Smart Real Estate News & Commentary by Chris McLaughlin June 9, 2011
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DSNews.com – short sales up
Servicers completed 1,666 short sales and deeds-in-lieu (DIL) of foreclosure under the Home Affordable Foreclosure Alternatives (HAFA) program in April. That’s up 73.7% from the 959 HAFA transactions completed the month before. HAFA has been in place since April of 2010. According to Treasury’s latest report, which covers program activity through April of this year, a total of 7,113 short sales and DILs have concluded through HAFA. Treasury says another 7,780 HAFA transactions have been started, meaning an agreement has been put in place between the servicer and the homeowner for terms of a potential short sale of DIL. Treasury notes that a short sale typically takes 120 days to complete under the program. The number breakdown in the report doesn’t specify how many of the HAFA“starts” are still in process or may have been withdrawn. Any short sale also requires the cooperation of a third-party purchaser, junior lien holders, and mortgage insurers to complete the transaction.
The latest data show that the 10 largest servicers participating in the federal government’s foreclosure prevention programs have completed a short sale or DIL for 82,995 borrowers who did not qualify for a Home Affordable Modification Program (HAMP) trial and 31,048 borrowers whose trial plans were canceled, indicating that servicers are employing their own short sale programs to avert foreclosure for borrowers that don’t fit the mod equation. Critics of HAFA have urged Treasury to raise the monetary incentive for servicers, investors, and subordinate lien holders, citing low payouts as a common reason HAFA short sales are rejected.
WSJ – mortgage rates hit new 2011 low
Home mortgage rates fell again to a fresh 2011 low as a week of downbeat jobs data fueled concerns over a possible economic slowdown this year, according to the latest survey from Freddie Mac. The decline in fixed rates represented the eighth-straight weekly fall and comes after the Bureau of Labor Statistics this week said employers added far fewer private-sector jobs than expected. The housing market continues to be fragile across the nation as well,” Freddie chief economist Frank Nothaft said, with Federal Reserve data released Wednesday showing weak sales and prices in most districts. The 30-year fixed-rate mortgage averaged 4.49% in the week ended Thursday, down from 4.55% the prior week and last year’s 4.72% average. Rates on 15-year fixed-rate mortgages fell to 3.68% from 3.74% the previous week and 4.17% a year earlier. Five-year Treasury-indexed hybrid adjustable-rate mortgages fell to 3.28%, from 3.41% last week and 3.91% a year earlier. One-year Treasury-indexed ARM rates decreased to 2.95%, from 3.13% the prior week and 3.91% a year earlier. To obtain the rates, fixed-rate borrowers required an average payment of 0.7 point, while the adjustable-rate mortgages required a 0.5 point payment. A point is 1% of the mortgage amount, charged as prepaid interest.
Banks fight back
The Foreign Account Tax Compliance Act was passed by Congress last year and comes into force in 2013. Last week, senior bank executives implored Tim Geithner, US Treasury secretary, to modify the law, according to people familiar with the meetings. Banks say they are already racking up significant costs. Eventually, they say, the task of scouring records for US citizens and then reporting them could run into billions of dollars and conflict with domestic privacy laws. Disclosure records show groups including Switzerland’s Credit Suisse, Barclays of the UK and TD Bank of Canada have together spent millions of dollars lobbying on the issue. Terry Campbell, Canadian Bankers Association head, said the act was “conscripting financial institutions around the world to be arms of US tax authorities”. Algirdas Semeta, the European tax commissioner, told the Financial Times that he shared the concerns of the financial sector and expected more meetings with US counterparts. “We can find alternatives that would ensure all necessary information on their taxpayers without imposing additional burdens on financial institutions in the EU,” he said. People involved in meetings on the subject say the Obama administration has indicated it will look to reduce the burden on banks, which have to identify US citizens with accounts of more than $50,000.
Olick – predicting home prices is impossible
“When Robert Shiller, co-creator of the S&P/Case-Shiller Home Price Indices , speaks, he tends to make headlines, and yesterday was no different. Claiming that he wasn’t making any predictions, he predicted that home prices could fall another 25%. ‘That wouldn’t surprise me at all,’ he hedged. And there was the headline, tragic as it is. I happened to be at the conference yesterday where he said that. In fact, I was a speaker/panelist at the Standard and Poor’s ‘Housing Summit 2011: Boom, Bust and Beyond.’ And, no offense, but that wasn’t the headline. What really struck me was what he said right before that. ‘Statisticians deal with things that repeat themselves. This housing boom and bust is so historic and unprecedented, you can’t forecast the future because you have no comparison.’ That was not only the headline, but the theme of the conference, as I sat on a panel with economists from S&P, Experian and Columbia Business School. Chip Case was there as well, disagreeing with Shiller on several points.
Audience members, largely from the finance industry, kept asking the same question in different ways, ‘When is this all going to get better??’ One by one, we panelists opined on headwinds and tailwinds, but never really answered. This is something of a shift from just the past few months, when the economists who cover housing seemed to be suddenly more bullish. But now we have a new dip in home prices, which is putting more borrowers in a negative equity position. There is more concern of more borrowers hitting that ‘stress threshold,’ as one panelist put it, where they just quit paying on their loans. We already have millions of borrowers who are not current on their mortgages. They haven’t hit the foreclosure pipe yet, but many will, and the panelists seemed most concerned about this huge glut of properties that will not just hit, but continue to plague the market for years to come.
This as the Treasury released a lackluster report on its own mortgage modification program and then punished several big banks for poor performance by cutting off the program’s financial incentives. By far the biggest concern among questioners and panelists alike was lack of buyer demand. The demand that should be there is pressured by fear, tight credit and under-employment. ‘Even with recent job growth, we still have 7 million fewer people employed today than at the peak in 2008, and the unemployment rate remains high at 9.1% officially, but a whopping total of 15.9% are underemployed or have given up their search,’ notes housing analyst John Burns. This ‘wage-less recovery,’ he argues is largely behind the lack of buyer demand, despite much-improved affordability.
But all real estate is local, right? And all these national numbers that folks like me spew don’t have any footing in local reality, right? Yes, that may be true when it comes to the numbers. All real estate is local, but consumer confidence is national, and that trumps the local numbers. I have to say, leaving yesterday’s conference, I felt a strange unease, not because we talked about the same barriers to recovery that I talk about every day of the week, but because all these experts who are supposed to tell us when it’s all going to be alright…don’t have a clue.”
Oil prices fall on productivity boost
Oil prices fell to near $98 a barrel today, extending a big loss from Friday after a report said Saudi Arabia plans to boost its crude production. Saudi newspaper al-Hayat reported Friday that the country will increase production by 13%, or about 1.14 million barrels per day, to boost global supplies and help lower prices. Earlier last week, the Organization of Petroleum Exporting Countries failed to reach consensus to raise output and left the cartel’s production quotas unchanged. Fighting in Libya since February has shrunk global crude output by shutting down the OPEC nation’s 1.6 million barrels a day of production. Political violence and upheaval in the Middle East and North Africa this year has probably added about $15 to the price of oil, said Paul Sheard, global chief economist at Nomura. Analysts are concerned an escalation of violence and instability in the Middle East would send oil prices higher and undermine global economic growth. In other Nymex trading in July contracts, heating oil rose moved up 0.01 cent to $3.1061 a gallon while gasoline added 0.14 cent to $3.0191 a gallon. Natural gas futures gained 5 cents to $4.807 per 1,000 cubic feet.
Fitch downgrades 9 mortgage servicers
Fitch Ratings downgraded ratings on nine mortgage servicers because of tougher regulations and the lack of urgency these companies displayed in response to the foreclosure crisis. The credit rating agency took action on two Bank of America servicing divisions of, two Wells Fargo servicing divisions, JPMorgan Chase , Citigroup , MetLife Bank , PNC Bank and SunTrust Mortgage . In late 2010, procedural defects surfaced across the servicing industry. Servicers halted the foreclosure process to fix affidavits required in judicial states. Federal regulators followed with investigations and consent orders, requiring new standards for servicing loans. Negotiations between the 50 state attorneys general remain ongoing.
“The full extent of the concerns resulting from this and other related functions within servicer operations is far from resolved. Fitch expects that the additional scrutiny from a wide range of interested parties, as well as the potential new regulation and heightened risk from litigation, will result in continued reluctance to proceed with foreclosure,” Fitch said. In November, Fitch placed these ratings on watch and complete a full review of the rated sevicers later in 2011. Fitch already incorporated the heightened resolution times and loss severities into its analysis of outstanding residential mortgage-backed securities bonds. Therefore, it does not expect to change outstanding RMBS bond ratings.
See you at the top!
Chris McLaughlin
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About the author: Chris McLaughlin is widely known as America’s top Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-foreclosure expert, he oversees more than 100 short sale & REO closings each month
* Long-time authority on real estate investing and rapid reselling of distressed homes. Own 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.
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According to the latest quarterly survey of housing released by The Wall Street Journal, the housing market is recovering at different rates in different parts of the country. Data released by MDA DataQuick shows that home sales in Minneapolis, Southern California and the San Francisco Bay Area rose sharply in June while data from Miller Samuel Inc, shows that there was a drop in home sales in Manhattan, Long Island, N.Y., and Charlotte, N.C., among other areas. A number of factors including unemployment and extent of 
The Government Accountability Office (GAO), in a report released this week, has exhorted the government to implement measures to remove glitches in the $75 billion mortgage modification program. The Obama administration has been criticized for the lack of effectiveness of the program so far. The GAO also said the administration’s estimate of 4 million people benefiting from the program could be an exaggeration. According to the GAO, the Treasury Department expects that servicers covering 90% of the distressed loans will be covered under the program and 65% of eligible borrowers would apply. However, servicers covering only 85% of loans have signed up so far.
With energy prices going up, homeowners are increasingly seeking the assistance of real estate professionals who are specializing in environment friendly buildings. “Many of the consumers that come to me want to know more about energy efficiency, healthy building design, what to look for in a home,” says Michael Kiefer, a real estate broker, who is a specialist in environment friendly buildings. EcoBroker, a company which provides “green designation” for real estate professionals, has trained over 5000 real estate professionals in the U.S. and abroad. The National Association of Realtors (NAR), which launched its Green Designee program last year, says the response to its program has been overwhelming. “All across the country, almost every time the courses being offered have been full,” NAR spokesman Andy Norton said. “And by the end of this year, the National Association is predicting that close to 4,000 realtors will have gone through the course, which is way ahead of the expectation.” Experts say that environmentally friendly homes often cost more than traditional homes, but the additional cost be recovered over time by way of energy efficiency. With homeowners getting more aware of the importance of environmental friendliness, the demand for real estate professionals with green certification is likely to grow in future.
The dismal state of finances in state governments is impacting jobless individuals seeking state assistance. Sixteen states are now paying jobless workers with borrowed cash and there are considerable delays in jobless workers receiving their benefit checks. Workers who wish to file an application for jobless claims are also seeing enormous delays. While the program makes over 80% of initial payments within 3 weeks, which is slightly below federal standard, individual cases which require review are prone to delays. Labor Secretary Hilda Solis said: “Obviously, some of our states were in a pickle. The system wasn’t prepared to deal with the enormity of the calls coming in.”
