Foreclosure Filings Fall for Fourth Month

December 14, 2009

Foreclosure filings fell 8% in November 2009 from October, the fourth straight month of declines, RealtyTrac of Irvine, Calif., recently reported.

With one filing for every 417 houses nationally, November saw the lowest amount of foreclosure activity since February. The numbers, while 18% higher than the same month last year, were a result of “loan modifications and other foreclosure prevention efforts,” said RealtyTrac chief executive James J. Saccacio. He said the recently extended and expanded homebuyer tax credit was keeping a lid on home value depreciation.

Saccacio warned, however, that a full recovery will come only “when unemployment recedes to normal, healthy levels and when availability of credit reaches a more rational balance between the extremes of the past few years.”

Data from Integrated Asset Services of Denver showed values continuing to decline despite the buying boom fostered by the tax credit.

Home values actually declined 0.05% nationally in October from September, with the Northeast, especially metropolitan Boston, dragging the numbers down. The Northeast region fell 1.6%; the Middle Atlantic, 0.06%.

“I have no doubt that the tax credit persuaded some buyers to make their purchase sooner than they otherwise would have,” said Dave McCarthy, president and CEO of Integrated Asset Services. “It’s reasonable to think the broader market will reflect that reality at some point down the road.”

Although Saccacio credited loan modification efforts as helping slow the rate of foreclosures, a recent Treasury report on the Obama administration’s Making Home Affordable program showed the effort coming up woefully short in getting lenders to alter mortgage terms permanently. Programs to mitigate foreclosures are not having the desired impact, said Michael Feder, president of Radar Logic in New York, which tracks the housing market.

Foreclosure1The Treasury Department reported that just 31,382 loans of the four million mortgages targeted had been modified permanently since the program began in February. There are 728,000 loans in “trial” modification. By some estimates, there is as much as $1 trillion in potential foreclosures already delinquent, Feder said. Lawmakers have been critical of the program, which they say is still focusing on the subprime-loan crisis of last year rather than mortgage foreclosures related to rising unemployment. They also have taken lenders to task, especially those who have taken government bailout money, known as TARP funds. Those lenders, however, have been reporting great success in modifying loans independent of the government program.

Resets of thousands of so-called exotic mortgages such as option adjustable-rate loans in 2010 “will undoubtedly lead to another wave of foreclosures as payments begin to double and triple,” said Sylvia Alayon, vice president of the Consumer Mortgage Audit Center in Fort Lauderdale, Fla.

“When principal balances go up and house values continue to plummet, refinancing will no longer be an option for homeowners in negative amortization,” she said.

(c) 2009, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

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Reuters: Existing Home Sales Seen at Highest Since July 2007

November 20, 2009

Sales of existing U.S. homes likely rose for second consecutive month in October, reaching their highest level since July 2007, according to a Reuters poll, as buyers scrambled to take advantage of greater affordability and a first-time home buyer tax credit.

The survey of 29 economists predicted sales of previously owned homes climbed to a seasonally adjusted annual rate of 5.70 million, the fastest pace since 5.73 million units were sold in July 2007 and up from 5.57 million units in September.House

Forecasts, however, ranged widely, from as low as a seasonally adjusted annual rate of 5.26 million to as high as 6.00 million units.

Existing home sales have been on an upward trend for most of this year and an increase in October would mark the sixth gain in seven months. Home sales typically pick up in the spring as warmer weather boosts activity, but the momentum continued into most of the summer and fall.

Consumers have come out in droves to take advantage of the federal government’s $8,000 first-time home buyer tax credit — part of the stimulus bill — which was originally set to end November 30.

The Obama administration recently extended the $8,000 first-time home buyer tax credit, added a $6,500 credit for home owners buying a new residence and increased income limits. Eligible borrowers must sign contracts by April 30 and close by June 30.

The lowest mortgage rates in decades and high affordability have also helped the housing market find some footing after a three-year slump. Home price declines have been moderating in many regions of the country and in some areas they have risen.

Improvement in the housing market bodes well for the U.S. economy, as it points to better demand in the sector where the first signs of the recession took root. But with distressed properties making up a high proportion of sales, there is widespread uncertainty about the sector’s long-term outlook.

To be sure, there is still a huge supply of unsold homes on the market and millions of more foreclosures are in the pipeline, which should continue to pressure prices.

The economic outlook is also crucial for housing demand and many potential buyers are staying sidelined due to unemployment or fear of losing their jobs. The U.S. Labor Department said the unemployment rate reached a 26-1/2-year high of 10.2 percent in October. Access to credit also remains tight.

While existing home sales are predicted to rise in October, declines are expected in the months following. Recent data indicates a sector that is still on shaky ground. The Commerce Department said new U.S. housing starts in October unexpectedly fell to the lowest level in six months, dropping 10.6 percent.

Existing home sales tally the number of previously constructed homes for which a sale closed during the month.

The National Association of Realtors will release U.S. existing home sales data on Monday at 10 a.m. (1500 GMT).

Source: Reuters

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Home Prices Fall But Sales Continue to Climb

November 11, 2009

A real estate group says home prices fell in eight out of every 10 U.S. cities in the third quarter of this year as heavily discounted distressed sales made up 30 percent of all deals.

But home sales continued their climb, with quarterly sales outpacing the second quarter and the previous year’s figures, the National Association of Realtors said Tuesday.

The median sales prices of existing homes declined in 123 out of 153 metropolitan areas compared with the same period a year ago. Prices rose in the other 30 cities.

The national median price was $177,900, or 11 percent below that of the third quarter last year.

“The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas,” said Lawrence Yun, the group’s chief economist. “But we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market.”

Separately, the Treasury Department said Tuesday that as of the end of October, more than 650,000 borrowers, or 20 percent of those eligible, had signed up for the Obama administration’s mortgage-relief program to reduce monthly payments to more affordable levels.

Launched with great fanfare in March, the plan got off to a weak start, but now nearly 920,000 loan-modification offers have been sent to more than 3.2 million eligible homeowners. That works out to 29 percent, up from 15 percent at the end of July.

The homes report said prices in Fort Myers, Fla., plunged 40 percent to $98,000 from a year ago, the worst in the nation. Las Vegas saw its median price tumble almost 35 percent to $138,500 year over year.

The largest price gain, by contrast, was in Cumberland, Md., where prices jumped 19 percent to $122,100. Davenport, Iowa, followed with an increase of 14 percent to $115,600.

The federal tax credit of up to $8,000 for first-time homebuyers helped boost sales in the third quarter. U.S. home sales rose in 45 states from the second quarter, with 28 states posting double-digit gains.

Total quarterly sales reached a seasonally adjusted annual rate of 5.3 million, up more than 11 percent from 4.76 million in the second quarter.

President Obama signed a bill last week extending and expanding the federal tax credit. Now, buyers who have owned their current homes for at least five years are eligible for tax credits of up to $6,500. First-time homebuyers – or anyone who hasn’t owned a home in the past three years – would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010, and close by June 30.

Meanwhile, though the Obama administration’s mortgage-relief program has reached one in five eligible homeowners, most of those borrowers are on temporary trial plans.

To make the change permanent, borrowers must complete a big stack of paperwork and show they can make their payments on time. At the beginning of September, only about 1,700 permanent modifications had been made. The Treasury Department expects to release updated data later this month.sold2

“We’re seeing some early indications that the servicers haven’t done enough to get all the documents in,” said Michael Barr, an assistant Treasury secretary.

In California, about 130,000 homeowners have been enrolled in the “Making Home Affordable” loan-modification plan. That works out to about 19 percent of the state’s homeowners who were either two payments behind or in foreclosure at the end of last month, according to Treasury Department data.

Two other hard-hit states, Arizona and Nevada, had similar rates of assistance as California, at 22 percent and 18 percent respectively. Florida, however, was much lower, at 12 percent, possibly because of high numbers of investor-owned properties that don’t qualify for the program.

Government officials say they are pressing mortgage companies hard to improve their performance. Still, many housing advocates have been disappointed with the $50 billion plan’s progress and say that getting a loan modification remains a battle.

Source: The Washington Times

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Expanded Version of Tax Credit Will Allow More Homebuyers to Qualify

November 9, 2009

President Obama recently signed an expanded version of the $8,000 first-time homebuyer tax credit that was set to expire on November 30. “The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. “Although the tax credit remains at $8,000 for homebuyers that have not owned a primary residence in the last three years, it has been expanded to include a $6,500 tax credit for homebuyers that have lived in their current primary residence for at least five consecutive years out of the past eight years. Under the old rules, move-up homebuyers did not qualify.” Consider these three examples:

Example 1:
Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:
Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:
Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight.

The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. “If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010,” Nicholas said. “It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit.”TaxCredit

The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. “This means that more people will qualify for the credit – especially in parts of the country with higher costs of living,” Nicholas said. “This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit.”

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples:

-The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others

-If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit).

-The credit applies even if you have co-signers on your mortgage loan

For more information, visit www.CMPSInstitute.org.

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Latest Homebuyer Tax Credit: Pay More, Get Less

November 5, 2009

President Obama could sign the $10.8 billion homebuyer tax credit extension and expansion plan into law as soon as next week. The Senate this evening voted 98-0 in favor of the extension. The House is expected to approve it within days.

But a new report from Goldman Sachs suggests that the six-month extension might do little for the fragile housing market and could be even less effective than the soon-to-expire credit for first-time buyers that cost taxpayers about $8.5 billion and lasted nearly a year.

The Congressional proposal would give buyers until April 30, 2010 to sign purchase contracts and another 60 days to close. And it will no longer be just for first-time buyers. Homeowners who have lived in their current home for five of the last eight years can claim $6,500, under the new law, which would only apply to houses purchased after the current tax credit expires Nov. 30. Income limits will be more generous: $125,000 a year for individuals, $225,000 a year for married couples.

But Goldman Sachs economist Alec Phillips says, in a report released to clients Nov. 3, that the expanded program won’t raise home prices and sales much and likely won’t significantly trim the supply of unsold homes.

“The extension of the current credit will probably result in some incremental first-time buying but not as much as the last one,” Phillips said in a phone interview today. “The expansion to the other population of buyers [existing homeowners] will provide a small boost to prices, but no more than 1%.”

According to Phillips’ calculations, all but about 200,000 of the 1.4 million first-time buyers who claimed the credit this year would have purchased a home even without the incentive. And the credit resulted in boosting home prices only by about 1%(Phillips assumed in his calculation that home prices rose in part because sellers built a large portion of the credit into their asking prices).

The pool of first-time buyers who still need an incentive to get off the fence is likely small because many of them have already taken advantage of the now-expiring credit. Existing homeowners who qualify for the new $6,500 credit could spur additional sales. But the supply of unsold homes will remain unchanged because most homeowners will have to sell their existing home in order to buy a new one (The credit only applies to principal residences).tax credit

This doesn’t mean that the credit is useless, only that it is inefficient. For one thing, it could stimulate the economy by giving consumers more money to spend. (Economist Simon Johnson argued in the Washington Post last week that the tax credit is both inefficient as a homebuyer incentive and as a economic stimulus).

“We were not arguing that [the expanded credit] would have no effect,” Phillips said. “Just will the effect be as great as last one?”

Source: BusinessWeek

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AP Poll: A Year Later, Worries Linger on Economy

September 16, 2009

WASHINGTON – One year after Wall Street teetered on the brink of collapse, seven out of 10 Americans lack confidence the federal government has taken safeguards to prevent another financial industry meltdown, according to a new Associated Press-GfK poll.

Even more — 80 percent — rate the condition of the economy as poor and a majority worry about their own ability to make ends meet. The pessimistic outlook sets the stage for President Barack Obama as he attempts to portray the financial sector as increasingly confident and stable and presses Congress to act on new banking regulations.

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The public sentiment also poses a challenge to central elements of Obama’s governing agenda. Half of those surveyed said deficit reduction should be a national priority over increased spending on health care, education or alternative energy.

“I know a lot of people who don’t have health care and really can’t afford it,” said Judy Purkey, a 57-year-old grandmother from Morristown, Tenn., who has raised four grandchildren and is living on disability payments. But she added: “The economy is so bad. You’ve heard the expression getting blood out of a turnip? — Well, that’s what’s going on.”

The president, in a CBS interview that aired Sunday on “60 Minutes,” acknowledged the public’s quandary.

“This is a very difficult economic environment. People are feeling anxious,” he said. “And I think it is absolutely fair to say that people started feeling some sticker shock.”

Still, Obama generally avoided public blame for the recession or the condition of the banking sector.

Only one out of five surveyed said Obama bore responsibility for the recession; 54 percent blamed former President George W. Bush and 19 percent blamed former President Bill Clinton.

Financial institutions, however, bore the brunt of the criticism — 79 percent of those surveyed said banks and lenders that made risky loans deserve quite a bit of the blame. Sixty-eight percent held the federal government responsible for not adequately regulating banks and 65 percent blamed borrowers who could not afford to repay loans.

In a glimmer of good news for the administration, 17 percent of those surveyed said the government’s massiveeconomic stimulus has improved the economy, a 10 percentage point increase over July. Nearly six out of 10, however, said they are not confident that $787 billion that Congress approved to lower taxes and inject spending into the economy will do any good.

The White House has been promoting the stimulus package as a job creator and job saver that has helped keep unemployment from rising above its current 9.7 percent level — the highest since 1983.

Michael Painter, a 38-year-old unemployed plumber from Orlando, Fla., said that while he believed that spending package would ultimately stimulate the economy, it had yet to help him or his laid-off wife and teenage daughter.

He said he approved of Obama’s job performance so far, but not Congress’. “The people in Congress need to quit bickering about party issues and start worrying about people issues.”

The Obama administration also has begun to portray the financial sector in more upbeat terms, eager to make the case that government interventions begun under then-President Bush and continued, altered or expanded under Obama have brought stability to the markets.

Obama plans to deliver a speech Monday — the anniversary of Lehman Brothers’ bankruptcy — to outline the administration’s achievements and press Congress to enact changes in bank regulations.

But the AP-GfK poll illustrates the difficulty he faces.

More Americans worry about facing big, unexpected medical expenses now than they did in July — up 7 percentage points to 68 percent among those polled. Likewise, more worry that the value of their stocks and retirement investments will drop — up 4 percentage points from July to 68 percent.

In October, then-President Bush pushed a $700 billion financial rescue package through Congress on the condition that only half could be spent without further congressional authority. Obama, upon becoming president in January, succeeded in getting the second amount released, despite growing apprehension among lawmakers about the wisdom of such a bailout.

Obama has repeatedly said that the rescue of the financial sector would be incomplete without a new regulatory regime that would prevent a recurrence of the crisis. Obama has sent the outlines of possible regulation to Congress. Key banking lawmakers in the House and Senate have promised Obama legislation by the end of the year, but there is vigorous debate over key elements of Obama’s plan, including a new consumer finance protection agency and the designation of the Federal Reserve as the main overseer of large institutions that could pose risks to the system.

The survey of 1,001 adults with cell and landline telephones was conducted from Sept. 3-8. It had a margin of sampling error of plus or minus 3.1 percentage points.

Source: Yahoo! News

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Two Major Lenders Step Up Mortgage Modifications

September 10, 2009

The sluggish $75-billion federal mortgage relief program got a boost from Wells Fargo & Co. and Bank of America Corp., both of which stepped up their efforts last month to modify home loans.

The two banks, which took a total of $70 billion in taxpayer bailout funds to shore up their finances, have been roundly criticized on Capitol Hill for not moving quickly to help distressed homeowners.

Last month, Bank of America more than doubled the number of home loan modifications it started, to 59,891, over its July numbers, while Wells Fargo increased its modifications 64% to 33,172. That helped pump up the industry’s response to the slow-starting federal program 53% to more than 360,000 modifications, according to figures released Wednesday by the banks and in the Treasury Department’s now monthly report.

Still, the Obama administration’s Making Home Affordable program isn’t getting to struggling homeowners quickly enough, some argue. The administration itself set a target of modifying 500,000 mortgages by Nov. 1.

“I am disappointed at the pace of this program,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Kevin Stein, associate director of the California Reinvestment Coalition, a homeowner advocacy group, said, “These numbers still aren’t where they should be.”

Even the Treasury Department acknowledged that the pace of modifications had to pick up.

“There are signs the plan is working,” Michael Barr, assistant Treasury secretary for financial institutions, told the House committee Wednesday. “But we can do better.”

The department’s monthly report, its second since the program was launched in March, should get some credit for giving the program a boost, Stein said.

“For the first time, last month we were able to see data on which companies were helping families avoid foreclosure and which companies were not,” he said. That exposure for July’s activity, he said, shamed especially Bank of America and Wells Fargo, which had turned in embarrassingly low numbers in July.

Also, although 85% of the mortgages nationwide are held by institutions voluntarily participating in the program, Stein suggested that banks and other lenders would be moving faster if participation were mandatory.

Up to 4 million homeowners have mortgages that qualify for adjustment under the administration’s program.

Bank of America, Wells Fargo and other loan servicers said slowdowns were caused by the need to increase staffing in loan-servicing departments and by government delays in distributing information about the program. Wells Fargo said it was well on its way to modifying more than its share of eligible loans.

Overall, about 1 in 5 eligible homeowners, or nearly 19%, have had their mortgages changed through the program, the report said. In July, that number was about 9%.

In some cases, loan servicers are using the plan’s rules to keep homeowners from taking part, which results in homes heading to foreclosure anyway, said Bruce Dorpalen, director of housing counseling for the Assn. of Community Organizations for Reform Now, or ACORN.

“We need stronger enforcement,” Dorpalen said. “We’re still finding foreclosure sales going through with no review to see if homeowners are eligible for loan modifications.”

ACORN is calling for the federal government to impose a one-year freeze on foreclosures to allow homeowners more time to figure out whether they are eligible for loan changes under the program.

Source: The L.A. Times

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