treasury department

Florida foreclosure limbo

Banks that made reckless home loans in south Florida have been tiptoeing away from foreclosures in a tactic designed to cut their losses. The result: Orphaned, dilapidated homes dot the landscape from Kendall to Lake Worth.  There are no owners willing to claim and care for them.  A months-long Sun Sentinel investigation of property code violations involving abandoned homes uncovered case after case in which banks launched foreclosure lawsuits but then stalled or avoided taking ownership. In effect, the banks legally sidestepped responsibility for the empty homes, causing great harm to neighborhoods.  The real estate industry calls such properties “bank walkaways.” They are no longer maintained by their legal owners, whether they were investors bailing out of unwise deals or families in financial ruin who decamped.  Nor are they being tended to by lenders, which have halted foreclosure proceedings because the remaining equity in the properties is deemed inadequate to cover the banks’ costs to reclaim title and maintain, refurbish and sell them.  The practice has contributed to South Florida’s foreclosure “limbo” problem in which thousands of vacant homes are stuck in unsettled court proceedings for years.

Spending down, income up

A Commerce Department report showed that personal spending increased 0.3% in the month, well down from the 0.9% jump in spending the month before. That was much weaker than the 0.5% gain in spending forecast by economists surveyed by Briefing.com.  Income increased a little faster, rising 0.4%, which was an improvement from the 0.2% rising the previous month. It was the first time since December that income growth outpaced spending increases, as consumers dipped into savings the previous two months in order to deal with rising prices, such as increases in gasoline prices.  But inflation moderated in March, and it allowed consumers to increase their savings again. The report showed that the savings rate, which compares after-tax income to the level of spending, edged up to 3.8% from 3.7% in February. That means the average family was saving $38 out of every $1,000 in take-home pay in the month.

ResCap bankruptcy could cost $1.2 billion

A bankruptcy filing on the ResCap mortgage unit could cost parent company Ally Financial between $400 million and $1.25 billion, according to a financial disclosure by the bank Friday.  “If a ResCap bankruptcy were to occur, we could incur significant charges, substantial litigation could result, and repayment of our credit exposure to ResCap could be at risk,” according to the filing.  On April 17, Ally disclosed the troubled mortgage unit missed an interest payment on its debt and would be considered in default if it wasn’t made within 30 days. More than $473 million on the debt is outstanding.  The unit actually forged a $191 million profit in the first quarter. But according to the filing Friday, Ally estimates the losses from litigation matters and repurchase obligations could reach as high as $4 billion over time.  Barclays Capital analysts predicted the unit could be placed into bankruptcy within one to two months, and outlined why selling the servicing rights would be critical for investors in ResCap issued mortgage-backed securities.  The unit has stopped lending to real estate developers and homebuilders in the US, according to the Ally filing Friday.

Student loans are a hot potato

In the political campaigns still taking shape, President Barack Obama, Republican challenger Mitt Romney and lawmakers of both parties say they want to protect college students from a sharp increase in interest rates on federally subsidized loans.  Agree, they might, and act they surely will. But first, they settled effortlessly into a rollicking good political brawl.  In less than 72 hours, what might have looked like a relatively simple matter mushroomed into a politically charged veto showdown that touched on the economy and health care, tax cuts and policies affecting women. Accusatory campaign commercials to follow, no doubt.  “This is beneath us. This is beneath the dignity of this House and the dignity of the public trust that we enjoy,” protested House Speaker John Boehner, R-Ohio as Democrats maneuvered for position on the student loan bill.

“It shouldn’t be a Republican or a Democratic issue. This is an American issue,” Obama said in North Carolina last week as he broached the topic of legislation in a move to gain support students in the fall election. He urged his listeners to tweet their lawmakers and urge them to block an increase in interest rates on federally subsidized loans issued beginning July 1.  There was partisan pop behind Obama’s message, though.  Over two days of campaign-style appearances on college campuses, he quoted one unnamed Republican lawmaker as saying she had “very little tolerance for people who tell me they graduate with debt because there’s no reason for that.” Another GOP lawmaker likened student loans to “stage three cancer of socialism,” he said. Both Republicans quickly said they had been quoted out of context. 

Within a day, Romney told reporters he agreed on the need to prevent the rate increase, while conceding nothing to Obama in the search for political advantage. “I support extending the temporary relief on interest rates for students,” he said, and cited “extraordinarily poor conditions in the job market” in a jab at the president’s handling of the economy.  Congressional Democrats announced they would write legislation to prevent a doubling of the current 3.4% interest rate, and cover the $6 billion cost by requiring more wealthy individuals to pay Social Security and Medicare payroll tax.  It was a not-so-subtle reprise of a campaign perennial, the allegation that Republicans want to cut programs benefiting those who aren’t rich to protect tax cuts for those who are.  “Let’s be honest,” said Senate Republican leader Mitch McConnell of Kentucky. “The only reason Democrats have proposed this particular solution to the problem is to get Republicans to oppose it, to make us cast a vote they think will make us look bad to the voters they need to win the next election.”  He then accused Democrats of wanting to pay for the legislation “by raiding Social Security and Medicare, and by making it even harder for small businesses to hire.”

TARP exec pleads guilty to fraud

Reginald Harper, former CEO of First Community Bank of Hammond, La., pleaded guilty to defrauding the firm out of millions of dollars in phony mortgages.  Harper faces up to five years in prison and a $250,000 fine. His sentencing is scheduled for Sept. 13. First Community applied for and was approved for $3.3 million in Troubled Asset Relief Program bailouts in 2008 but withdrew its application afterward.  Four years prior, Harper loaned $2 million to real estate developer Troy Foquet in 2004 to build out parcels of real estate, according to the charges.  Once it became difficult to find qualified homebuyers, Harper would loan potential buyers money to make it appear to the mortgage lender the borrower had more cash than they actually did. He also used “straw” buyers to obtain mortgages, which were used to pay off the original loans to Foquet.  Foquet also paid Harper with insufficient checks, which were credited as a loan payment in order to avoid reporting the delinquency.  Foquet pleaded guilty to the charges in March.  Executives had the choice of writing off losses on bad loans or covering up those losses through fraud,” said Special Inspector General for TARP Director Christy Romero. “Harper chose the latter and concealed the status of the loans from others at First Community Bank, from the bank’s regulators and in the bank’s TARP application.”

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).

Foreclosure backlog looms

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

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

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

Jobless claims up

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

CoreLogic – First Quarter 2012 Multifamily Applicant Risk Index Report

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

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

Understanding the Multifamily Applicant Risk Index (MAR Index)

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

BOA tops estimates

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

California foreclosure reform moves forward

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

Half a decade into the deepest US housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end.  House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.  But a painful part two of the slump looks set to unfold: Many more US homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.  “We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010,” said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio.  “Last year was an anomaly, and not in a good way,” he said.  In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.  Five major banks eventually struck that settlement with 49 US states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.

 Mortgage servicing provider Lender Processing Services reported in early March that US foreclosure starts jumped 28% in January.  More conclusive national data is not yet available. But watchdog group, 4closurefraud.org which helped uncover the “robo-signing” scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash.  Although foreclosure starts were 50% or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47% from 2011. Those of Wells Fargo’s rose 68% and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment. 

Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.  Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64%), Chicago (43%) and Miami (53%).  RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it’s mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.  “The subprime stuff is long gone,” said Michael Redman, founder of 4closurefraud.org. “Now the folks being affected are hardworking, everyday Americans struggling because of the economy.”

Crackdown on tax havens

As regulators clamp down on money flows around the globe, governments, even those that prided themselves on the strength of their secrecy laws, like Switzerland, are facing pressure to share banking information and change their policies.  Now, private banks and wealth managers are scrambling to convert so-called black money — assets that have not been disclosed — into accounts that are above board.  The shift may provide opportunities for the industry. As more funds become legitimate, analysts say financial institutions will be able to sell extra wealth management products to affluent people and enter markets that had previously been off limits.  “There’s much less black money now than three years ago,” said Jean Schaffner, head of the Luxembourg tax practice at the law firm Allen & Overy. “It’s in the banks’ interests for clients to come forward with their money.”  For decades, Western governments tolerated offshore tax havens, places where the wealthy could park millions away from the gaze of their domestic authorities. Switzerland, in particular, developed a reputation as a place where the wealthy could rely on secrecy laws.  But the tide began to turn in 2008, particularly after the financial crisis prompted many governments to act in concert.  As Switzerland and other locales tightened their financial controls, many people initially flocked to other tax havens like Singapore and Hong Kong, which still offer some of the world’s most secret accounts. But these places, too, are facing new pressures.

NAHB – 101 improving housing markets

The list of housing markets showing measurable improvement expanded slightly to include 101 metropolitan areas in April, according to the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI), released today. Thirty-five states (including the District of Columbia) are now represented by at least one market on the list. The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. The 101 markets on the April IMI represent a net gain of two from March, with 13 metros being added and 11 markets slipping from the list while 88 markets retained their places on it. Among the new entrants, areas as diverse as Rome, Ga.; Coeur d’Alene, Idaho; Greenville, N.C.; Brownsville, Texas; St. George, Utah; and Huntington, W.Va., are now represented on the IMI.  The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas.

The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the US Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.  A complete list of all 101 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in April, is available at: www.nahb.org/imi.

Job improvement slows

US payrolls rose far less than expected in March, keeping the door open for further monetary policy support from the Federal Reserve, even as the unemployment rate fell to a three-year low of 8.2%.  Employers added 120,000 jobs last month, the Labor Department said on Friday, the smallest increase since October.  Economists polled by Reuters had expected nonfarm employment to increase 203,000 and the unemployment rate to hold at 8.3%.  The slowdown in employment growth last month likely reflected the fading boost from unseasonably warm winter weather. It supported the caution on the labor market from Fed Chairman Ben Bernanke last week.  Bernanke expressed doubts the recent job gains could be sustained, and March’s weak report was in line with expectations that economic growth slowed to an annual pace of 2% in the first quarter from the 3% rate in the October-December period. 

The weakness in hiring last month was concentrated in the vast private services sector, which added only 90,000 after increasing payrolls by 204,000 in February. Retail employment fell dropped 33,800 after falling 28,600 the prior month.  Construction hiring fell 7,000, the second straight monthly decline. Temporary help fell 7,500 after rising 54,900 in February.  However, manufacturing enjoyed another month of strong job gains, with factories adding 37,000 new positions, helped by carmakers trying to meet pent-up demand for motor vehicles. Factory jobs increased by 31,000 in February.  Government employment edged down 1,000 after rising 7,000 in February. Despite the weak employment gains last month, average hourly earnings rose 5 cents.  The workweek dipped to 34.5 hours from 34.6 hours in February.

WSJ – Fed in favor of the banks’ foreclosure-rental approach

Last month, Bank of America Corp. announced a plan to allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate.  In addition, Fannie Mae is selling 2,500 homes in eight metropolitan areas around the country. The government-controlled mortgage firm is selling the $320 million portfolio to investors, who would be required to turn them into rental properties.  The Federal Reserve set out new polices for banks that decide to rent out foreclosed homes, endorsing a strategy for managing the huge number of distressed properties that have piled up during the housing bust. The central bank said in a six-page policy statement Thursday that the Fed’s regulations permit the rental of foreclosed properties to tenants “in light of the extraordinary market conditions that currently prevail.” The policy clarified that banks that would otherwise be required to sell off the properties more quickly can turn to rental as a strategy. 

Federal Reserve Chairman Ben Bernanke and other central bank officials have spoken publicly about the need to encourage banks to rent out foreclosures. “With home prices falling and rents rising, it could make sense in some markets to turn some of the foreclosed homes into rental properties,” Mr. Bernanke said in a February speech.  The central bank said that banks holding large numbers of foreclosures should establish detailed policies for renting foreclosures, including a process to determine whether the properties are safe to occupy and meet local building code requirements.  The Fed said banks should set up criteria by which properties are picked to be rental properties. The banks should establish plans that “describe the general conditions under which the organization believes a rental approach is likely to be successful,” the central bank said.