the bucket. We’re really just a small part of the game at this point.’”

Gas prices down

The average retail price of a gallon of gasoline in the United States declined for the first time since mid-December, dropping 5.44 cents over the past two weeks, the nationwide Lundberg Survey showed.  The national average for a gallon of regular gasoline fell to $3.9127 on April 20, from $3.9671 on April 6, according to the survey of gasoline retailers in the continental United States.  Still, drivers are paying 3.27 cents more for a gallon than they did a year ago.  “The decline began in California about six weeks ago,” survey editor Trilby Lundberg said, adding that prices peaked there on March 9 at $4.3162 and fell in subsequent surveys by nearly 15 percent to $4.1669.  Drivers in Chicago continued to pay the most at the pump — $4.26 per gallon — even though prices fell nearly 19 cents from April 6.  Prices in Tulsa, Oklahoma, remained lowest at $3.52 per gallon.  “If crude oil does not shoot back up we may find another price decline of 5-10 cents in the coming weeks,” Lundberg said.  Average diesel prices fell 4.15 cents to $4.1735 compared with two weeks earlier.

California Bay area sales up

March home sales in California’s Bay Area reached their highest level for the month in five years, the result of lower prices, low interest rates and an improving economy.  About 7,700 new and resale houses and condos sold in the nine-county Bay Area in March, up 34.9% from 5,702 in February, and up 9.1% from 7,051 a year earlier, according to San Diego-based DataQuick.  The February to March sales jump is normal for the season, but the latter’s sales count was the highest for the month since 8,317 homes were sold in 2007. Since 1988, March sales have ranged from 4,898 in 2008 to 12,645 in 2004, with an average of 8,812.  “This is the time of year when buying patterns usually start to normalize,” said DataQuick President John Walsh. “And while the changes we’re seeing are incremental, they’re incremental in a positive direction. That said, there’s a long way to go.”  The median price paid for all new and resale houses and condos sold in the Bay Area in March totaled $358,000, a 10.2% increase from $325,000 in February, but down 0.6% from $360,000 in March 2011. 

To put these figures in perspective, the low point of the current real estate cycle fell to $290,000 in March 2009, while the peak rose to $665,000 in June/July 2007.  Statewide median home prices posted their first year-over-year increase in 16 months. The California Association of Realtors members said tight inventory (4.1 months) throughout the state and particularly robust sales in the San Francisco Bay area helped fuel the price increase.  “Two of the big issues to watch closely are how fast distressed properties are being put on the market, and the availability of, or lack of availability of, mortgage financing,” DataQuick’s Walsh said.  Distressed property sales, according to the firm, made up 44.3% of the resale market, down from 48.8% in February and 48.2% a year earlier.  Foreclosure resales accounted for 24.9% of resales in March, falling from 26.4% in February, and down from 31.5% in the year-ago period. Foreclosure resales averaged about 10% over the past 17 years.  Short sales made up 19.4% of Bay Area resales in the month, down from 22.4% in the previous month and up from 16.7% a year earlier.

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Understanding the Multifamily Applicant Risk Index (MAR Index)

by admin on April 19, 2012

Foreclosure backlog looms

RealtyStore has completed a new study of the foreclosure status in three major housing markets, finding the amount of pending listings exceeds the amount of active foreclosures listed for sale by a margin of over 2 to 1. This shadow inventory of foreclosed homes illustrates the significant overhang of foreclosure listings that are anticipated to be unleashed on the housing in the wake of resolving the so-called foreclosure robo-signing situation in late 2010. The study was conducted for Cook County, IL (including metro Chicago), Miami-Dade County, FL (including metro Miami) and Maricopa County, AZ (including metro Phoenix).  Foreclosure counts in each location were tabulated by owner, including bank or lender owned homes, foreclosures owned by Fannie Mae or Freddie Mac, and HUD homes. Although Arizona had previously been one of the hardest hit areas for foreclosure activity, Cook County, IL shows a near equal total amount of foreclosed homes. Miami-Dade foreclosures number at roughly half the count of either other market.

The breakdown of active foreclosure listings vs pending, or shadow inventory, foreclosures listings was consistent across each market surveyed. On average, 29% of total foreclosures across the counties are currently listed for sale. Cook County, IL foreclosures were most heavily represented with active listings, with 32% of its foreclosures presently being marketed to buyers, and 68% of foreclosures pending listing. Maricopa County, AZ foreclosure listings for sale represent only 25% of recorded foreclosures in the county, with 75% of local foreclosures yet to be listed for re-sale. Miami-Dade, FL currently offers 29% of its total foreclosures on the market for re-sale, with 71% of its foreclosure inventory awaiting listing on the market.  According to RealtyStore, median list prices of foreclosures for sale in Cook, Maricopa and Miami-Dade counties continue to run below average home prices. Cook County foreclosures are listed at a median price of just $72,650 and an average price of $95,997. Miami-Dade foreclosures list at a median price of $106,900 and average $145,059, while Maricopa lists foreclosed homes slightly higher with a median of $109,900 and the average foreclosure listed at a price of $168,744.

The foreclosure median list prices come in at 56% and 42% below the median sales prices of single-family homes selling in metro-Chicago and Miami, respectively, as reported by the NAR in Q4, 2011. Metro-Phoenix posts a smaller price gap at 7%, suggesting foreclosure saturation may be peaking in Maricopa County.  Individual foreclosure listings continue to cover all portions of the pricing spectrum, ranging from as low as $5,900 for a single family foreclosed home in Chicago, IL to as high as a foreclosed estate in Paradise Valley, AZ listed at $5,700,000.

Jobless claims up

Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 386,000, the Labor Department said. But the prior week’s figure was revised up to 388,000 from the previously reported 380,000.  The four-week moving average for new claims, considered a better measure of labor market trends, rose 5,500 to 374,750.  Economists polled by Reuters had forecast claims falling to 370,000 last week.  The claims data covered the week for April’s nonfarm payrolls survey. The four-week average of new applications rose marginally between the March and April survey periods, suggesting not much change in labor market conditions.  Employers added 120,000 new jobs to their payrolls in March, the least since October, after averaging 246,000 jobs per month over the prior three months. Most economists have viewed the pull-back in job growth as payback after the weather-induced gains in the previous months.  The number of people still receiving benefits under regular state programs after an initial week of aid rose 26,000 to 3.30 million in the week ended April 7.  The number of Americans on emergency unemployment benefits fell 19,419 to 2.78 million in the week ended March 31, the latest week for which data is available.  A total of 6.77 million people were claiming unemployment benefits during that period under all programs, down 187,807 from the prior week.

CoreLogic – First Quarter 2012 Multifamily Applicant Risk Index Report

CoreLogic today announced that CoreLogic SafeRent, provider of the nation’s leading suite of screening and risk management services designed for the multifamily housing industry, released its first quarter 2012 multifamily applicant risk (MAR) index report. The first quarter MAR Index value increased one point from the fourth quarter 2011 and three points from a year ago, indicating an increase in national renter credit quality and slightly better applicant pool.  The MAR Index for first quarter 2012 is based exclusively on applicant traffic credit quality scores from the CoreLogic SafeRent statistical lease screening model (Registry ScorePLUS) and is updated quarterly to provide property owners and managers with a benchmark against which to evaluate their applicant credit quality trends against market based MAR Index trends. This comparison indicates the relative strength of their property portfolio to attract and secure applicants with higher credit quality and an increased likelihood of fulfilling lease obligations.

When comparing applicants for one- versus two-bedroom units, the first quarter 2012 MAR Index is slightly higher for one-bedroom units at 102, compared with 101 for two-bedroom units.  Regionally, the South and Midwest reflected the lowest MAR Index, each with values of 98, a one point increase from the fourth quarter 2011. The Northeast continues to maintain the highest MAR Index with a value of 111.  The three Metropolitan Statistical Areas (MSA) with the steepest decreases in the MAR Index were Cincinnati-Middletown, Ohio, Ky., Ind.; Columbus, Ohio; and Birmingham-Hoover, Ala.; each with decreases of three points. The three MSAs with the greatest increases in the MAR Index were Chicago-Naperville-Joliet, Ill., Ind., Wis.; Denver-Aurora, Colo.; and Salt Lake City, Utah; each with increases of four points. 

Understanding the Multifamily Applicant Risk Index (MAR Index)

The MAR Index is published quarterly by CoreLogic SafeRent. It provides trends of national and regional traffic credit quality scores whereby a lower index value indicates an applicant pool with a higher risk of not fulfilling lease obligations. A MAR Index value of 100 indicates that market conditions are equal to the national mean for the index’s base period of 2004. A MAR Index value greater than 100 indicates market conditions with reduced average risk of default relative to the index’s base period mean. A value less than 100 indicates market conditions with increased average risk of default relative to the index’s base period mean. The MAR Index is derived from the statistical screening model from CoreLogic SafeRent, which is the multifamily industry’s only screening model that is both empirically derived and statistically validated. The statistical screening model was developed from historical resident lease performance data to specifically evaluate the potential risk of a resident’s future lease performance. The model generates scores for each applicant indicating the relative risk of the applicant not fulfilling lease obligations. A lower score indicates a more risky applicant.

BOA tops estimates

Bank of America (BOA) reported lower first-quarter profit as the second-largest US bank took accounting charges related to its debt, but results topped analysts’ estimates as credit quality improved.  The bank reported charges of $4.8 billion related to changes in the value of its debt, partially offset by gains of $3.4 billion from equity investments and debt-related transactions.  Excluding debt valuation adjustments, it earned 31 cents a share.  First-quarter net income was $653 million, or 3 cents a share, down from $2.05 billion, or 17 cents per share, a year earlier.  Revenue declined to $22.3 billion from $26.9 billion.  The Charlotte, N.C.-based bank took a loan-loss provision of $2.4 billion, compared with $3.8 billion a year ago.  In its capital markets operations, Bank of America reported sales and trading revenue of $3.8 billion, up from $1.5 billion in the fourth quarter but down from $4.6 billion a year ago.

California foreclosure reform moves forward

Seven bills reforming some foreclosure rules passed committees in the California state legislature this week.  The bills were introduced in February. One set of bills extends protections to tenants, giving them 90 days before eviction after the foreclosure sale of the property. Another increases penalties to banks that fail to maintain blighted homes.  Servicers would be required to provide documentation to the borrower establishing its right to foreclose before the filing first step in the process, under other passed bills. Evidence of ownership and chain of title must also be shown to the borrower.  Two other bills charge servicers a $25 fee for every notice of default recording. The money will fund investigations for California AG Kamala Harris. Another piece of legislation passed by committee allows Harris to convene a grand jury to investigate financial crimes in different jurisdictions.  “All Californians have been impacted by the toll the mortgage and foreclosure process has taken on our neighborhoods,” Harris said. “Our California Homeowner Bill of Rights will provide relief for homeowners, tenants and communities. I thank the authors and supporters of these important bills.”

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Builder confidence down

by admin on April 16, 2012

BOA Florida plan draws 678 short sales

Bank of America’s (BOA) payoff to Florida homeowners who do a short sale instead of dragging out a foreclosure has averaged $12,000 per deal and helped close 678 contracts statewide since it debuted in October.  The Florida-only plan originally targeted 20,000 homeowners with incentives of between $5,000 and $20,000 to forgo the more than two-year foreclosure process and leave their home in “broom swept” condition for a new owner.  Bank of America spokesman Rick Simon said the Charlotte, N.C.-based company remains “enthused” about the pilot program, which generated 3,900 purchase offers and 11,000 verbal agreements from customers who said they were interested in participating.  “We’ve quietly done a little experimentation with a similar plan in one of the non-judicial states, but we are not to the point of announcing a major expansion,” said Simon, adding that monthly short sale volume has more than doubled this year.  “Of particular note is the response from ‘hand-raisers’ who heard about the program and asked to be included without us reaching out to them.” 

To participate, purchase offers had to be submitted by mid-December. Sales must close by Aug. 31.  Attorney Adam Seligman said his North Palm Beach firm of Cohen, Norris, Wolmer, Ray, Telepman and Cohen has closed about a dozen Bank of America short sales in which owners received a cash incentive.  “It’s just difficult dealing with them because they can’t seem to put into writing who qualifies,” Seligman said about Bank of America. “They have general guidelines, but nothing specific.”  Florida was a testing ground for Bank of America because of the state’s high foreclosure rates. Wells Fargo and JPMorgan Chase have similar plans.  In March, Florida ranked fourth nationally in foreclosure activity, with one in every 336 homes receiving some type of foreclosure notice, according to a RealtyTrac report that was released Thursday.  The same report said it takes an average of 861 days to foreclose on a home in Florida.  Short sale incentive money is meant to dissuade struggling borrowers from going through a prolonged foreclosure, which can cost the bank more in the end then a cash payout up front. Typically, the bank also is willing to waive a deficiency judgment, which is the remaining balance on the home seller’s mortgage after the short sale is completed.

Retail up

Total retail sales increased 0.8%, the Commerce Department said on Monday, after rising 1% in February.  Last month’s gains, which surpassed economists’ expectations for only a 0.3% rise, could prompt analysts to raise their first-quarter growth forecasts from an annual pace of around 2.5% currently.  The economy grew at a 3% rate in the fourth quarter.  The rise in sales last month was broad-based, even though Americans paid 27 cents more per gallon of gasoline than they did the prior month.  Motor vehicle sales rose 0.9% after increasing 1.3% in February. Auto sales have accelerated in recent months, boosted by pent-up demand by households.  Excluding autos, retail sales climbed 0.8% last month after advancing 0.9% in February. 

Elsewhere, gasoline sales receipts increased 1.1% after rising 3.6% in February. Excluding autos and gasoline, sales advanced 0.7% in March, adding to the prior month’s 0.5% gain.  Details of the report showed some strength, suggesting consumer spending will continue to support growth.  Last month, clothing store receipts rose 0.9%, while sales at building materials and garden equipment suppliers jumped 3.0% — the largest gain since December.  So-called core retail sales, which exclude autos, gasoline and building materials, rose 0.5% after increasing by the same margin in February. Core sales correspond most closely with the consumer spending component of the government’s gross domestic product report. Sales at restaurants and bars edged up 0.3%, while receipts at sporting goods, hobby, book and music stores rose 0.5%. Sales of electronics and appliances increased 1.0%, the largest gain since October, while receipts at furniture stores climbed 1.1%.

Spring recovery?

Five years after the US housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery.  Reduced prices, record-low mortgage rates, higher rents and an improving job market appear to be emboldening many would-be buyers.  Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.  And many people seem to have concluded that prices won’t drop much further. In some areas, prices have begun to tick up.  Interviews with more than two dozen potential buyers, sellers, brokers, Realtors and economists suggest that confidence is up and that sales will move slowly but steadily higher.  The spring buying season got an early lift-off from an uncommonly warm January and February — a winter that was the best for sales of previously occupied homes in five years. Permits to build houses and apartments rose in February to their highest level since 2008.

Some analysts detected a slight uptick in prices for February and March. CoreLogic, a real estate data firm, says prices for homes not at risk of foreclosure — about two thirds of the market — rose 0.7% in February. It was the first increase in four years. Price gains occurred both in some hard-hit areas, such as Phoenix, and some still-thriving areas like New York and Washington.  In Miami, the average sales price has surged 14% in the past year, according to Trulia, a real estate data firm. In Phoenix, the average is up 13%, in Pittsburgh 9%.  Earnings reports Friday from two big banks suggested that more people are taking out mortgages. JPMorgan Chase issued 6% more mortgages from January through March than it did a year ago and got 33% more applications. Wells Fargo issued 54% more mortgages and received 84% more applications.  Still, few think the housing industry is nearing a return to full health. For that to happen, a robust job market would be needed. More hiring would give more people the money and job security to buy. That would help boost sales and prices.  Such areas as Atlanta, suburban Las Vegas and central California show few signs of recovery. And in some others — from Seattle to Cleveland — home prices have continued to slip. The average has dropped 9% in Seattle over the past 12 months and 7% in Cleveland.

US can handle higher gas prices and 30% taxes

Cheer up, Treasury Secretary Timothy Geithner says not to worry!  According to him, the US economy is in a better position to deal with high gasoline prices and taxes. He added that unseasonably warm winter had lowered overall energy costs for consumers.  “The economy is in a much better position to deal with those pressures … because natural gas prices are down, the overall cost of energy for consumers is down,” Geithner said on ABC’s “This Week” program.  A spike in gasoline prices caused economic growth to brake sharply in the first half of last year. Gasoline prices have risen 64 cents since the start of this year, leaving many Americans with a sense of deja vu, which was further reinforced by a slowdown in the pace of job creation last month.  However, Geithner said it was too early to tell whether the economy, which he described as getting stronger, would go through a repeat of last year. “We can’t tell yet. Obviously, we’ve got a lot of challenges ahead and some risks and uncertainty ahead. And some of those risks are, of course, Europe is still going through a difficult crisis,” he said.  He also dismissed suggestions that the country’s huge budget deficit put it at risk of being the next Greece, adding that the challenge was to bring the deficit down without compromising economic growth.  In a separate interview, Geithner said a proposal to impose at least 30% income tax on Americans making more than a million dollars a year will not hurt the economy by stifling investment and growth.

NAHB – builder confidence down

Builder confidence in the market for newly built, single-family homes declined for the first time in seven months this April, sliding three notches to 25 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, released today. The decline brings the index back to where it was in January, which was the highest level since 2007.  “Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.  “What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said NAHB Chief Economist David Crowe. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”

Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. Each of the index’s components registered declines in April. The component gauging current sales conditions and the component gauging sales expectations in the next six months each fell three points, to 26 and 32, respectively, while the component gauging traffic of prospective buyers fell four points to 18. (Note, the overall index and each of its components are seasonally adjusted.)  Regionally, the HMI results were somewhat mixed in April, with the Northeast posting a four-point gain to 29 (its highest level since May of 2010), the West posting no change at 32, the South posting a three-point decline to 24 and the Midwest posting an eight-point decline to 23.

Fitch – builder confidence should be up

Fitch Ratings believes single-family housing starts will increase 10% in 2012, while new home sales will rise 8%, according to the firm’s latest US homebuilding update.  Still, the ratings giant sees an erratic homebuilding market after witnessing disappointing results for 2011.  “Single-family housing finished well below expectations at the beginning of the year,” Fitch said in its update. “Single-family starts fell 8.5%, while new home sales declined 5.9%. Existing home sales, meanwhile, improved 1.7%.”  Despite challenges in the housing market and the expectation that home prices will remain soft, Fitch expects builders to fare better in 2012 with the market peppered with less competitive rent options and new home inventories at historic lows.  Fitch’s outlook for homebuilders runs from stable to negative, with most builders rated as stable.   The sector continues to face headwinds from a an anemic job market and what Fitch calls “negative buying psychology,” where people are afraid to buy a home, fearing home prices are still vulnerable to decline.  Going forward, Fitch believes public homebuilding firms will add selectively to their developed lot holdings while committing resources to partially or undeveloped land.  “The still irregular flow of appropriately priced land from banks and other sources tends to support this strategy,” Fitch said. “However, if the operating environment becomes more challenged. Fitch expects builders will be more cautious as to land purchase and will preserve cash.”

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Higher prices coming?

by admin on April 12, 2012

WSJ – foreclosures fall, but…

First-quarter foreclosures declined 16% from a year earlier, falling to their lowest quarterly total since 2007, according to the latest report from market researcher RealtyTrac.  The number of foreclosure filings in the first quarter fell 2% sequentially. Default notices, scheduled auctions and bank repossessions were reported on 572,928 US properties in the latest quarter, the lowest level since the fourth quarter of 2007, when 527,740 properties with foreclosure filings were reported. One in every 230 US housing units had a foreclosure filing during the quarter.  In March, there were 198,853 US properties in varying stages of foreclosure, down 17% from a year earlier and 4% from the prior month.  RealtyTrac reported the decline in foreclosure activity is primarily due to decreasing activity in states that use the nonjudicial foreclosure process. Foreclosure filings in these 24 states and the District of Columbia, which represented more than half of the nation’s total during the quarter, fell 28% on the year. States that primarily use the judicial foreclosure process saw a 10% year-over-year increase in foreclosure activity in the first quarter.

RealtyTrac Chief Executive Brandon Moore warned that the low foreclosure numbers in the latest period do not indicate that the massive amount of distressed properties built up over the past few years has evaporated.  “There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March,” Moore said in a statement. “The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen–both in terms of new foreclosure activity and new short sale activity.”  Completing the foreclosure process took an average of 370 days in the first quarter, up from 348 days in the prior quarter. However, RealtyTrac noted the average foreclosure timeline fell in bellwether states like California, Colorado, Utah, Massachusetts and Nevada.

Nevada’s foreclosure activity fell 62% on the year and 26% from the prior quarter, but the state again posted the nation’s highest foreclosure rate. In the latest period, one in every 95 Nevada housing units received a foreclosure filing.  California had the second highest rate, though the state’s default activity also decreased on a quarterly and annual basis. One in every 103 California housing units had a foreclosure filing in the first quarter. The state also had the highest number of properties with foreclosure filings.  Arizona had the third highest foreclosure rate, with one in every 106 housing units receiving a foreclosure filing.

Jobless claims up

Initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 380,000, the Labor Department said on Thursday, defying economists’ expectations for a drop to 355,000.  The four-week moving average for new claims, considered a better measure of labor market trends, rose 4,250 to 368,500.  Some economists blamed the Easter holidays for the spike in claims and expected applications to trend lower in coming weeks.  “It’s very difficult to know the extent to which that’s driven by seasonal effects from Easter or not,” said Eric Green, chief economist at TD Securities in New York.  The claims data comes in the wake of Friday’s disappointing employment report for March, which showed the economy created 120,000 new jobs, the smallest amount since October.  Despite the rise in claims last week, both first-time applications for unemployment aid and the four-week average held below the 400,000 mark, implying steady job gains.

Olick – higher prices coming?

“A response to a recent RealtyCheck blog on home prices included the following:  ‘Someone needs to explain to Ms. Olick what these ‘price declines’ really represent because they most assuredly do not measure how much home values have changed. They simply measure the statistical midpoint for all home sales. So in an economy where people are buying smaller homes that number moves down. That doesn’t mean that every house lost that % value.’  Thanks, but no explanation necessary, as I believe I covered that a while back. But I would like to elaborate a bit on this theme, as we’re starting to see some changes mortgage applications; specifically the average loan amount is rising, which might suggest a turnaround in pricing, due to a change in the type of homes being bought.  The average size of a mortgage purchase application increased 9% from December to the end of March, from $214,500 to $233,300 in March, according to the Mortgage Bankers Association. ‘That points to underlying improvement in borrowers’ appetite for mortgage credit,’ notes Paul Diggle of Capital Economics. 

Just yesterday analysts at Goldman Sachs said both Toll Brothers and Pulte Homes should benefit from more positive sentiment among high end buyers. Their survey showed 63% of respondents expect home prices to be either stable or rise, but 83% of respondents with an annual income above $120,000 expect home prices to be either stable or rise. That’s up from 75% six months ago.  If in fact the higher end buyers start getting back into the market, or at least the move-up buyers, that will shift the volume to a higher price range and consequently the median price, which gets all that national attention. 72% of home sales in February were of homes priced less than $250,000, according to the National Association of Realtors.  Of course, as I always say, all real estate is local, as are all home prices, and let us not forget that.”

Producer prices flat

US producer prices were unchanged last month after advancing 0.4% in February.  Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.3%.  Wholesale prices excluding volatile food and energy costs rose 0.3% after February’s 0.2% gain.  That was a touch above economists’ expectations for a 0.2% advance and marked the fifth successive month of increases in core PPI.  Over one-third of the rise in core PPI was attributed to prices for light motor trucks. Higher costs for passenger cars, soaps and detergents also contributed to the advance in core PPI.  However, manufacturers have limited scope to pass on these increased costs to consumers given the still considerable slack in the economy.  Overall producer prices were held back by a 2.0% fall in gasoline, the largest decline since October, after a 4.3% jump in February. That offset a 0.2% rise in food prices, which halted three straight months of declines.  However, gasoline prices rose 7.5%, when seasonal factors are excluded.  In the 12 months to March, wholesale prices increased 2.8%, the smallest increase since June 2010, after advancing 3.3% in February.  Outside food and energy, producer prices were pushed up by light motor trucks prices, which rebounded 0.7% after falling 0.4% in February. Passenger car prices rose 0.8% after edging up 0.1% the prior month.  The increases likely reflected strong demand for automobiles.  In the 12 months to March, core producer prices increased 2.9% after rising 3.0% the previous month.

Loan demand improves

Loan demand in the banking industry, as well as residential and commercial real estate activity, improved in most Federal Reserve districts across the US, according to the latest Beige Book from the Fed.  The survey, which develops a consensus on economic activity by interviewing industry contacts in every Federal Reserve district, reported that the US economy continued to grow at a modest pace from mid-February to late March.  Residential real estate activity also improved in most districts, with Cleveland and San Francisco remaining outliers with lackluster real estate activity.  Nationwide construction of multifamily housing units grew in most Fed districts, with most of the construction centered around apartments and senior housing.  Meanwhile, home prices continued to fall in key areas like Boston, New York and Minneapolis. Prices remained flat in San Francisco.  Mild winter weather during the first part of the year delivered a slight boost in real estate activity in the areas of Boston, Philadelphia and Kansas City. 

Conditions in the financial services and banking industry remained “stable” as demand for lending increased modestly. While lending remained unchanged in St. Louis, it expanded in New York, Philadelphia, Cleveland, Richmond, Chicago, Kansas City, Dallas and San Francisco.  “In general, the demand for commercial and industrial loans remained steady, while several districts reported an increase in commercial real estate lending activity,” the Beige Book said.  “The Philadelphia and Cleveland districts reported increased lending for multifamily housing and health care, and contacts in Richmond cited increased lending to small business to finance inventory and capital expenditures.”  Overall, residential real estate showed signs of modest improvement and multifamily housing construction continued to grow. On the banking side, credit quality increased and financial firms noted improvement in loan demand.

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