inflation

CoreLogic – less than 1% decrease in housing prices

CoreLogic today released its March Home Price Index (HPI) report which shows that nationally home prices, including distressed sales, declined on a year-over-year basis by 0.6% in March 2012 compared to March 2011. On a month-over-month basis, home prices, including distressed sales, increased by 0.6% in March 2012 compared to February 2012, the first month-over-month increase since July 2011.  Excluding distressed sales, month-over-month prices increased for the third month in a row. The CoreLogic HPI also shows that year-over-year prices, excluding distressed sales, rose by 0.9% in March 2012 compared to March 2011. Distressed sales include short sales and real estate owned (REO) transactions.  “This spring the housing market is responding to an improving balance between real estate supply and demand which is causing stabilization in house prices,” said Mark Fleming, chief economist for CoreLogic. “Although this has been the case in each of the last two years, the difference this year is that stabilization is occurring without the support of tax credits and in spite of a declining share of REO sales.”  “While housing prices remain flat nationally, in many markets tighter inventories are beginning to lift home prices,” said Anand Nallathambi, president and chief executive officer of CoreLogic. “This is true in Phoenix, New York and Washington, for example, which all reflect higher home price values than a year ago. A continuation of this trend will be good for our industry across US markets.”

Highlights as of March 2012

-  Including distressed sales, the five states with the highest appreciation were:  Wyoming (+5.9%), West Virginia (+5.3%), Arizona (+5.1%), North Dakota (+4.7%) and Florida (+4.5%).

-  Including distressed sales, the five states with the greatest depreciation were: Delaware (-10.6%), Illinois (-8.3%), Alabama (-8.0%), Georgia (-7.3%) and Nevada (-5.8%).

-  Excluding distressed sales, the five states with the highest appreciation were: Idaho (+5.4%), North Dakota (+5.1%), South Carolina (+4.7%), Montana (+3.5%) and Kansas (+3.4%).

-  Excluding distressed sales, the five states with the greatest depreciation were: Delaware (-7.6%), Alabama (-4.1%), Nevada (-3.9%), Vermont (-3.9%) and Rhode Island (-2.9%).

-  Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to March 2012) was -33.7%. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -24.5%.

-  The five states with the largest peak-to-current declines including distressed transactions are Nevada (-59.9%), Arizona (-48.6%), Florida (-48.1%), Michigan (-45.1%) and California (-42.7%).

-  Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 57 are showing year-over-year declines in March, eight fewer than in February.

Business confidence lackluster

While the National Federation of Independent Business’ Small Business Optimism Index rose two points in April to 94.5, the index is back to the same level it had been in February 2011.  “It’s positive from last month,” said NFIB chief economist William Dunkelberg. “But we’re in the same place as a year ago, so a whole year has gone by and we don’t go anywhere.”  In areas like capital outlays, indications are that while things are slowly improving, it’s “nothing to write home about,” said Dunkelberg. The Index now stands at 54%, far above the 44% in August 2010, but below the average rate of 60%.  “In the smallest businesses, we’re seeing improvement,” said Dunkelberg, “but it’s going on under the government’s radar. It will take a while before it registers” in the national picture, he said, pointing to the job creation number in particular. “Hopefully this time they will not deteriorate again.” and that’s pretty much the hope for all 10 categories in the index, many of which have, over the course of the past few years, seen ups and downs.  “We keep getting these head fakes, like last year, and we’re wondering if [the index] will do it again,” said Dunkelberg, referring to March 2011, when the survey took a dip, and then continued a downward trend throughout the spring and summer, only starting to rise again last October. “Last year, it kept getting worse; this time March took a dive, then came back.”

Regulations stifle mortgage market

Rulemakings will dominate the mortgage industry this year as the sector continues its “slow, bumpy road to recovery,” keynote speakers said as the Mortgage Bankers Association’s (MBA) secondary conference got into full swing Monday in New York City.  The rulemaking surrounding the Qualified Mortgage — or QM, repurchase requests, national servicing settlements and government-sponsored enterprise reform will dominate the year, said David Stevens, president and CEO of the MBA. But despite the attention to those four key areas, the MBA is tracking some 100 rulemakings in the Dodd-Frank Act.  Monday’s opening session was part feel-good, part dire warning as speakers struck a balance between the good and the bad in the current marketplace.  An opening video, for example, provided the feel-good atmosphere. It showed an MBA member’s recollections of his immigrant father buying a tract home in the New York burrough of Queens after World World II.

Mitch Kider, with Washington, D.C.-based law firm Weiner Brodsky Sidman Kider PC, recounted the reverence his father felt for the bank that provided the Federal Housing Administration loan that made it all possible.  “The people that work in this industry are working there because their heads and their hearts are in the right place,” he said. “As mortgage bankers, you are doing wonderful things for society.”  Stevens brought things back to earth by voicing borrower trepidation to buy homes, lender concern over burdensome regulations and investor mistrust of the process.  Borrowers, especially those on the margins, could be negatively impacted if the qualified mortgage rule — what he called “the holy grail of who gets access to a mortgage” — is too narrowly defined.  The need for more clarity in the system, for borrowers, lenders, mortgage servicers and investors, was a recurring theme from opening speakers.  On GSE reform, Stevens urged the industry do what it can without Congress, where he predicted a continued logjam.  “We need to take control of our own destiny,” he said.

Lewis Ranieri, chairman and founding partner of Ranieri Parnters, widely considered a pioneer of modern mortgage finance, said the industry must be aware of those would not be content to fix the capital market but who believe the capital markets “are not simply broken … but are profoundly the wrong thing to do.”  If it doesn’t stay aware, the industry may end of with a fundamental rewrite of the way it does business, where everything resides on the balance sheet, he said.  Two mortgage businesses came to him recently about a possible sale due to the tough regulatory environment, Ranieri said.  “I truly believe the future of our industry is decided in the next eight months,” he said. “There is a regulatory movement that isn’t just trying to fix, it’s trying to change.”  Richard Dorfman, managing director of the Securities Industry and Financial Market Association, or SIFMA, said it falls on the industry to define the issues in ways that resonate with consumers.  Instead of complaining that Dodd-Frank is a burden to the banks, regulations should be defined in ways that show how they limit mortgage access to potential homebuyers, for example, he said.  “Consumers must be served, and they can and will be served by this industry,” he said. “There is no doubt in my mind.”

Krugman’s ideas “reckless” and “silly”

The president of the Federal Reserve Bank of Dallas, Richard Fisher, rejected the idea that higher inflation would spur the economy on Monday.  Saying the last thing businesses needed in this economy was uncertainty, Fisher sided with Federal Reserve Chairman Ben Bernanke in his public feud with Paul Krugman, the leftwing economist and New York Times columnist.  Called “The Battle of the Beards” by The Washington Post, the back-and-forth between the two economists began when Krugman called on the Fed to raise inflation targets, a move Bernanke called “reckless.”  “I would say that Ben Bernanke’s guilty of understatement. It would be more than reckless. It’s a silly thing to recommend,” Fisher said.  “I understand the argumentation from Krugman’s standpoint, from his perspective. He’s just trying to broaden the window to try to make things normal if we were to go below the 2% rate. That’s our long-term target. I believe we’re going to stick with it. I personally feel that this is something that is ultra-critical for our credibility.”

Olick – $150,000 off?

“A select group of struggling mortgage borrowers are about to get an offer that sounds too good to be true. Executives at Bank of America say they will begin mailing 200,000 letters offering certain customers mortgage principal reduction.  ‘If people get these things and toss them, they won’t be eligible,’ says Ron Sturzenegger, the Bank of America executive charged with providing solutions to borrowers in need of mortgage assistance.  But the offer is real, and eligible borrowers could get as much as $150,000 knocked off the balance of their mortgages. It is all part of the $25 billion settlement reached this year between federal and state agencies and the nation’s five largest mortgage servicers over fraudulent foreclosure document processing (so-called ‘robo-signing’).  Bank of America, in a deal with state attorneys general and the US Department of Justice, committed $11 billion to mortgage principal reduction, but executives say they will go beyond that if enough borrowers respond to their offer. Five thousand borrowers have already received a collective $700 million in principal reduction through a pilot program for those already in a modification negotiation. The 200,000 borrowers being targeted now may have already exhausted modification options or may have yet to contact the lender.

Executives say borrowers receiving the letters are eligible, but they still have to prove they qualify. In order to be eligible, a borrower must be 60 days late on the mortgage payment as of Jan. 31, 2012. The borrower has to owe more on the mortgage than the home is currently worth, commonly known as being ‘underwater’ on the mortgage, and the borrower’s loan must either be owned by Bank of America or serviced by Bank of America for an investor who is allowing the modifications.  In order to qualify for the modification, the borrower must answer the letter with full documentation of income, showing that under the terms of the modification they can still make the monthly payment. A borrower with no income would therefore not qualify. A borrower’s current monthly payment must be  more than 25% of gross income, and the borrower must show they are unable to afford that.  ‘If you can afford to make your monthly payment and are choosing not to, you will not get this principal modification,’ says Sturzenegger.  If the borrower qualifies, Bank of America will bring the monthly mortgage payment down to 25% of the borrower’s gross income. That could mean principal forgiveness well over $100,000, as there is no limit to the amount of the mortgage. If enough borrowers respond, it could cost Bank of America far more than it committed to in the settlement.  ‘Yes, we have the capability to go well beyond the $11 billion,’ adds Sturzenegger.

If the borrower qualifies, Bank of America will bring the monthly mortgage payment down to 25% of the borrower’s gross income. That could mean principal forgiveness well over $100,000, as there is no limit to the amount of the mortgage. If enough borrowers respond, it could cost Bank of America far more than it committed to in the settlement.  ‘Yes, we have the capability to go well beyond the $11 billion,’ adds Sturzenegger.  Bank executives say that before choosing which borrowers will get the offer, they performed a net present value test on each loan, making sure that the principal reduction modification would net Bank of America or the investor who owns the loan more than foreclosing on the home. ‘It has to be fair to the investor as well,’ says Sturzenegger.  Not all of the 200,000 borrowers who receive the letters are expected to respond. Executives say there is a level of fatigue among delinquent borrowers who have already received several notices or who may have gone through a failed modification process already. Some borrowers simply don’t want to stay in their homes, while others may think the offer is a scam.  ‘They have been contacted by a lot of other people, and this offer may appear too good to be true,’ says Sturzenegger.

That’s why Bank of America is sending the letters by certified mail and trying to make the language as simple as possible. A sample letter obtained by CNBC shows a bring red box in the top corner labeled, ‘IMPORTANT’ and simple language stating, ‘Qualifying customers may reduce their monthly payment by an average of 35%.’  Some 6,500 letters should be arriving in mailboxes across the country this week, with a wave of new letters going out every week until the end of the summer, when all 200,000 should have been mailed. Bank of America is staggering the mailings in order to handle the expected response. The bank has staffed up to handle the task, with 50,000 employees manning servicing desks, but the process will clearly take a lot of time. That’s why Bank of America has suspended any foreclosure actions against these 200,000 borrowers until the process is complete. There are currently 5.59 million US loans that are either delinquent or in the foreclosure process, according to Lender Processing Services. Bank of America services one million of those loans, but many of them are owned by Fannie Mae and Freddie Mac. Their regulator, Edward DeMarco of the Federal Housing Finance Agency, has yet to agree to principal reduction in loan modifications, despite harsh criticism from some lawmakers on Capitol Hill and increasing pressure from the White House.”

Consumer credit on the rise

US consumer credit shot up during March at the fastest rate since late 2001 as credit-card use, and student and car loans ballooned, data from the Federal Reserve showed yesterday.  Total consumer credit grew by $21.36 billion — more than twice the $9.8 billion rise that Wall Street economists surveyed by Reuters had forecast. That followed a revised $9.27 billion increase in outstanding credit February.  It was the largest surge in consumer credit for any month since November 2001, when it climbed by $28 billion, according to the Fed’s statistics.  The increase in March was concentrated in nonrevolving credit, which includes student and car loans. It climbed by $16.17 billion following a revised $11.62-billion gain in February.  Concern about student-loan levels has increased in an environment where newly graduating students face difficulty finding a job and keeping up on payments.  Congress is currently considering how to prevent a low interest rate for student loans from doubling on July 1 and is expected to find a way to do so, if only to avoid irritating young voters ahead of November’s presidential elections.  But so-called revolving, or credit-card debt, also gained strongly in March. It rose $5.18 billion in a sharp reversal from February when this category of credit use contracted by $2.35 billion.

NAHB – 100 markets on the improving list

The list of housing markets showing measurable and sustained improvement held virtually unchanged in May at 100, down from 101 in April, according to the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI), released yesterday. The number of states represented on the list also held firm from the previous month, at 35 (including the District of Columbia).  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. While 83 metros held onto their previous places on the IMI and 17 new ones were added to the list in May, 18 metros dropped from the list, for a net loss of one. Metros newly added to the list in May include such geographically diverse places as Phoenix, Ariz.; Bowling Green, Ky.; Bend, Ore.; and Lubbock, Texas.  “The fact that there are 100 markets in 34 states and the District of Columbia represented on the improving list illustrates that all housing markets are local, and that the national headlines often don’t apply to what’s happening in a specific metropolitan area,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “In places where employment is firming up along with demand for new homes, the main factors weighing down the housing market continue to be access to credit (for both builders and buyers) and the difficulty of obtaining accurate appraisals on new construction.”

“The overall number of markets on the IMI continued to plateau this month, with more than a quarter of all US metros still showing signs of improvement,” said NAHB Chief Economist David Crowe. “Many of these are relatively small markets in terms of their population and building volume, which is why their improvement is barely registering on the national scale as of yet. Moreover, we are seeing some shifting of markets on and off the list primarily due to small seasonal house price changes in areas that have had flat, stable prices rather than a boom-and-bust cycle.”  “The fact that the number of improving metros continued to hold its own with 100 entries in May shows that there are many places across the country where confidence and consumers are returning to the housing market,” observed Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.  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.

Buying a home may never be cheaper

Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market.  With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable — but it won’t stay this way for much longer.  Stuart Hoffman, chief economist for PNC Financial Services, said he expects home prices to flatten out by the third quarter and start climbing by next year.  A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores. 

Some economists, like Trulia’s Jed Kolko, expect home prices to pick up even more quickly. Trulia’s data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.  “This is a strong indicator that we will start seeing home price indexes, like the S&P/Case-Shiller, start to report home price increases this summer,” he said.  Prospective homebuyers who’ve been sitting on the fence shouldn’t worry if they aren’t quite ready to make the leap. Analysts are predicting that the initial price gains will be modest, at least, in most markets.  Hoffman, for example, is forecasting a 2% increase in 2013 compared with 2012. Meanwhile David Stiff, chief economist for Fiserv, predicts that prices will turn in the last quarter of 2012 and will rise 4.2% for the 12 months through September 2013.

Job cuts up

Planned job cuts increased by 7.1% to 40,559 in April from March, the latest job cut report released by outplacement firm Challenger, Gray&Christmas showed today.  From the same month a year ago, job cuts were up 11.2% and so far this year the number of job cuts has increased by 9.8% to 183,653.  But despite the year-on-year increase, the monthly average in the first four months of this year is below the 12-month average of last year, the report pointed out.  April’s job cuts were led by the education sector, with a total of 9,027 planned cuts, up 142% from March as school districts continue to be under pressure to cut costs amid massive state and local budget deficits. But the pace of downsizing in the sector fell 32% from a year ago, the report added.  Consumer products companies have been the main job cutters for the year, having announced 20,134 planned job cuts through April, 257% more than the cuts announced by this point last year. 

“Even at its best, job creation is falling well short of what is needed to make a substantial dent in unemployment,” John Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.  “While some would like to attribute the lack of hiring to uncertainty and regulatory roadblocks, the fact is that demand for goods and services simply has not reached a level that warrants accelerated hiring,” Challenger added.  He added that state and local governments, as well as the federal government, were still “in cost-cutting mode,” consumer spending remained soft and although business spending was improving, it was not nearly enough to make up for the shortfall in consumer and government spending.

LPS – foreclosures down

The March Mortgage Monitor report released by Lender Processing Services, Inc. shows that while March foreclosure starts increased a modest 8.1% since last month, overall, they were still down more than 31% year-over-year. Also in March, first-time foreclosure starts hit a five-month high. However, despite the increase, the number of first-time foreclosure starts in March was still far below those seen throughout much of 2011 and all of the previous three years.  As reported in LPS’ First Look, the national foreclosure inventory stayed relatively stable in March, remaining at the historically high levels maintained since the end of 2010. This national performance masks underlying differences between judicial states, where foreclosure inventory levels stand at 6.5%, and non-judicial states, where foreclosure inventory levels are more than 2.5 times lower at 2.45%.

The March data also showed that mortgage delinquencies have continued to decline, reaching their lowest level since August 2008, with seriously delinquent inventory (loans more than 90 days delinquent) declining in both judicial and non-judicial foreclosure states. Likewise, the rate of new problem loans (seriously delinquent loans that were current six months ago) continues to improve nationally, in both judicial and non-judicial states. At the same time, the LPS March mortgage performance data did show that foreclosure sales continued to behave somewhat erratically, dropping to their lowest level since December 2010, and most sharply in non-judicial states.  On the origination front, the data showed that February mortgage originations rebounded somewhat from their January lows, and that, despite slightly higher interest rates, prepayments increased in March. Mortgage prepayment activity – a key indicator of mortgage refinances – increased broadly, across all investor categories.

As reported in LPS’ First Look release, other key results from LPS’ latest Mortgage Monitor report include: 

Total US loan delinquency rate:​  7.09 % ​

Month-over-month change in delinquency rate:​  -6.3 %​

Total US foreclosure pre-sale inventory rate:​  4.14 %​

Month-over-month change in foreclosure pre-sale inventory rate:​  -0.1 %​

States with highest percentage of non-current* loans:​  FL, MS, NJ, NV, IL​

States with the lowest percentage of non-current* loans:​  MT, AK, SD, WY, ND​

*Non-current totals combine foreclosures and delinquencies as a% of active loans in that state.

Jobless claims down slightly

Initial claims for state unemployment benefits dropped 27,000 to a seasonally adjusted 365,000, the Labor Department said. That was the biggest weekly drop since early May last year.  The prior week’s figure was revised up to 392,000 from the previously reported 388,000. The four-week moving average for new claims, considered a better measure of labor market trends, edged up 750 to 383,500 – the highest level since December.  Economists polled by Reuters had forecast claims falling to 380,000 last week.  The data has no bearing on the government’s closely watched employment report for April, to be released on Friday. Employers are expected to have added 170,000 new jobs to their payrolls last month, a step up from March’s 120,000 tally, according to a Reuters survey.  However, there is a downside risk to this forecast as initial claims were elevated for much of April. An independent survey on Wednesday showed private employers added only 119,000 jobs last month, the fewest in seven months, and well below economists’ expectations for a gain of 177,000 positions.  Nonfarm payrolls had averaged 246,000 jobs per month between December and February. 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 dropped 53,000 to 3.28 million in the week ended April 21.  The number of Americans on emergency unemployment benefits slipped 4,772 to 2.72 million in the week ended April 14, the latest week for which data is available. The number of people on extended benefits declined 57,528 to 354,883.  Nine states lost eligibility for extended benefits beginning that week and five others reduced the duration of emergency compensation.  A total of 6.60 million people were claiming unemployment benefits during that period under all programs, down 85,523 from the prior week.

WSJ – Beazer homes surges in home sales

Beazer Homes USA Inc. reported a narrower fiscal-second-quarter loss Wednesday as the builder recorded a surge in home closings and sounded a hopeful note for the months ahead.  The Atlanta-based company, one of the largest home builders in the US, said its closings climbed 50% in the latest period to 844 homes. New orders, meanwhile, climbed 29% to 1,512 homes.  The results come as the US housing market has begun to show signs of emerging from the worst downturn in generations, albeit in fits and starts, as buyers get back into the game. With several home builders reporting increased sales and orders in recent weeks, many industry-watchers now think the hard-hit sector is set for a rebound.  “We remain hopeful, but cautious, about the prospects for a sustained market recovery, as a number of factors continue to pose challenges for prospective home buyers,” Chief Executive Allan Merrill said Wednesday in a statement accompanying the results.

For the quarter ended March 31, Beazer posted a loss of $39.9 million, or 51 cents a share, compared with a year-earlier loss of $53.8 million, or 73 cents a share.  The latest period included charges of $1.2 million for inventory impairments and $2.7 million tied to the refinancing of debt. The year-earlier period included charges of $17.8 million for inventory impairments.  Revenue surged 52% to $191.6 million. Analysts expected a loss of 43 cents a share on $192 million in revenue.  The average sales price rose to $224,700 from $216,300, while home-building gross margin narrowed to 10.9% from 12.4% in the prior year. Several of Beazer’s peers are seeing improved margins.  The builder’s cancellation rate rose to 22.5% from 20%, indicating more deals are unraveling before completion. “Given that most peers had declining cancellation rates, we were surprised” by the increase, wrote David Goldberg, a builder analyst with Credit Suisse, in a client note.

Retail slows

Retailers are reporting sales gains for April that show a slowdown in spending from the previous month as cooler weather, an early Easter and renewed worries about the economy dampened shoppers’ enthusiasm to buy.  As merchants report their sales figures Thursday, Costco Wholesale Corp. and Target Corp. posted gains that were smaller than Wall Street expected. Teen retailer Wet Seal Inc. posted a bigger-than-expected sales drop.  The figures are based on revenue at stores open at least a year. That metric is considered a key indicator of a retail health because it measures growth at established locations while excluding results from stores recently opened or closed.

Freddie earns $577 million

Freddie Mac reported net income of $577 million in the first quarter before it made a $1.8 billion dividend repayment to the Treasury Department.  The government-sponsored enterprise and one of the largest mortgage financiers in the country drew $19 million from the Treasury as part of its ongoing conservatorship bailout.  Net income for the quarter dropped from a $676 million gain one year ago because of higher derivative losses and lower net interest income.  Higher valuations of the mortgage bonds Freddie holds available for sale pushed total comprehensive income to $1.78 billion in the first quarter. The $1.8 billion repayment to the Treasury offset this total, forcing the remaining to be drawn from the government.  Freddie financed over $114 billion in mortgages during the first quarter, up from $105 billion one year ago.  Roughly 87% of its business was refinancing. More than 416,000 borrowers refinanced their Freddie-guaranteed home loan in the first three months of 2012, but the company said it is still too early to estimate how many will ultimately qualify for the expanded Home Affordable Refinance Program.

69,000 foreclosures in March

CoreLogic today released its National Foreclosure Report for March, which provides monthly data on completed foreclosures, foreclosure inventory and 90+ day delinquency rates. There were 69,000 completed foreclosures in March 2012 compared to 85,000 in March 2011 and 66,000* in February 2012. Through the first quarter of 2012, there were 198,000 completed foreclosures compared to 232,000 through the first quarter of 2011. Since the start of the financial crisis in September 2008, there have been approximately 3.5 million completed foreclosures.   Approximately 1.4 million homes, or 3.4% of all homes with a mortgage, were in the national foreclosure inventory as of March 2012 compared to 1.5 million, or 3.5%, in March 2011 and 1.4 million, or 3.4%, in February 2012. The number of loans in the foreclosure inventory decreased by nearly 100,000, or 6.0%, in March 2012 compared to March 2011.   

The share of borrowers nationally that were more than 90 days late on their mortgage payment, including homes in foreclosure and real estate owned (REO) assets, fell to 7.0% in March 2012 from 7.5% in March 2011, and remained unchanged from 7.0% in February 2012.  Also in March, the inventory of REO assets held by servicers nationwide grew more slowly than the pace of REO sales, as measured by the distressed clearing ratio.  The distressed clearing ratio is calculated by dividing the number of REO sales by the number of completed foreclosures. The higher the distressed clearing ratio, the faster the pace of REO sales relative to the pace of completed foreclosures.  The distressed clearing ratio for March 2012 was 0.81, up from 0.76 in February 2012.

 Highlights as of March 2012

-  The five states with the largest number of completed foreclosures for the 12 months ending in March 2012 were:  California (150,000), Florida (92,000), Michigan (62,000), Arizona (58,000) and Texas (57,000). These five states account for 49.1% of all completed foreclosures nationally.

-  The% of homeowners nationally who were more than 90 days late on their mortgage payments, including homes in foreclosure and REO, was 7.0% for March 2012 compared to 7.5% for March 2011, and 7.0% in February 2012.   

-  The five states with the highest foreclosure rates were:  Florida (12.1%), New Jersey (6.6%), Illinois (5.4%), Nevada (4.9%) and New York (4.9%).

-  The five states with the lowest foreclosure rates were:  Wyoming (0.7%), Alaska (0.8%), North Dakota (0.8%), Nebraska (1.1%) and South Dakota (1.4%).

-  Of the top 100 markets, measured by Core Based Statistical Areas (CBSAs) population, 35 are showing an increase in the year-over-year foreclosure rate in March 2012, two more than in February 2012 when 33 of the top CBSAs were showing an increase in the year-over-year foreclosure rate.   

*February data was revised.  Revisions are standard, and to ensure accuracy CoreLogic incorporates newly released data to provide updated results.

BOA to cut 400 jobs

Bank of America (BOA) is planning to cut up to 400 jobs in its investment banking, corporate banking, and sales and trading units, The Wall Street Journal reported, citing people familiar with the situation.  An expected sale of the bank’s non-US wealth-management operations in Asia, Latin America, and Europe would eliminate up to 2,000 jobs, the Journal reported.  Reuters reported on April 17 that Bank of America was looking to sell its wealth-management units outside the US for as much as $3 billion.  BOA declined to comment on the Journal report.  Last spring, the bank announced a cost-cutting program called Project New BAC that aims to eliminate 30,000 consumer banking and technology jobs over the next few years.  The bank has said it expects to wrap up plans for the second phase of the program, which focuses on investment banking, commercial banking, and related support jobs in May. The second phase is expected to cut fewer jobs than the first because it covers a smaller, more efficient part of the bank.  At the end of March, Bank of America had about 278,700 employees worldwide.

Olick – renter nation

“More Americans are renting homes, and fewer are owning them; it’s not as if this is news to anyone who follows the US housing market, but a new report from the Census Bureau today really put an historical exclamation point on the trend.  The share of US household renting reached a fifteen year high, and home ownership reached a 15-year low. Funny how those numbers travel together.  34.6% of households were renters in the first quarter of this year, and that number is climbing, as lack of credit or sufficient down payment keeps Americans young and old from becoming home owners. Rental vacancies are therefore falling, the lowest rate out West, where foreclosures have run the highest during this housing crash. That is also where investors are rushing in to buy foreclosed properties and put them up for rent. Single family homes for rent, in fact, surpassed multi-family units, taking 52% of the $3 trillion rental market, according to CoreLogic.

Both rental and homeowner vacancies are down, which is a general positive for the housing market, because empty houses are a blight on communities. ‘The vacancy rates will only decline if household formation is increasing or units are being destroyed,’ notes ISI Group’s Stephen East.  While banks have bulldozed some foreclosed properties here and there, the practice is by no means popular or widespread. That should mean that household formation is increasing, which is generally a product of an improving jobs picture. Younger Americans who have been living together or with their parents may finally be getting into their own homes, more likely into rentals, but at least they’re forming their own households. That is thanks to a small drop in the unemployment rate among 25-34 year olds to its lowest rate in three years. The home ownership rate now stands at 65.4%, down a full percentage point from a year ago, and down from just over 69% at the peak in 2004.  Since the recession began, growth in overall new households has been about 50% short of trend lines, according to analysts at Goldman Sachs. While household formation is rebounding for single or un-related Americans, formation among families is still waning; that may be due to the types of homes they need, i.e. larger, single-family homes. It thus stands to reason that pent-up demand will show itself first in single family rentals in the future and less in multi-family. No wonder investors are flooding the foreclosure market.”

No more easing?

Two top Federal Reserve officials — one with a dovish, employment-focused bent, and the other a self-avowed inflation hawk — yesterday both said they see no need for the US central bank to ease monetary policy any further.  But the comments, from San Francisco Fed President John Williams and Dallas Fed President Richard Fisher, do not mean they believe the central bank should quickly move to raise rates, which it has kept near zero for more than three years.  The economy grew at a 2.2% pace last quarter, down from its 3% growth rate in the final three months of the year. Recent economic data, including a gauge of business activity in the US Midwest, signal growth may slow further this quarter.  “I don’t think we are ready to exit yet,” Fisher, an inflation hawk, told Reuters at the Milken Institute Global Conference in Los Angeles.  Fisher said he would oppose the extension of Operation Twist, the Fed bond-buying program that is set to end in June, but stopped short of calling for outright monetary tightening.  “We’ll have to see how the year works out,” he said.

US home ownership sets new record – down

The US homeownership rate fell to the lowest level in 15 years in the first quarter as borrowers lost homes to foreclosure and tighter inventory and credit kept buyers off the market.  The rate dropped to 65.4% from 66% in the fourth quarter and fell a full percentage point from a year earlier, the Census Bureau said in a report today. That is the lowest level since the first quarter of 1997, and down from a record 69.2% in June 2004.  Mounting foreclosures are displacing borrowers, while a lack of inventory has kept home sales from accelerating amid record affordability, the National Association of Realtors reported April 19. Stricter mortgage standards are also limiting purchases as rental demand surges, said Paul Diggle, property economist with Capital Economics Ltd. in London.  “Although house prices and mortgage rates have fallen to a level that makes buying preferable to renting, ongoing problems accessing mortgage credit are preventing many households from taking advantage,” he wrote in a note today.  The US apartment vacancy rate fell to 4.9% in the first quarter, an 11-year low, according to New York-based Reis Inc. (REIS).  The vacancy rate for rental homes was 8.8% in the first quarter, compared with 9.7% a year earlier, the Census Bureau said in today’s report.

Of the estimated 132.6 million US homes, 18.5 million, or 13.9%, were vacant in the first quarter. A year earlier, about 19 million homes were vacant, according to the report. That includes homes for sale or rent or held off the market, and vacation properties used seasonally.  The ownership rate may drop below 64% by the end of 2015 and stay there for years, Scott Simon, the mortgage bond head of Pacific Investment Management Co. in Newport Beach, California, said in an e-mail today.  “It will be lower by 2017,” he said. “It will be lower in 2020.”  About 6 million borrowers will lose their properties in the next five years because of inability to pay, creating 4 million new rental households, Simon said in an April 24 interview on Bloomberg Television.  The homeownership rate fell 3 percentage points from a year earlier to 61.4% in the first quarter for people aged 35 to 44, the biggest drop of any age group. The Northeast had the biggest regional decline, with the ownership rate falling 1.4 percentage points to 62.5%. The West had the lowest ownership rate at 59.9%, down 1 percentage point from a year earlier. 

The US homeownership rate rose to a record in 2004 when President George W. Bush, running for re-election, called for expanding home-loan availability to create an “ownership society.” The current rate of 65.4% matches the average since 1965, when the Census Bureau began reporting the figures, according to data compiled by Bloomberg.  Home prices fell 3.5% in February from a year earlier and are 35% below their July 2006 peak, according to the S&P/Case-Shiller index of 20 US cities. The average rate for a 30-year fixed loan was 3.88% last week and reached 3.87% in February, the lowest level in at least four decades, according to Freddie Mac.  About 2.37 million homes were listed for sale in March, a and 6.3 month supply and down 22% from a year earlier, the Realtors association said on April 19. A six-month supply is considered a healthy market, according to the group.

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).