mortgage applications

Detroit sales down, prices up

The best inventory on the market in metro Detroit — where foreclosures and short sales account for 36% of the listings — attracts multiple bids and pushed the median sales price to $70,000 last month, up 18.6% from $59,000 in April 2011, according to Realcomp, a Farmington Hills-based multiple listing service.  Its members reported 4,351 closed sales in April, which is down by 2.2% from the 4,439 homes and condos that sold in the same month a year ago.  Sales gains were seen in Macomb County, up 8.9% to 922, and Oakland County, up 1.5% to 1,448. Pulling down the metro area results were Livingston County, with a 9.5% drop to 182 homes sold in April, followed by Wayne County, with a 9% decline to 1,789 home sales from 1,965 last April.  All four counties included in the metro Detroit stats — Livingston, Oakland, Macomb and Wayne — saw median sales price increases in April. Here’s the breakdown:

-  Livingston: $150,000, up 7.1% from $140,000.

-  Macomb: $72,500, up 13.3% from $64,000.

-  Oakland: $114,500, up 9% from $105,000.

-  Wayne: $38,000, up 27.1% from $29,900.

The Detroit area, which is defined as Detroit, Hamtramck, Harper Woods and Highland Park, saw median prices rise to $9,000, up 2.3% from a year ago, but sales dropped 22% to 539 in April.  Nearly half, or 48%, of sales last month were cash sales and homes were selling an average of three days faster with 87 days on market, Realcomp said.  Inventories dropped 18.3% in April to 26,896 homes for sale in the entire multiple listing service compared with 32,910 in April 2011. The MLS includes metro Detroit plus parts of the Thumb and Genesee County.

Retail sales up slightly

Sales at US retailers barely rose in April as the boost from an unseasonably warm winter faded, pointing to some loss of momentum in consumer spending early in the second quarter.  Retail sales edged up 0.1%, held back by a decline in receipts from building materials and clothing stores, the Commerce Department said on Tuesday. That was the smallest gain since December when sales were flat.  Other data showed manufacturing remained resilient, with a gauge of factory activity in New York state bouncing higher this month as new orders and shipments rose.  The New York Federal Reserve said its Empire State general business conditions index jumped to 17.09 in May from 6.56 in April, outpacing economists’ expectations of 8.50.  “Growth is there, but it’s not that convincing,” said David Sloan, senior economist at 4CAST in New York.  March’s sales were revised slightly down to show a 0.7% rise rather than the previously reported 0.8% increase. Economists polled by Reuters had expected retail sales to gain 0.2% last month.  In the 12 months to April, sales rose 6.4%.

Olick – Obama’s “responsible” homeowners

“As part of his ‘To Do List,’ President Barack Obama visited Val and Paul Keller on Friday. The White House described them as ‘responsible’ homeowners who owe more on their mortgage than their Nevada home is currently worth.  They owe $168,000 on their mortgage, but their Reno home is currently valued at $100,000.  The president is doing so to, ‘help demonstrate a concrete and tangible example as to why this broader push [to refinance] is so important not only for millions of Americans but for our economy,’ said Shaun Donovan, secretary of Housing and Urban Development, in a conference call with reporters before the event.  During that call, Donovan used the words ‘responsible homeowners’ more than a dozen times, in describing whom the administration’s proposed refinance programs should help.  It is not the Kellers’ fault that home prices in Reno are down 52% from the peak, right? The Kellers bought their house 14 years ago, and they have not been late on a mortgage payment, according to Donovan. They were able to take advantage of the newly expanded government refinance program through Fannie Mae and Freddie Mac for severely underwater borrowers, and they are in fact putting some of their savings on the monthly mortgage toward paying down principal.  But were they responsible? 

The Kellers bought their home before the height of the housing boom. The trouble I’m having understanding this whole scenario is that the median home price in Reno is actually 7% higher today than it was 14 years ago. If the Kellers had a ‘responsible’ loan, that would be a 30-year fixed, in which case they should have paid at least some principal on the loan over the last 14 years. And didn’t these ‘responsible’ borrowers, the Kellers, put some money down on the home?  We went looking: According to Washoe County records, the Kellers purchased their home in June 1998 for $127,000. So why do they have, according to the White House, a $168,000 mortgage?  White House officials now confirm to CNBC that the Kellers did a cash-out refinance in 2007, when their home had appreciated to $250,000. Again, it’s not illegal, but are these the ‘responsible’ borrowers that the administration is looking to help? They took out a $178,000 loan, using the $51,000 to pay down debt on the family construction business, so Paul could retire. Had they not taken that money out, and continued paying on the original mortgage, they would not be underwater today.  ‘This is a family, first and foremost, that has met their responsibility, remained on time with their mortgage and used their equity in their home in a way that so many Americans do, to send their kids to college, support a small business or save for retirement,’ said Donovan, whom we contacted after learning of the refinance. ‘They deserve the chance to benefit from these record low interest rates because they have met their responsibilities.’

Another administration official familiar with the Kellers’ case says the couple were responsible because despite the incredible runup in home prices, they did not take all the equity out of the house. ‘She did not use her home as an ATM in the sense that we saw during the crisis, because she didn’t cash out all of the equity leaving her no cushion. She had a 71% LTV (loan to value ratio), or 30% equity in her home. That is by almost any definition a very responsible position to be in,’ he added. In the past, Obama has criticized borrowers, who at the peak of the housing bubble, pulled money out, referring to it as using their house as an ATM.  LTV, Donovan and the other administration official claim, is not a minor issue. So it seems they are defining ‘responsible’ as a borrower who maintains an equity cushion in the house, even when that house price has nearly doubled in just eight years.  ‘This was truly 100 year flood, and so lots of people who had 20, 30, 40% equity in their homes now find themselves underwater,’ says the White House official, who also commends the Kellers for not walking away from their mortgage.”

Europe barely dodges formal recession

Stronger-than-expected growth in Germany was enough to help the European Union and the 17-nation eurozone avoid falling into recession for the second time since 2009 during the first three months of this year.  Initial readings on gross domestic product, the broadest measure of an economy’s health, released Tuesday showed Germany’s economy grew 0.5% in the first quarter, an improvement from the decline of 0.2% at the end of 2011.  The forecast had been for growth of only 0.1% for Germany, the continent’s largest economy, and there were some fears that it could report a drop in GDP for the second straight quarter, the common definition of an economy in recession.  The growth in Germany was enough to have GDP in the 27-nation EU and the 17-nation eurozone that uses the common currency both remain unchanged compared to the previous quarter, following a 0.3% decline on that basis at the end of last year. Economists had forecast that both would fall into recession with another quarter of falling GDP.

Decline in foreclosure activity in California hurting the market

The pace of foreclosures in California is slowing to a crawl, according to figures for the month of April compiled by foreclosure information company ForeclosureRadar Inc. of Discovery Bay.  In California, Notice of Default filings were down 69.8% from the peak in March 2009, and 15.8% from April 2011.  Foreclosure sales also declined, however, foreclosure investors purchased a record percentage of the limited inventory that was actually sold. California investors purchased 41.3% of foreclosure sales last month, the report says.  The low number of sales, combined with record% purchased on the courthouse steps left very little to become Bank Owned (REO). This further depletes the inventory of Bank Owned homes as REO sales continue to outpace the addition of new inventory, says ForeclosureRadar.

Despite investors purchasing a higher percentage of foreclosure sales, margins have rapidly declined in recent months. In California the discount between market value and winning bid have on average declined to 12.3%. This leaves investors who intend to resell their purchases with record low profits after eviction, repairs, and closing costs.  “Foreclosure declines would be wonderful news if they were being driven by a true market recovery in which hundreds of thousands were no longer unable to make payments, and millions were no longer upside down,” says Sean O’Toole, founder and CEO of Foreclosure Radar.  “That is not the reality today. Instead we are seeing unprecedented government intervention into the foreclosure process leaving underwater homeowners in limbo, while stealing opportunity from investors and first time buyers,” he says.  “California’s pending legislation, which is similar to laws we previously saw enacted in Nevada, will almost certainly bring foreclosure activity to a near halt there if passed. The reality is that these laws don’t solve anything as they fail to address the real problem – negative equity – while instead they punish real estate professionals, homebuyers, and investors far more than the banks they were aimed at.”

Fed governor Duke wants certainty

Federal Reserve Gov. Elizabeth Duke on Tuesday urged policymakers to finalize regulations and rules to provide more certainty for the housing market.   Establishing regulations and deciding on the future of government-controlled mortgage giants Fannie Mae and Freddie Mac will help reduce the uncertainty contributing to tight mortgage lending, Duke said in remarks prepared for a National Association of Realtors conference on Tuesday. She did not discuss monetary policy in her remarks.  “The most important solution that I am suggesting today is that policymakers move forward with the difficult decisions that will affect the future of the mortgage market,” Duke said. “If lenders tighten more than is warranted, it will hamper the recovery of the housing market and, in doing so, restrain economic growth.”  Duke did not make specific policy recommendations, but she stressed that questions around the future of Fannie Mae and Freddie Mac must be resolved. More than three years after the government took the two mortgage giants into conservatorship, there still is no consensus about how they should be structured and what the government’s role should be, potentially discouraging private companies, Duke said.  “Private capital might be reluctant to enter the market until the future parameters of government support are resolved,” she said.

Duke did note some encouraging signs in the housing market, including a slowdown in the pace of home prices’ decline and an edging up in housing starts and permits. And she expressed confidence that as the economy slowly improves, some elements of the housing market will strengthen, as confidence increases.  Lenders seem to be reluctant now to make loans in part because of concerns over the higher cost of servicing delinquent loans and worries over regulations still being shaped, Duke said.  “Collectively, these uncertainties about the future are likely contributing significantly to the tight lending standards in the mortgage market today,” she said. The Federal Reserve will use its “best judgment to weigh the cost and availability of credit against consumer protection, investor clarity, and financial stability as it writes rules,” she said.  Duke stressed that lenders need clarity to shape business models and plan for the future.  “I don’t want to diminish the importance of any individual policy decision, but I do believe that the most important prescription for the housing market is for these decisions to be made and the path for the future of housing finance to be set,” she said.

NAHB – builder confidence up in May

Builder confidence in the market for newly built, single-family homes gained five points in May from a downwardly revised reading in the previous month to reach a level of 29 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), released today. This is the index’s strongest reading since May of 2007.  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 rebounded from declines in the previous month. The component gauging current sales conditions and the component gauging traffic of prospective buyers each rose five points in May to 30 and 23, respectively, with the traffic component hitting its highest level since April of 2007. The component gauging sales expectations in the next six months rose three points to 34.  Three out of four regions registered improving builder sentiment in May. This included a six-point gain to 32 in the Northeast, and five-point gains to 27 and 28 in the Midwest and South, respectively. The West posted a two-point decline, to 29.

Discounts converge – short sales now better than foreclosures

Short sales, once a rare event in local real estate market, today are nearly as prevalent as foreclosures as lenders seek to avoid adding to their foreclosure inventories and troubled homeowners opt for a faster way out of default.  Historically, foreclosures have been discounted 10% or more. Now, as short sales become more popular, the difference between and short-sale discounts and foreclosure discounts is shrinking, according to the latest LPS Home Price Index.  In April 2007, as the housing bubble burst, foreclosures sold at a 19% discount and short sales sold at a discount of 10%. As the volumes of both forms of distressed sales have increased, so have the discounts, but short sale discounts have increased more. Today foreclosures sell at a 29% average discount and short sales at an average discount of 23%, a difference of only 6%.

The shrinking discount may make short sales more attractive to buyers than foreclosures. In general, home sellers undergoing short sales are motivated to do so to protect their credit to the extent possible and they tend to maintain better condition of their properties than borrowers undergoing foreclosure. Foreclosures also may be vacant for long periods of time. Today’s average processing timeline for foreclosures is about a year, and substantially higher in some judicial states. With a short sale, the property may not be vacated at all during the sales process.  LPS suggests that the task of managing the large number of distressed properties in the market today is immense, which may, in some cases, contribute to suboptimal pricing of some distressed properties. Since 2007, discounts for both foreclosures and short sales have increased, but short-sale discounts increased a bit faster.

PPI falls

The Labor Department said on Friday its seasonally adjusted producer price index (PPI) dropped 0.2% last month. That was the first drop of the year and the biggest decline since October.  Economists polled by Reuters had expected prices at farms, factories and refineries to be flat.  The decline left wholesale prices 1.9% higher in April that a year earlier, the weakest reading since October 2009.  Wholesale prices excluding volatile food and energy costs rose in line with economists’ expectations, up 0.2% after March’s 0.3% gain.  The drop in PPI was due to a 1.4% decline in energy prices, the biggest drop since October. Gasoline costs slumped 1.7%, while prices also fell for residential natural gas and liquefied petroleum gas.  The producer price index outside food and energy was pushed up by a 0.4% increase in the index for pharmaceuticals. Higher prices for civilian aircraft also pushed up the core index.  In the 12 months to April, core producer prices increased 2.7% after rising 2.9% the previous month. April’s reading was the lowest since August and just below analysts’ expectations.

Olick – mortgage market hampers recovery

“The Realtors say it, the home builders say it, and now the chairman of the Federal Reserve is saying it: ‘Some creditworthy borrowers are still having trouble getting a mortgage.’  Loose mortgage underwriting is largely blamed for the housing crash, and as a result the credit markets have swung in the opposite direction, some say too far.  ‘You’ll see fewer willing lenders at 660 than you do at the top end of the scale,’ notes Bankrate.com’s Greg McBride, referring to FICO scores (Fair Isaac Corporation).  Twenty five% of Americans today have a FICO credit score lower than 650, and twelve% more are below 700. While the Federal Housing Administration (FHA), the government’s mortgage insurer, is supposed to be serving borrowers with lower credit scores, the average FICO for an FHA loan in March was 701.  ‘It’s often the lender regarding the higher score,’ says Rick Sharga of Carrington Mortgage Holdings. Despite the FHA insurance, lenders just won’t take the chance.

Many borrowers who lost big during the housing crash are now fighting to regain their credit, but the time it takes to do that depends largely on how high their credit score was to begin with. According to FIC, a borrower with a credit score above 780 who lost a home to foreclosure will need 7 years of unblemished credit to regain their standing. A borrower who started at 680 will need just three years. Just being late on mortgage payments, up to ninety days, will drop your credit score 80 points if you started at 680 but 130 points if you were at 780. The higher you start, the harder you fall.  And it is not just credit standing in the way of a home loan. In order to get today’s record low interest rates, you need to put 20% down on the home. For a $300,000 home, that’s $60,000. On top of that you often have a 6% brokers fee and then closing costs, which averaged just over $4000 last year, according to Bankrate.com. If you do have lower credit, or a lower down payment, you will have to pay private mortgage insurance.  If you don’t have much money to put down, and you do have lower credit, the FHA is your only option now, but fees and premiums are going up there as well. 27% of home purchase financing in March of this year came from FHA loans, according to Campbell/Inside Mortgage Finance, but that was just before fees went up. The FHA share of mortgage originations has been dropping precipitously since then.

As the housing market recovers, and home prices stabilize, one might assume the credit markets would loosen as well. That has not been the case so far, according to a recent Federal Reserve survey of bankers. In fact, mortgages will likely get more expensive, as federal regulators move closer to new rules concerning risk retention in mortgage lending.  In addition to fees, credit and down payment, just less than a quarter of homeowners with a mortgage owe more on that loan than their home is currently worth. These so-called ‘underwater’ borrowers are therefore trapped, unless they have enough cash to put out and are willing to eat their losses. There are also many more who are in a near-negative equity position, which means they do not have enough equity in their homes to cover a new down payment, closing costs and brokers fees. That knocks a lot of potential buyers out of today’s market.  There is no question that we must not return to the lax lending of the past, where borrowers were asked no questions and offered whatever they wished. There is a question of how tight the mortgage market needs to be, when housing is still the chief impediment to overall economic recovery.”

Subprime is back

Mortgage backed securities are hot again.  Many of the hedge fund traders gathered at the Skybridge Alternatives investor summit at the Bellagio Hotel in Las Vegas are enthusiastically seeking out the once “toxic” mortgage bonds for their portfolios.  Even Kyle Bass, the Texan hedge fund manager who made billions shorting mortgage bonds in the years before the financial crisis, is bullish on mortgage credit. The “worst” bonds, those not backed by Fannie Mae and Freddie Mac, could see gains of 15%, he said Thursday.  The primary attraction of the bonds is their price. Although in recent months the bonds have rallied by as much as 20%, they still trade at steep discounts to par value. Last year they fell 40%.  The hedge fund mangers attracted to the bonds believe that even with massive defaults, they will continue to generate cash flows in excess of what current market prices indicate.  Some of the enthusiasm for the bonds is rooted in the idea that the housing market may be reaching a bottom. If home prices began to rise, mortgage defaults would likely decline and the prices of the bonds rise. But some traders believe that even if housing declines further and the economy stalls, the bonds could be profitable because the Federal Reserve would step in and buy them as part of a new round of quantitative easing.

NAHB – 55+ confidence up

Builder confidence in the 55+ housing market for single-family homes had a significant increase in the first quarter of 2012 compared to the same period a year ago, according to the latest National Association of Home Builders’ (NAHB) 55+ Housing Market Index (HMI) released today. The index increased 10 points to 27, and although 27 is relatively low for an index that lies on a scale of 0 to 100, it is nevertheless the highest reading since the inception of the index in 2008.  The 55+ single-family HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic). An index number below 50 indicates that more builders view conditions as poor than good. All index components remain well below 50, but increased considerably from a year ago, each reaching an all-time high: Present sales rose 12 points to 27, expected sales for the next six months increased eight points to 32 and traffic of prospective buyers rose nine points to 26.  The 55+ multifamily condo HMI remains the weakest of the 55+ housing market indices, but also recorded an all-time high at 15, up seven points from a year ago. All index components showed an increase compared to a year ago: Present sales rose five points to 14, expected sales for the next six months increased seven points to 20 and traffic of prospective buyers jumped nine points to 15.  The 55+ multifamily rentals continue to lead the way in the overall 55+ housing market. Present production climbed 11 points to 31, expected future production increased eight points to 35, current demand for existing units rose three points to 42 and expected future demand increased one point to 45.

MOODY’s issues capital warning

Moody’s has warned that the tendency of global banks to avoid new capital requirement rules and load up on debt will continue to put pressure on their creditworthiness.  The credit rating agency announced it was placing 17 banks on review for a downgrade earlier this year, citing “vulnerabilities” in the companies’ vast and volatile capital markets businesses.  Moody’s caution could see all 17 banks downgraded when the review is finally completed, expected to happen in mid-June. Three of the banks, Credit Suisse, Morgan Stanley, and UBS, face as much as a three-notch downgrade; 10 face a two-notch slide and four a one-notch drop.  The potential downgrades have become a talking point on Wall Street, with some bankers openly criticizing Moody’s and others privately attempting to change the agency’s mind in closed-door meetings.

Commercial real estate improves slightly

Conditions in the commercial real estate sector improved in the first quarter, but investors and executives are worried about some of the commercial mortgages set to mature in the coming year and the market’s general lack of interest in sub-A real estate assets, real estate executives said.  Executives in the industry provided this “luke warm” feedback in the latest Real Estate Roundtable quarterly sentiment survey.  The survey’s overall confidence index is at 70, which shows confidence in the industry to be more favorable than not. Still, that index score is down from a reading of 77 in the first quarter of 2011, but up from a score of 59 in the fourth quarter of 2011.  To get the index number higher, the job market will have to improve, bringing demand for commercial real estate assets in the below Class-A category with it, the executives said.  “Fostering a commercial real estate recovery that extends beyond so-called class A or trophy assets in gateway markets still depends on an improved jobs picture, more confidence among businesses and consumers, and reduced uncertainty on looming tax and budget issues,” said roundtable chairman Daniel Neidich. “Our Q2 survey confirms the need for swift policy action to boost employment, business investment, and economic certainty.”  Another issue delaying full confidence in commercial real estate is the overall economy and uncertainty about how the US will handle economic issues and issues related to employment and business investment.

Foreclosure-rescue company president arrested

The president of a Palm Beach County foreclosure-rescue company was arrested Thursday and charged with several counts of fraud, including acting as a loan originator without a license, after an investigation that included law enforcement officials from Boca Raton to Tallahassee.  Guilfort Dieuvil, 38, is president of the Nationwide Investment Firm Corp., a for-profit company that has homeowners quitclaim deed their properties to it with promises to broker a short sale or loan modification, while also defending the case in court.  The arrest comes after The Palm Beach Post revealed, in a series of four articles beginning in November, lawsuits, police reports and letters to state officials from homeowners complaining that instead of getting the help they sought, they unwittingly signed over the deeds to their homes.  Some claim they were threatened with eviction and left with debt on properties to which they no longer have title.  Details of the investigation that led to Dieuvil’s arrest were not available late yesterday, but Boca Raton Police Department officer Sandra Boonenberg said detectives from her department worked in conjunction with other agencies on the case.

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).