mortgage applications

Smart Real Estate News & Commentary by Chris McLaughlin February 29, 2012

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MBA – mortgage application down

Mortgage applications decreased 0.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 24, 2012. This week’s results are adjusted for the Presidents Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 0.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 9.4% compared with the previous week. The Refinance Index decreased 2.2% from the previous week. The seasonally adjusted Purchase Index increased 8.2% from one week earlier. The unadjusted Purchase Index increased 0.9% compared with the previous week and was 4.3% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 0.33%. The four week moving average is down 0.96% for the seasonally adjusted Purchase Index, while this average is up 0.64% for the Refinance Index.

The refinance share of mortgage activity decreased to 77.9% of total applications from 80.1% the previous week. This is the lowest refinance share since December 2, 2011, and the first time the measure has fallen below 80% since December 9, 2011. The adjustable-rate mortgage (ARM) share of activity decreased to 5.0% from 5.3% of total applications from the previous week. “Mortgage rates remained near survey lows last week, but refinance volume fell slightly,” said Michael Fratantoni, Vice President of Research and Economics at the Mortgage Bankers Association. Fratantoni continued, “According to survey participants, more than 20% of refinance applications were for HARP loans. The HARP share of total refinance applications has increased over the past month. Purchase application volume increased over the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010.” In January 2012, among home purchase applications, 86.4% were for fixed-rate 30-year loans, 6.5% for 15-year fixed loans and 5.4% for ARMs. The share of purchase applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 1.7% of all purchase applications. The share of 15-year fixed and ARM decreased from the previous month while the 30-year fixed and “other” fixed category shares increased from last month.

Growth up 3%, inflation up

Gross domestic product expanded at a 3% annual rate, the quickest pace since the second quarter of 2010, the Commerce Department said in its second estimate. That was a step up from the 2.8% pace it reported in January. Price indexes also swelled, with the core personal consumption expenditures (PCE) index jumping 1.3%, against an advanced reading of 1.1%. Economists polled by Reuters had expected fourth-quarter GDP would be unrevised at a 2.8% pace. The economy grew at a 1.8% pace in the third quarter. While the rebuilding of inventories added a hefty 1.88 percentage points to GDP in the last quarter, the pace of accumulation was not as fast as previously reported. Business inventories increased $54.3 billion, instead of $56.0 billion. Excluding inventories, the economy grew at a 1.1% rate, rather than 0.8%. That was still a sharp step-down from the prior period’s 3.2% pace. Although business overall business spending was revised up, investment in equipment and software was lowered to a 4.8% growth rate from 5.2%. Export growth estimates were also lowered, but weaker imports led to a smaller trade gap.

In addition, consumer spending — which accounts for about 70% of US economic activity — was a touch firmer than initially thought. Consumer spending rose at a 2.1% rate instead of 2%. Even spending on home building was firmer than previously estimated and investment on nonresidential structures was modestly weak. So far data ranging from employment to manufacturing have shown underlying strength in the economy, reducing the need for the Federal Reserve to ease monetary policy further by launching a third round of asset purchases or quantitative easing. But surging gasoline prices, which have risen 12.6% or 42 cents since the start of the year and averaged $3.78 a gallon in the week through Monday, are clouding the outlook. High gasoline prices helped to almost snuff out growth early last year. However, economists believe the impact on households this time could be mitigated somewhat by weak costs for natural gas and a strengthening labor market.

WSJ – Senators for short sales

The best that can be said about the latest Congressional attempt to heal the housing market is that politicians have at least diagnosed a real problem: a glut of homes for sale. Like other proposed top-down fixes, however, the latest Beltway brainstorm would likely hurt more than help. Republicans Lisa Murkowski and Scott Brown and Democrat Sherrod Brown want to speed up short sales, which occur when a lender agrees to let a homeowner pay off a mortgage by selling a home at a price below the outstanding loan balance. Their bill—introduced earlier this month—would force lenders to approve or deny short-sale offers within 75 days or face a $1,000 fine, plus attorneys’ fees. The lender could ask for an extension only once, for 21 days. Accelerating short sales isn’t a bad idea, in and of itself. Delinquent borrowers can offload their mortgage and find another home they can afford, or move to an area that’s cheaper. Lenders don’t have to endure a lengthy foreclosure process and risk having the property sit unoccupied for months, if not years. Borrowers who can afford the home can snap them up at bargain prices.

But why do the Senators want to interfere in a market that is working? CoreLogic recorded 293,574 short sales last year, up from 273,100 in 2010 and 64,813 in 2007. That makes sense: Lenders want to minimize their losses as best they can and are working through their portfolio as quickly as possible. Setting an arbitrary timeline for short sales makes for a good political talking point, but it might have unintended consequences. Lenders often have to coordinate with investors and second-lien holders to approve the deal, which takes time. They also don’t want to rush, make a mistake and expose themselves to litigation for sloppy paperwork, especially after the recent furor over alleged “robo-signing” abuses. Fraud is another concern, though it’s hard to get firm estimates on the extent of the problem. Risk consultancy Interthinx estimates about $1 billion was lost annually in deals between 2007 and 2010 when buyers resold property for more than 20% of the original sale value within six weeks—a red flag for fraud in a market with falling or flat home prices. Sometimes a broker’s low-ball assessment done on a house is fraudulent; sometimes a broker conceals from the lender the fact that a willing buyer exists for the house at a higher price. Big banks like Wells Fargo or Bank of America can devote resources to fighting this kind of fraud but smaller lenders may not have the same capabilities. Try as Congress might, there’s no quick fix to the oversupply of homes that’s weighing down the housing market. Increasing the regulatory burden on lenders will only prolong the pain.

WSJ – home prices hit new lows

Home prices fell to fresh lows in December, but economists say that a drop in the number of homes listed for sale could help stabilize prices in parts of the country this year. Home prices fell by 4% last year, according to the Standard & Poor’s/Case-Shiller index that tracks 20 metro areas. Prices dropped by 1.1% for the three-month period ending in December compared with the same period ending in November. That was slightly better than November’s reading, when prices were down 1.3% from October. Tuesday’s report is the latest evidence that the housing market still faces a cloudy outlook after a six-year downturn. The inventory of homes for sale has contracted, reducing competition among sellers, according to The Wall Street Journal’s quarterly survey of housing-market conditions in 28 metro areas.

But a large potential backlog of foreclosed properties hangs over many housing markets. Other headwinds including tight mortgage-lending standards that show few signs of easing. “These are times of continued, great uncertainty about home prices,” said Robert Shiller, the Yale University economist who co-founded the index that bears his name. “We might be on the verge of a home recovery, but then, maybe not.” Others are becoming somewhat optimistic. Thomas Lawler, an independent housing economist in Leesburg, Va., said the S&P/Case-Shiller index should hit a bottom this spring. He said many analysts have overlooked positive developments, including a dearth of new construction and the falling share of homes selling out of foreclosure. “You don’t hear very many people talk about the actual housing stock, and how slow it’s growing,” he said, while conceding that it is “absolutely true that organic demand has yet to show any material rebound.”

Even when prices stop falling, they aren’t likely to rise for years, leaving millions of homeowners stuck in properties worth less than what they owe. “We’re looking at an L-shaped recovery,” said Stan Humphries, chief economist at real-estate website Zillow, who predicts another 3.7% decline in home prices for the coming year. In most of the country, home prices aren’t falling at anywhere near their jaw-dropping pace of 2008. But only two markets showed an increase in home prices during the fourth quarter. In Phoenix, home prices were up by 0.8%, while Miami reported a smaller gain of 0.2%. Detroit was the only city to post a year-over-year gain, rising by 0.5%. Home prices in Atlanta, meanwhile, fell by 12.8% last year, while Chicago posted a 6.5% decline. One surprising development in many housing markets is that the supply of homes for sale has fallen to a five-year low. While that normally would be a sign of health, real-estate agents say a paucity of homes is holding back sales.

At the current sales rate, it would take about four months to sell the supply of homes on the market in Denver, Washington, D.C., and Orange County, Calif. That level is lower, at less than three months, in Phoenix and San Francisco, and has dropped to just 1.9 months in Sacramento, Calif. But several markets still face supply-demand imbalances that could keep pressure on prices. New York’s Long Island had a 13-month supply of homes at the end of the fourth quarter. Nashville and Charlotte, N.C., had a 12-month supply, and northern New Jersey had a nearly 11-month supply. Those numbers will rise if banks sell more foreclosed properties as they correct deficient mortgage-handling practices.

Unemployment for 5 years

The US economic recovery is “frustratingly slow” and it could take four to five years to ratchet the unemployment rate down to about 6%, from more than 8% now, a top Federal Reserve official said yesterday. The recovery is held back by the housing market and Europe’s debt crisis among other headwinds, but monetary policy is now appropriately positioned to eventually achieve this “maximum employment” level, said Cleveland Fed President Sandra Pianalto. “We do not have a good deal of concrete history for monetary policy to fit our current circumstances, but I am confident the Federal Reserve is making the most of its tools to move the economy in the right direction,” the Fed official said at an economic development meeting in Westfield Center, Ohio. Pianalto, a voter this year on the Fed’s policy-setting panel, is a moderate dove in line with Chairman Ben Bernanke’s core of policymakers who have taken aggressive action to bring down unemployment, which stands at 8.3% after rising above 9% last year. The US central bank in late 2008 slashed interest rates to near zero and has since bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades.

Olick – time to buy?

“Nobody wants to catch a falling knife. It is as simple as that. If potential buyers see continued home price erosion, they will stay parked on the sidelines. But as with everything else in this unique and historic housing market, perhaps the usual logic doesn’t apply. ‘Housing is one of the great investments right now. I tell people all the time when they come up to me, they say, ‘What should I do, Mr. Trump?’ I say go buy a house,’ said Donald Trump earlier today on CNBC. ‘It wouldn’t be an obvious mistake to buy a house now,’ hedged Robert Shiller, barely a few hours later. Perhaps they were just jumping off Warren Buffett’s declaration yesterday that if he had a way to manage them, he would buy a couple of hundred thousand single family homes and rent them out. Housing appears to be rated a ‘buy’ these days, especially among investors, who see a ripe and rising rental market and big potential for income. But is it the right time yet for what I call ‘organic’ buyers to get in? By this I mean people buying a home to actually live in it, raise a family in it, let the dog run around in the back yard. If prices are still falling, couldn’t an even better deal be waiting down the road a bit?

No. House prices will continue to fall on a national basis at least through 2012, but you have to look past national headlines to your local market, which is likely already recovering nicely. The trouble with the national numbers is that they are heavily weighted toward the lower end of the market and to the distressed end of the market. Around 73% of homes that sold in January were priced below $250,000, according to the National Association of Realtors. Forty-seven% of homes sold that same month were considered ‘distressed,’ which is either a foreclosure or a short sale (where the lender allows the borrower to sell for less than the value of the mortgage). With all the activity in these areas, no surprise that prices skew lower. The $250,000 to $500,000 price range may now be the sweet spot for the market. Sales in January were up in this price range, and if you have good credit, you are within GSE and FHA loan limits in most markets. While FHA just raised its insurance premiums, which may hurt much-needed first-time homebuyer demand, it is still one of the best loan products out there today, especially for those with lower down payments. You cannot time housing any more than you can time the stock market. True, housing moves far more slowly, but that works to its benefit, as prices don’t rise and fall on daily news or even on major events. Sales have clearly bottomed in housing, and prices always lag sales. They will lag longer this time around, no question, but they will come back. Supply and demand will eventually win out, even after an historic crash. If you can’t get a good mortgage now, then perhaps it’s not your time, but if you can, waiting may not buy you much.”

US conducts criminal libor probe

The US Justice Department is conducting a criminal probe into whether the world’s biggest banks manipulated a global benchmark rate that is at the heart of a wide range of loans and derivatives, from trillions of dollars of mortgages and bonds to interest rate swaps , a person familiar with the matter said. While the Justice Department’s inquiry into the setting of the London interbank offered rate, or Libor, was known, the criminal aspect of the probe was not. A criminal inquiry underscores the serious nature of a worldwide investigation that includes regulators and law-enforcement agencies in the United States, Japan, Canada and the UK. Several major global banks, including Citigroup, HSBC, Royal Bank of Scotland and UBS, have disclosed that they have been approached by authorities investigating how Libor is set. No bank or trader has been criminally charged in the Libor probes. It wasn’t clear which banks or traders the Justice Department is targeting in its criminal probe.

Fannie loses $2.4 billion, asks for $4.6 billion

Fannie Mae lost $2.4 billion in the fourth quarter and asked the federal government for another $4.6 billion in bailouts. Fannie earned a $73 million profit the same period the year before. The government-sponsored enterprise reported a $16.8 billion loss for the entire year, widening 20% from the $14 billion in losses in 2010. Fannie paid $2.6 billion in dividends to the Treasury Department in the fourth quarter. Since entering conservatorship in 2008, Fannie received $116 billion in bailouts through the end of 2011 and paid back roughly $19.8 billion. A $6.1 billion increase in lost net fair value of its assets pushed a poorer performance in 2011. Significant declines in interest rates over the year pushed more losses on its risk management derivatives. Combined with Freddie Mac and Ginnie Mae, the federal government guaranteed more than 99% of mortgage-backed securities issued between 2009 and 2011, accounting for more than 85% of all single-family loans.

Fourth quarter revenues declined 8% to $4.5 billion from the year before. Revenues for the year actually increased 17% to $20.4 billion. Fannie charged off $4.7 billion in credit losses, increasing 40% from the same quarter in the prior year. The higher losses came from a slight increase in foreclosures. The mortgage giant repossessed more than 47,000 homes in the last three months of 2011, up from nearly 46,000 one year prior. The problem loans continue to rise from the books of business originated between 2005 and 2008. These loans cost Fannie $140 billion since 2009. Its becoming a smaller portion of the entire portfolio, though, shrinking to 31% at the end of 2011 from 39% the year before. “Our new single-family book now accounts for more than half of our overall single-family guaranty book of business,” said Fannie Mae CFO Susan McFarland.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

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

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

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Smart Real Estate News & Commentary by Chris McLaughlin February 28, 2012

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NAR – pending home sales up

Pending home sales are on an upward trend, which has been uneven but meaningful since reaching a cyclical low last April, and are well above a year ago, according to the National Association of Realtors (NAR).  The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 2.0% to 97.0 in January from a downwardly revised 95.1 in December and is 8.0% higher than January 2011 when it was 89.8. The data reflects contracts but not closings.  The January index is the highest since April 2010 when it reached 111.3 as buyers were rushing to take advantage of the home buyer tax credit.  The PHSI in the Northeast rose 7.6% to 78.2 in January and is 9.8% above a year ago. In the Midwest the index declined 3.8% to 88.1 but is 10.8% higher than January 2011. Pending home sales in the South increased 7.7% to an index of 109.1 in January and are 10.5% above a year ago. In the West the index fell 4.4% in January to 101.9 but is 0.7% above January 2011.

Why gas prices vary across the country

The national average for regular gasoline rose to $3.70 Friday, up 14 cents in the past week – and only about 40 cents shy of the all-time record high of $4.11 a gallon reached in July 2008.  While many are feeling the pain at the pump, Americans are seeing widely divergent prices depending on where they live.  Why are drivers in Fort Collins, Colorado paying a little over $3, while those in Santa Barbara, California are seeing gas prices at $4.33 a gallon?  Colorado, Montana, Utah and Wyoming have the cheapest pump prices in the country, at about $3.21 a gallon or less on average, while retail gasoline prices are near $4.30 a gallon in California and are over $4 in some parts of New York.  The answer lies in the “chaos” in crude oil prices around the nation, says OPIS energy analyst Tom Kloza. “There’s never been more diversity in crude oil prices. There’s never been more diversity in gasoline prices.”  The divergence in pump prices comes from the wildly differing wholesale prices for gasoline. The wholesale price of gasoline in the Rocky Mountains and Midwest is about 20 to 40 cents cheaper than on the East Coast, for example.

The price of the refined fuel reflects regional supply issues that face refiners in various parts of the country, based on the type of oil they process. Crude oil in some landlocked areas in the Midwest — such as North Dakota, where there has been a tremendous supply surge recently — reached about $95-$96 a barrel Friday. For refineries that use sour crude in the Midwest, Western Canadian Select grade of crude, a heavy grade, the price is closer to $91 a barrel.  Yet, on the East Coast, refining capacity, and as a result gasoline supply, has been drastically reduced in the past few months. Two refiners outside of Philadelphia, which account for 20% of the gasoline in the northeast have shut down. Overall US and European refinery shutdowns have taken about 2.6 million barrels of gasoline supply off the market since 2009, says Houston-based energy analyst Andy Lipow.

East Coast refiners import most of crude oil from Europe and West Africa. North Sea Brent crude prices rose have risen above $125 a barrel. Light Louisiana sweet crude prices on the Gulf Coast reached $130 a barrel on Friday, due to tight supplies of European and West African crude blends.  (RBOB gasoline futures traded at the CME Group’s New York Mercantile Exchange – in close proximity to East Coast refiners and delivery terminals – also more closely reflects the Brent crude price. March RBOB gasoline futures rose 1% Friday to settle at a 2012 high of $3.15 a gallon.)  Wholesale oil and gasoline prices have been rising sharply all over the country in the past few days, Kloza says. “At this rate, it’s a foregone conclusion retail prices will rise another 5 to 15 cents a gallon this week.” Retail gasoline prices have already spiked 5 cents since Friday.  At this rate, if the surge in gasoline prices next month mirrors the month of February, record pump prices may be in store even before the summer driving season gets underway.

Olick – 2500 foreclosures up for bulk sale

“Barely six hours after billionaire investor Warren Buffett said that if he could he’d like to buy ‘a couple of hundred thousand single family homes’, the regulator of Fannie Mae and Freddie Mac put about 2500 of theirs up for sale.  It is the next step in the government’s REO (bank-owned) to rent program; the plan, announced earlier this month, is designed to help Fannie and Freddie unload thousands of foreclosed properties weighing on their books. Fannie Mae alone owns more than 100,000 repossessed properties.  ‘This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,’ said FHFA acting director Edward DeMarco in a press release.

While the prequalification phase began several weeks ago, investors can now move to the next phase, where, if accepted by proving financial capacity and experience, they can get access to the properties for sale. The bulk of the properties are in the most distressed markets, such as Florida, parts of California, Phoenix, AZ, and Las Vegas, NV. Atlanta, GA, however, has the highest number in the mix, 572 properties making up 23% of the total up for sale. Atlanta housing was hit hard by the recession and high job losses. Just 17% of the properties are vacant, so investors would largely be getting assets with existing cash flow.  As these first properties hit the market, there is no shortage of investors ready to scoop them up. Rental demand is still surging, and rents continue to rise, despite record high affordability and record low mortgage rates. Nearly 47% of all closings in January were of distressed properties, according to a new survey from Campbell/Inside Mortgage Finance, and investors now make up nearly a quarter of all buyers, according to the National Association of Realtors.

As banks start to ramp up the foreclosure process again, after a year of delays following the ‘robo-signing’ scandal, more properties will be repossessed and put up for sale; investors are flocking to the deals, largely using all cash, as they get into increasingly competitive situations. Even owner-occupants (non-investors) are turning more to cash, as credit is still tight.  ‘Despite near record low mortgage rates, homebuyers are finding it very advantageous in the current housing market to shop with cash. And low returns on money deposited in banks as well as mortgage approval hassles also are pushing homebuyers to consider all cash transactions,’ according to Campbell/IMF. ‘Between last October and January, the use of cash by current homeowners purchasing a new principal residence surged from 30.8% to 34.1%.  Critics of the bulk REO to rent program say that giving large investors with hoards of cash bulk deals squeezes out smaller investors who might do more improvements to the properties and then turn around and sell them at higher prices, thereby increasing overall home values. Investors in the FHFA program are required to hold the properties and rent them for ‘a specified number of years,’ according to the agency’s initial announcement.”

S&P Greece downgrade may be short

Standard & Poor’s downgrading of Greece’s long-term ratings to ‘selective default’ could well be short but there is a risk Athens falls back into default later, S&P analyst Moritz Kraemer said today.  S&P cut Greece’s rating on Monday, the second ratings agency to proceed with a widely expected downgrade after Athens announced a bond swap plan to lighten its debt burden.  “It’s a distinct possibility that this will be a short default which will be cured,” Kraemer told Reuters Insider television. “The more interesting question is not when it will be cured but whether it will be the last one.”  “I think the rating coming out of default of the Hellenic Republic will give some indication of what the likelihood of another restructuring down the road would be.”  When assessing what rating to give Greece in the future, S&P would look at the political environment, the growth outlook and the remaining debt stock.  “We think that on all three fronts there are huge question marks,” said Kraemer.

DSNews – debt and delinquency on the decline

Real estate-related debts are on the decline, as are overall delinquencies, according to a quarterly report from the Federal Reserve Bank of New York.  Debt maintained through mortgages and home equity lines of credit (HELOC) declined $146 billion during the fourth quarter of last year. Mortgages made up a majority of the decline – $134 billion – while HELOCs made up the remaining $12 billion.  Mortgage debt is now 11% below its peak, while HELOC debt is now 11.7% below its peak.  Also in the fourth quarter, the delinquency rate on consumer debt was reduced from 10% to 9.8%.  About $1.12 trillion of the total $11.53 trillion in consumer debt was delinquent. About $824 billion in debt was seriously delinquent (90 or more days past due).  While overall delinquency declined, about 2.2% of mortgage loans became delinquent in the last quarter of the year.

Foreclosures increased 9.5% over the quarter as 289,000 homes received foreclosure filings. However, the foreclosure rate is still 35.3% below the level recorded in the fourth quarter of 2010.  Also, despite the rise in foreclosure filings, the rate of loans that became seriously delinquent declined, corresponding with a rising cure rate, which reached 27.2% at the end of last year.  “Overall it appears that delinquency rates are stabilizing at levels that remain significantly higher than pre-crisis levels,” said Andrew Haughwout, VP and economist at the Federal Reserve Bank of New York.

FHA to raise premiums

The Federal Housing Administration (FHA) will raise mortgage insurance premiums this April in order to repair the health of its emergency fund.  The FHA upfront mortgage insurance premium will increase to 1.75% from 1% of the base home loan amount. This will apply regardless of the term or loan-to-value ratio beginning in April.  The annual mortgage insurance premium will increase by 10 basis points for loans under the $625,500 limit beginning April 1 and by 35 bps for home loans above that amount starting in June, the FHA said Monday. Authority for these raises come under the payroll tax cut extension agreed to last fall.  The FHA said the changes will boost the Mutual Mortgage Insurance Fund by $1 billion.  The UFMIP can still be financed into the mortgage. The increase to the upfront premium will cost new borrowers roughly $5 more per month.  Reverse mortgages and borrowers in special loan programs would be exempt from the changes, according to the FHA.

Last week at the Mortgage Bankers Association servicing conference in Orlando, FHA Commissioner Carol Galante said there would be upcoming insurance premium changes for the streamline refinance program. An FHA spokesman said these changes would be included in a letter to lenders due soon.  The MMI fund slipped below the Congressionally mandated 2% threshold in 2008, and in slipped to 0.2% last year. According to an analysis of President Obama’s budget, the fund could have declined further in 2013 and possibly needed a bailout from the Treasury Department. Nearly $1 billion in revenue from settlements with mortgage servicers announced in the last few weeks will also keep the fund from needing assistance, according to FHA.  “After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market,” Galante said. ”These modest increases are one of several measures we are taking towards meeting the Congressionally mandated 2% reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
portfolio of nearly 150 high-value, high-profit
properties

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

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

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

wwwSmart Real Estate News & Commentary by Chris McLaughlin February 24, 2012

Forward this e-mail to your friends!

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WSJ – The case for rentals

Lewis Ranieri, the co-inventor of the mortgage-backed security, authored a research paper with University of California economist Kenneth Rosen that lays out the case for using federal entities to support private investors who are already converting foreclosed properties into rentals.  The foreclosure-to-rental model can be developed in “most every market in the United States,” write Messrs. Ranieri and Rosen. But they also highlight their “top 10” markets where such a program makes the most sense. Those markets generally have high levels of foreclosures and strong apartment fundamentals. They include Chicago, Denver, Detroit, Oakland, Seattle, Minneapolis, and Los Angeles.  Some markets, such as San Francisco, aren’t great candidates because while they have strong rental conditions, they don’t have high levels of bank-owned foreclosures. Others, such as Las Vegas, aren’t well suited yet because they have poor rental fundamentals despite a glut of bank-owned inventory.

The paper argues that existing industry and government effort to modify mortgages, while necessary, won’t alone be enough to deal with the problem of already vacant properties and those that may not qualify for modifications.  So why is the government needed? There’s two reasons: First, Fannie Mae, Freddie Mac, and the Federal Housing Administration sit on nearly half of all foreclosed properties, making them key sellers to investors that are converting properties into rentals.  Second, Mr. Ranieri says investors could soak up the overhang of distressed properties even faster if Fannie or Freddie expanded their investor financing programs.  The paper addresses many of the logistical challenges involved with building the infrastructure needed to acquire and manage scattered-site rental homes. “I’m always asked is this kind of a program scale-able? The answer is there are already people who are already doing a reasonable job with it,” Mr. Ranieri said in a speech last year.

The paper includes a series of other interesting ideas that build on the rental-conversion idea:

- Employ a “rent-to-own” option that would allow tenants to allow some tenants to ultimately purchase their rental homes. Mr. Ranieri has already employed that option through his company, Selene Finance, which invests in distressed loans and homes.

-  Raise the ceiling on the number of loans that Fannie and Freddie will guarantee to a single buyer. Currently, those limits are set at 10 and four, respectively, but Mr. Ranieri has argued that investors who make large down payments of 30% or 35% should be able to take out 25 mortgages. That would allow smaller investors to get more involved in repairing their local markets, even as federal officials consider structured sales of bulk properties to larger outfits.

-  Change appraisal rules for investor purchases to evaluate the value of properties based on the rental income, rather than the traditional metric of “comparable sales.”

Other influential housing analysts, including Laurie Goodman of Amherst Securities, have also strongly backed policies that would convert bank-owned foreclosures and other distressed properties into rentals.  But the idea remains unpopular with the National Association of Realtors and major real-estate brokerages, which say that foreclosed properties are selling briskly and don’t need to be taken off the market.

Jobs recovery, or not?

Based on weekly jobless claims, the February jobs market is bearing out to look very much like January, which saw 243,000 net new jobs and the unemployment rate at 8.3%, down from December’s 8.5%.  Thursday’s weekly jobless claims were unchanged at 351,000 for the week ending Feb. 18, the same week that the Bureau of Labor Statistics will use for the February monthly employment report survey week. Continuing claims fell by 52,000, to 3.4 million, with the four-week average falling to 359,000, its lowest level since March 2008.  “[The] bottom line is claims have been improving. The trend in layoffs is improving. That tells you firms are more optimistic about the outlook and they continue to lower the amount of cost cutting,” said Credit Suisse economist, Jonathan Basile.  While that’s a good sign, Basile said it may be some time before the trend can be trusted as signs of a sustainable jobs recovery.  “We do know this is a very warm winter, and in recent months, there’s been a lot more construction jobs showing up than usual,” said Basile. “These are the times of year when there are construction layoffs. I think we’re going to have to get through the March, April, May data to sort out whether this strength in jobless claims is a weather phenomena or a fundamental move.”  Economists at Barclays Capital said they are now looking for a total nonfarm payroll addition of 225,000 jobs in February and a decline in the unemployment rate to 8.1%. The February employment report will be released March 9.  The economists note that the ongoing improvement in the weekly claims data and other indicators indicates improvement in private employment across a variety of sectors.  But they also note: “Favorable weather conditions are also likely to support hiring in construction-related sectors.” They also see federal and state governments continuing to cut jobs.

BOA: no more mortgages for Fannie

Bank of America (BOA) is faced with numerous reps and warrants challenges on the mortgage front, and as a result of growing uncertainty, it will no longer sell certain mortgage refinances into Fannie Mae mortgage-backed securities.  “The issue is tied to ongoing disagreements between Bank of America and Fannie Mae in regards to repurchases,” said Dan Frahm, spokesman for BOA.  Specifically, Bank of America will no longer place non-Making Home Affordable Program (MHA) refinance first-lien residential mortgage products into Fannie mortgage-backed securities.  Making Home Affordable is the Obama administration’s initiative to help struggling homeowners get mortgage relief through a variety of programs.  “We continue to deliver MHA programs, including loan modifications and refinancing through HARP to our customers whose loans are owned by Fannie Mae,” Frahm said, adding mortgage origination levels will not drop at the bank. “We’re adequately prepared for this, there will be no impact to our customers.”

BOA will likely do more business with Freddie Mac and Ginnie Mae as a result of this decision.  The bank says the risk of repurchases on non-MHA mortgages is too great, and hedging repurchase risk is now too difficult.  “We are not able to predict changes in the behavior of the GSEs based on our past experiences,” BOA reports in a regulatory filing with the Securities and Exchange Commission. “Therefore, it is not possible to reasonably estimate a possible loss or range of possible loss with respect to any such potential impact in excess of current accrued liabilities,” the filing states.  “The ultimate resolution of these exposures could have a material adverse effect on our cash flows, financial condition and results of operations,” the filing said.  At the heart of the decision is recent changes in mortgage insurance policies. The filing notes Fannie Mae policy where MI rescission must be resolved in a timely fashion. As of Dec. 31, 2011, 74% of the MI rescission notices received had not been resolved, and Fannie began exercising repurchases with Bank of America.  “We have informed FNMA that we do not believe that the new policy is valid under our relevant contracts with FNMA and that we do not intend to repurchase loans under the terms set forth in the new policy,” BOA states. “If we are required to abide by the terms of the new FNMA policy, our representations and warranties liability will likely increase.”

Oil hits $108

Oil prices rose to a fresh nine-month high above $108 a barrel Friday in Asia amid signs the US economy is improving against a backdrop of elevated tensions in the Middle East over Iran’s nuclear program.  Benchmark crude for April delivery was up 59 cents to $108.42 per barrel late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.55 to settle at $107.83 in New York on Thursday.  Brent crude was up 55 cents at $124.17 per barrel in London.  The government said Thursday that the number of people seeking unemployment benefits last week was unchanged and that the four-week average was the lowest in four years.  Traders brushed off evidence that crude demand in the US remains weak. The Energy Department’s Energy Information Administration said Thursday crude inventories rose 1.6 million barrels last week and that oil demand has dropped 6.7% from a year ago.  “The ability of crude to post new highs in the face of what appeared to be a bearish EIA report attests to the underlying strength of this price advance,” energy trader and consultant Ritterbusch and Associates said in a report. “The oil market has evolved into somewhat of a self perpetuating cycle in which new highs beget new buying that forces new highs.”  Crude has jumped from $96 earlier this month amid growing tension over Iran’s nuclear program and fears global crude supplies could be disrupted. Some analysts expect economic sanctions by the US and Europe and countermeasures by Iran will help keep crude prices elevated this year.  “There is a relatively high and growing probability to a scenario in which there is no resolution in 2012, in which oil prices grind higher along with a gradual escalation of tension,” Barclays Capital said in a report.  In other energy trading, heating oil fell 0.5 cent to $3.29 per gallon and gasoline futures were steady at $3.29 per gallon. Natural gas fell 0.2 cent to $2.62 per 1,000 cubic feet.

Frustration with Florida’s foreclosures

Florida courts continue to struggle with a backlog of more than 368,000 pending cases, according to Jane Bond, a Florida foreclosure attorney at McCalla Raymer. It’s a nightmare, attorneys say — one with no end in sight.  “It’s not as bad as it seems. It’s much, much worse,” said David Rodstein, a foreclosure attorney with the Rodstein Law Group.  Bond and Rodstein chaired a panel at the Mortgage Bankers Association annual mortgage servicing conference in Orlando, Fla. The state is suffering from an ailing housing market. Home prices dropped 41% from 2006. Nearly half of all borrowers are underwater. Distressed properties abound. Unemployment is at 9.9%. And as it tries to clear the backlog of foreclosures, the state is going nowhere fast.  “The judges are frustrated. The attorneys are frustrated. The servicers are frustrated. Everyone is frustrated,” Bond said.  The average foreclosure in Florida takes nearly 800 days to complete, more than twice the national average, according to RealtyTrac.  Rodstein said 40% of foreclosures filed by servicers are contested by the borrower because of a very efficient bar system in the state. It’s helped create a cottage industry of delays, displacing an earlier system not any fairer.  “Borrowers can hire these attorneys for a small monthly payment — much less than the mortgage — and the attorney can come in and easily delay the case for year plus,” Rodstein said.

But the delay recently has much to do with some attorneys’ own mistakes.  Massive firm David J. Stern ceased foreclosure work in March after coming under investigation for robo-signing and other document problems. The entire firm crashed later in the year. Several other firms came under investigation as well.  The result was almost a complete freeze on the system. What had been a 60,000 foreclosure filings per month pace slowed to less than 19,000, according to Bond.  The Florida Bar News reported in November that the court system, which operates almost entirely on foreclosure fees since the crisis, had to take out a bridge loan to continue operating as the robo-signing correction paused the process.  An accelerated “rocket docket” that had made some progress through the backlog closed in the summer when funding ran out.  Servicers had to spread out the Stern cases among many more firms. Consent orders signed with regulators in April capped the amount of files a servicer could have with one law firm. One bank, Bond said, went from having six representatives in the state to more than 26 after Stern folded.  Defense attorneys aren’t letting up for what they claim to be a system still under abuse by the servicers. According to a survey released Wednesday by the National Consumer Law Center, 90% of defense attorneys claimed clients were foreclosed on while waiting for a modification, a practice banned by consent orders last year.  “Until rigorous national mortgage servicing standards that are enforceable by homeowners are put in place by the federal government, banks will continue to seize homes illegally and routinely,” said NCLC attorney Diane Thompson.

The problems aren’t over for Florida or the rest of the country either. According to Lender Processing Services, roughly 1.7 million mortgages are more than 90 days past due but not yet in the foreclosure process.  “Unless you’re a servicer with a very geo-centric model, you’re having to deal with different state policies that are changing month to month,” said Rick Sharga, executive vice president at Carrington Mortgage Services. “The tendency is to almost throw your hands up in the air.”  The state legislature is working on speeding up the process. The Florida Senate passed H.B. 213 last week to allow servicers to use an alternative court process that could potentially limit the amount of hearings per foreclosure and would loosen affidavit requirements.  After delaying the bill last week, a second committee in the Florida House of Representatives passed the bill Wednesday for the floor to vote.  If signed into law, the bill would take effect in July. Servicers and the courts will need more time to implement it as well. Until then, the backlog remains.  “We don’t have a paradise,” Bond said at the conference, which is being held next to the Walt Disney World. “We have the opposite.”

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
portfolio of nearly 150 high-value, high-profit
properties

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

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

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Smart Real Estate News & Commentary by Chris McLaughlin February 21, 2012

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Florida foreclosure bill moving along

The state Senate version of the controversial Florida Fair Foreclosure Act, which proponents say protects homeowners and opponents claim is far from fair, passed the Senate Judiciary Committee on Monday and appears to be on a fast track to the Legislature floor.  The bill to streamline foreclosures, introduced to the Legislature by Rep. Kathleen Passidomo, R-Naples, has roused the passions of those who say it’s needed to revive the foundering real estate industry and those who say it’s just plain unconstitutional.  “I think it’s one of the most important pieces of legislation we have the potential to pass this year,” said Sen. Jack Latvala, R-St. Petersburg, who sponsored Senate Bill 1890. The Senate measure is a combination of two House bills, the first sponsored by Passidomo and a second, companion bill sponsored by Rep. Greg Steube, R-Parrish.

The bill contains a provision of finality of judgment, which means that once a home is foreclosed upon and sold in a short sale to a new owner, that new owner holds clear title to the property even if it turns out that the home was foreclosed upon fraudulently by the lender. The original homeowner can’t get his home back, but he can sue the lender for damages.  Passidomo, who is a real estate attorney, said that some people are misunderstanding the finality of judgment provision. It is meant to protect an innocent third party who buys the foreclosed home, she said. If it turns out that a lender didn’t really hold the note, and a different lender comes forward with the real note and tries to foreclose, the third party is protected, she said.  “The bankers don’t like this bill because it makes them produce all kinds of stuff,” Passidomo said. The point is to hold lenders’ feet to the fire and make sure they have the proper paperwork, she said. “Don’t file your complaint until you have your ducks in a row.”

Under current uniform commercial code, the lender isn’t barred from foreclosing if it can’t produce the note, Passidomo said. “If you have a car title and by mistake, the dog eats it, you can go up and get a new title,” she said. “The fact that you’ve lost it doesn’t mean it’s gone.”  Rather, the lender must provide an affidavit that says they do have the right to foreclose. A judge may require the lender to put up a bond, possibly for the amount owed on the mortgage, so that if another lender shows up with the real note, the borrower won’t be foreclosed upon twice. Instead, the second lender that holds the note can go after the first lender for the mortgage.  The bill advanced 5-2, along party lines. The measure goes next to the Senate Banking and Insurance Committee, chaired by Sen. Garrett Richter, R-Naples. The House bill goes to the Judiciary Committee.

Greek’s new deal

Euro zone finance ministers sealed a 130-billion-euro ($172 billion) bailout for Greece on Tuesday to avert a chaotic default in March after persuading private bondholders to take greater losses and Athens to commit to deep cuts.  By agreeing that the European Central Bank would distribute its profits from bond buying and private bondholders would take more losses, the ministers reduced the debt to a point that should secure funding from the International Monetary Fund and help shore up the 17-country currency bloc.  But the austerity measures wrought from Greece are widely unpopular among the population and may hold difficulties for a country which is due to hold an election in April.  Further protests could test politicians’ commitment to cuts in wages, pensions and jobs.  Every government in the currency union will also have to approve the package.  Northern creditors, such as Germany, had pressed for even tougher measures to be placed on Greece, but Finance Minister Wolfgang Schaeuble said he was very confident a majority in parliament would approve the package.

Some economists say there are still questions over whether Greece can pay off even a reduced debt burden.  A return to economic growth could take as much as a decade, a prospect that brought thousands of Greeks onto the streets to protest on Sunday.  The cuts will deepen a recession already in its fifth year, hurting government revenues.  A report prepared by experts from the European Union, European Central Bank and International Monetary Fund said Greece would need extra relief to cut its debts near to the official debt target given the worsening state of its economy.  If Athens did not follow through on economic reforms and savings to make its economy more competitive, its debt could hit 160% by 2020, said the report, obtained by Reuters.  “Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,” the nine-page confidential report said.

LPS “first look” report

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

Total US loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​  7.97%​

Month-over-month change in delinquency rate:​  -2.2%​

Year-over-year change in delinquency rate:​  -10.5%​

Total U.S foreclosure pre-sale inventory rate:​  4.15%​

Month-over-month change in foreclosure presale inventory rate:​  1.1%​

Year-over-year change in foreclosure presale inventory rate:​                 -0.1%​

Number of properties that are 30 or more days past due, but not in foreclosure: (A)​  3,998,000​

Number of properties that are 90 or more days delinquent, but not in foreclosure:​                1,772,000 ​

Number of properties in foreclosure pre-sale inventory: (B)​  2,084,000​

Number of properties that are 30 or more days delinquent or in foreclosure:  (A+B)​  6,082,000 ​

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

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

*Non-current totals combine foreclosures and delinquencies as a% of active loans in that state.
Notes:
(1) Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets
(2) All whole numbers are rounded to the nearest thousand.

Home depot increases income

Home Depot Inc.’s fiscal fourth-quarter net income rose 32% as homeowners spent more on renovation projects and mild weather in the US helped results surpass expectations.  Shares rose 3% in premarket trading.  Home-goods sellers like Home Depot and others are facing cautious consumer spending and prolonged weakness in the housing market. They’ve had to adjust to fewer consumers making large-scale home renovations by cutting costs and improving services such as online shopping and customer service.  But Home Depot’s sales increase shows there may be some pent-up demand for home improvement, even during the winter.  “We had a strong finish to 2011, and with favorable weather, our business delivered results that exceeded our expectations,” Chairman and CEO Frank Blake said in a statement.  The largest US home-improvement company reported Tuesday that it earned $774 million, or 50 cents per share, for the period ended Jan. 29. That’s up from $587 million, or 36 cents per share, a year earlier.  The earnings topped the 42 cents per share that analysts surveyed by FactSet expected.

Doubt that the settlement will end foreclosure woes

Even as government officials prepare to unveil new standards this week for how banks treat millions of Americans facing foreclosure, housing advocates and homeowners are skeptical the rules will be able to do something past efforts have not: provide a beleaguered borrower with one individual to help them navigate the mortgage maze.  So the promise of a single point of contact has emerged as a crucial element in the much-ballyhooed $26 billion settlement reached earlier this month involving state attorneys general, the federal government and the five biggest mortgage servicers. These rules will apply nationwide and come with commitments of strong enforcement by federal and state authorities, but they carry a familiar ring for those experienced in the foreclosure process.

Last April, the industry made many of the same pledges under a consent order with the Office of the Comptroller of the Currency and since then, consumer representatives say, there has been barely any improvement, adding that loan files continue to be handed off from one agent to another, sometimes weekly, and that even when a single person is assigned to their cases, one phone call after another goes unreturned.  “It doesn’t seem like much has changed,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, or Nedap, a resource and advocacy center that works with community groups in New York. “We’re still seeing the same systematic problems.”

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
portfolio of nearly 150 high-value, high-profit
properties

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

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com