by JASON PHILYAW
Initial jobless claims fell considerably last week dropping to 388,000, which is the lowest point in two and a half years and well below most analysts' estimates.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Dec. 25 fell by 34,000 from the previous week's 422,000 that was revised upward by a few thousand.
Weekly claims finally dipped lower than 400,000, which is the level most economists believe indicate the economy is expanding and jobs growth is strengthening.
Analysts surveyed by Econoday expected jobless claims to come in at 415,000 with a range of estimates from 414,000 to 425,000. A Briefing.com survey projected new claims of 415,000 last week.
The four-week moving average decreased by 12,500 to 414,000 claims from a revised average of 426,500. The moving average, which is considered a less volatile indicator than weekly claims, is also now at the lowest point in more than two years. The seasonally adjusted insured unemployment rate rose to 3.3% for the week ended Dec. 18 from 3.2% the week prior.
The total number of people receiving some sort of federal unemployment benefits was nearly 8.9 million for the week ended Dec. 4, according to the Labor Department.
URL to original article: http://www.housingwire.com/2010/12/30/jobless-claims-fall-by-34000-to-lowest-point-since-july-2008
Thursday, December 30, 2010
Faces of the home-foreclosure crisis
Source: The Wall Street Journal
The foreclosure crisis that erupted four years ago has claimed more than five million American homes—about 10% of all homes with a mortgage. It began in lower-income neighborhoods and has spread to some of the most exclusive addresses in the U.S.
The seeds of the crisis were planted a decade ago when banks, discovering the high returns from selling bundles of securitized mortgages, relaxed lending standards and originated millions of adjustable-rate subprime mortgages. Such loans were designed to allow just about anyone to get a home loan.
When interest rates on the adjustable-rate mortgages finally climbed, many borrowers began falling behind on their payments, leading to the first wave of delinquencies and defaults.
At the start of 2008, with the U.S. economy weakening and job losses multiplying, the defaults began to spread as millions of Americans with plain-vanilla prime mortgages also ran into trouble making their payments. In some cases, borrowers found they had paid inflated prices for homes they could no longer afford. Others got into trouble by or borrowing against the equity in their homes. According to the Federal Reserve, Americans withdrew more than $1.1 trillion of equity from homes in 2006 and 2007.
By the end of 2008, with home values plunging, one in six homeowners found themselves underwater—owing more on their homes than they were worth. Borrowers, even those with stable jobs, began to see such negative equity as a reason to stop making their payments. That triggered the third wave of the foreclosure crisis: the strategic default.
The Obama administration is working with banks to head off future defaults and stanch the foreclosure wave by modifying mortgages. The federal programs have so far disappointed. The Home Affordable Modification Program, for example, was launched in the summer of 2009 with the intention of modifying three million to four million loans. So far, it has provided permanent help to fewer than 450,000 struggling borrowers.
Here are six stories of people caught in the foreclosure crisis, by circumstance or choice—from those who fell victim to hard times to others who squandered equity on cash purchases.
The crisis looks set to continue. Another four million people are in danger of losing their homes, according to the Mortgage Bankers Association. And until foreclosures are cleared, the housing market is unlikely to recover.
The foreclosures have had a silver lining for one group of Americans: Many families locked out of the housing market during the boom can now afford to buy.
—Robbie Whelan
Loan Choice Proved Costly
When Ghislaine Apollon emigrated from Haiti to the U.S. in 1974, she dreamed of owning a home. In 1997, after years of scraping by, she bought a fixer-upper in the Queens section of New York City.
Her original $147,000 mortgage was affordable on her income of about $1,600 a month from working in a hospital linen department, she said. Ms. Apollon then made some costly choices. First, she refinanced several times and took out large amounts of cash, pushing her loan balance to nearly $400,000. And the last time she refinanced she ended up with an option adjustable-rate mortgage, which lets borrowers select from different payment choices. Ms. Apollon, like many borrowers, opted to pay the minimum, which adds to the balance.
Option ARMs have become the focus of state investigations and lawsuits by borrowers who believe they were misinformed about the loan's complicated structure.
Consumer advocates say such option ARMs have proven a problem nationwide. "Every option ARM that we've seen has been delinquent," said Farida Rampersaud, director of the Foreclosure Prevention Services Program at the Ridgewood Bushwick Senior Citizens Council Inc. in Brooklyn, N.Y. "In most instances, the homeowner doesn't understand the nature of the product."
Trouble for Ms. Apollon started almost as soon as she moved into the single-story home. The ceiling leaked; the basement flooded several times. She refinanced several times to fund repairs, ratcheting up her monthly payments each time.
Ms. Apollon refinanced a final time in 2007 with Countrywide Financial Corp., which was acquired by Bank of America in 2008. This time, she wasn't looking to pull out money, but to get into a mortgage with more affordable payments. Ms. Apollon said she was stunned when she realized the consequences of her decision to make minimum payments: After a few years, "my mortgage went up and up and up" to $1,700 a month.
Realizing she would have to pay much more than that a month to start reducing her loan balance, Ms. Apollon sought a loan modification. She is being helped by Neighborhood Housing Services of Jamaica, a nonprofit.She wants a plain fixed-rate mortgage that doesn't grow.
Lenders aren't granting nearly as many loan modifications as consumer advocates would like, but Ms. Apollon has a few things in her favor. Under a 2008 settlement with several state attorneys-general over charges of predatory lending by Countrywide, Bank of America agreed to modify the terms of certain subprime and option ARM mortgages.The bank said it reviewed Ms. Apollon for that program in August 2009, but "her financial situation did not support a modification."
She was denied a modification under a government program earlier this year and stopped making payments in October. Bank of America said it was reviewing her request for a modification.
Ms. Apollon -- who receives extra income by renting part of the home to a relative -- has been depositing $1,600 a month into an account to get her mortgage back on track if she's granted a modification and to show that "I'm willing to pay," she said.
—Dawn Wotapka
Lost: A Business, Then a House
Like other people whose fortunes were tied to real estate, Sidney Banner has suffered a one-two punch from the downturn.
In 2008, he lost his small, family-run commercial-mortgage brokerage business, when tighter lending requirements made it difficult to finance sales of commercial properties.
This month, the 84-year-old Mr. Banner and his wife lost their 3,200-square-foot home in an affluent section of Boca Raton, Fla. They've moved into an 880-square-foot rental apartment in a modest neighborhood of Palm Beach County, cutting their monthly housing expenses from $2,600 to $400.
Mr. Banner bought his house 22 years ago for $296,000. By 2007, the house was valued at $429,000. Like many other homeowners at the time, Mr. Banner tapped the equity in his home by taking out a $250,000 loan. He used the money to try to keep his business afloat as the real-estate market unraveled.
A year later, Mr. Banner defaulted on his first and second mortgages; the value of his home fell to $350,000. It is now scheduled for auction in January at a foreclosure sale.
"When things were good, making payments was easy," Mr. Banner said. "But now I've cut down to the bone, to the point that we can live on Social Security payments."
Many former mortgage brokers have been able to find new jobs working for banks and other companies. But Mr. Banner typifies one problem facing older Americans: the difficulty of finding employment. Only about 6.1 million of the 38 million Americans aged 65 or older were employed in 2009, according to the Bureau of Labor Statistics.
For two years, Mr. Banner and his wife received $1,200 a month in unemployment payments, in addition to their $3,200 social-security checks. The unemployment payments have now run out, so Mr. Banner said he was going back to work. He hopes to start a company brokering small commercial-real-estate loans to borrowers he finds through online advertising and Craigslist.
Mr. Banner said the foreclosure may have been a blessing in disguise: "My wife and I are both very much more relaxed now that we walked away from this enormous responsibility, and all these people calling us every day, looking for something they're not going to get."
—Robbie Whelan
After the Good Life Goes Sour
Like many Americans who saw their home values shoot up during the housing boom, Christine Carr found lots of ways to spend her equity windfall.
A decade ago, she and her husband paid nearly $180,000 for a three-bedroom home in Dallas, N.C., outside Charlotte. Their income easily covered the $1,100 monthly mortgage payment.
In 2006, after discovering the house's value had skyrocketed by $100,000, the couple took out a second mortgage and got cash. They bought a $70,000 camper, took a cruise to Alaska and vacationed in Belize. The new loan added $698 to the couple's monthly payment.
"We had a ball," she said.
Three years later, her husband moved out and stopped contributing to the mortgage payments, she said. Then she lost her job as a consulting firm's marketing manager. In April 2009, Ms. Carr put the house on the market for about $235,000. With no income, Ms. Carr, now divorced, didn't qualify for a loan modification, which would have lowered her mortgage payment.
In July 2009, she asked the lender, Bank of America, to let her hand over the home to avoid the foreclosure process. But the two sides couldn't come to terms.
With no interest from buyers, Ms. Carr stopped making payments that August. "It was a gut-wrenching decision," the 46-year-old woman said. "I was raised to live up to my commitments."
These days, she receives a monthly statement that details the swelling late fees and penalties for both of her loans. Although she found work in March this year, Ms. Carr said she had no intention of paying: She has moved to a rental and her Dallas home sits abandoned. The luxury camper was sold for "a lot less" than the purchase price, she said.
Ms. Carr said she felt guilty but was ready to move on. "It makes me sick to my stomach sometimes, just thinking about it," she said. "But once you make the decision, you stick with it."
—Dawn Wotapka
Housing Nightmare Is a Dream for Some
Last year, Bret Sands and his fiancee, Fysah Thomas, shared a cramped $600-a-month studio apartment. Today, they're living in a Seattle lakefront property with three bedrooms, hardwood floors and a spiral staircase.
"This is a freaking dream house," said Mr. Sands. still giddy months after purchasing the home in March.
If there's an upside to the foreclosure crisis, it is largely enjoyed by people like Mr. Sands and Ms. Thomas: They can now afford to buy. He's a surveyor of marine vessels and she's the lead vocalist in a band. Both watched the mid-decade housing boom pass them by, thinking they'd never be able to join.
Then the bubble burst. According to the Case-Shiller Home Price Indices, prices in Seattle through October were about 25% off their July 2007 peak—with single-family homes now selling at a median price of $481,000, according to the local multiple listing service.
In 2008, Mr. Sands, age 34, started to see the stock market falter and grew worried about his retirement savings account. He took $60,000 out of the account, and with an eye on plummeting home prices, he and Ms. Thomas decided to buy a house.
They never intended to buy a foreclosure but nothing else fit their budget.
After two months and about 30 tours with SeattleHome.com real estate broker Sam DeBord they found their house. It went into foreclosure when its owner's restaurant went belly up. Ms. Thomas saw it during a random web search. The couple paid $232,000 for a house that in 2007 had been appraised at $300,000. One of its main attractions: It sits among much larger, half-million-dollar homes along Angle Lake.
"We wouldn't have been able to afford a house if the market hadn't dropped," Mr. Sands said.
With help from friends and Ms. Thomas's carpenter father, they have embarked on renovations: paint, French doors, new bathroom, new kitchen.
Because the house needed so much work, Mr. Sands kept a lot of his cash to pay for renovations. He put about $9,000 down under a loan insured by the Federal Housing Administration.
"It should be an inspiration to any other people like us," Ms. Thomas said. "Being able to buy a home is one of the most important decisions you can make."
—Mitra Kalita
Falling Value Ruled Out Refinancing
Kelli Kobor and her husband thought they were making a safe investment in 2004 when they made a $350,000 down payment on the $1.3 million purchase of their five-bedroom Dutch colonial in Kenilworth, Ill., a wealthy suburb on Chicago's North Shore.
Ms. Kobor and her husband have no other debt. They never refinanced or took out a second mortgage. But like many other Americans, they ran into trouble making their mortgage payments last year after Ms. Kobor's husband lost his job and later found a new one that paid much less.
Their home had fallen in value, wiping out any equity and making it impossible to refinance. Ms. Kobor wasn't eligible for the government's loan-modification programs because her loan was too large; her mortgage servicer offered a six-month interest-rate reduction that tacked the payment shortfall onto their loan.
Tired of feeling "strung along," they ultimately surrendered the home to the bank in what's known as a deed-in-lieu of foreclosure, and moved out in August. They now rent a three-bedroom ranch-style home in Deerfield, about 10 miles away.
Moving her family was a "very difficult choice, a very difficult transition," says Ms. Kobor, 43. She still takes her son to play with his best friend and former neighbor. "Every time I drop him off," she says, "I have to look at my house." The home was listed for sale last month at $749,000.
While Ms. Kobor felt vindicated that "there was recognition by the bank that the value had dropped considerably," she says it was also maddening because the bank "wouldn't ever negotiate with us. They took this thing that we actually prized and they practically threw it away."
Ms. Kobor and her husband are saving to buy another home, although this time they'll approach home ownership differently. They will take out a smaller loan, one they can repay within 10 or 15 years. "We will never leverage up like that again," she says.
But the biggest surprise over losing her house is that "our lives are so much better now," Ms. Kobor says. "The relief of knowing that we are not in a bottomless hole that we'll never be able to climb out of—psychologically, it has been great."
More borrowers need to "wise up," she says, and realize that the government and the banks aren't likely to help them. "People who are in our situation, we're told, 'Save your house,' " she says. But the crisis has taught her that "what's much more important is saving your family, saving your sanity, saving your financial future."
—Nick Timiraos
Seeing the Allure of 'Can Pay, Won't Pay'
When Chris Hanson bought his $875,000 luxury condominium in Scottsdale, Ariz., four years ago, he could afford the $90,000 down payment.
He said he had no difficulty paying the $5,000 monthly mortgage on the three-bedroom unit, which has floor-to-ceiling windows and views of Camelback Mountain. The condo is in a gated complex with a gym and pool.
And, true to his word, he didn't miss a single payment—until last month. Concluding that the home, now worth about half of what he paid, won't recover its value for at least 10 years, Mr. Hanson decided to walk away.
"It's a no-brainer once you do the math," said the 27-year-old real-estate investor.
He plans to let the lender foreclose on the home and rent an even nicer unit in either the same complex or one nearby, which he figures will cost less than half of his monthly mortgage payment.
Borrowers like Mr. Hanson represent the latest—and for lenders the most troubling—wave of the foreclosure crisis. When the housing downturn began, economists and industry executives believed homeowners would walk away from underwater properties only after a financial shock—a job loss or divorce.
Mr. Hanson's case illustrates the growing risk that borrowers in hard-hit housing markets will "strategically" default, even when they can afford to stay in the homes. Nearly one-third of homeowners in Arizona, and half of those in Nevada, owe more than 125% of the value of their homes, according to CoreLogic Inc., a real-estate data firm.
Mortgage-finance giant Fannie Mae has threatened to withhold credit for up to seven years from people who carry out strategic defaults and to pursue their assets in states that allow for deficiency judgments.
Mr. Hanson said that he felt little moral obligation to make his payments because he felt banks' shoddy lending practices were primarily responsible for fueling the housing boom and bust. Financial institutions often have no problem defaulting on soured commercial real-estate investments, he said.
Mr. Hanson runs an investment firm that buys up foreclosed properties and resells them. He said the company buys two to three homes a week at prices ranging from $15,000 to $1 million; they've recently expanded into distressed multifamily homes. He said he realized months ago his home would take years to recover its value but decided only six weeks ago to stop making payments.
He worried that wrecking his sterling 800 credit score would make it harder to run his business. But, in the end, he said he decided it was worth the risk.
"It's actually really relieving," Mr. Hanson said.
—Nick Timiraos
URL to original article: http://www.housingwire.com/2010/12/29/faces-of-the-home-foreclosure-crisis
The foreclosure crisis that erupted four years ago has claimed more than five million American homes—about 10% of all homes with a mortgage. It began in lower-income neighborhoods and has spread to some of the most exclusive addresses in the U.S.
The seeds of the crisis were planted a decade ago when banks, discovering the high returns from selling bundles of securitized mortgages, relaxed lending standards and originated millions of adjustable-rate subprime mortgages. Such loans were designed to allow just about anyone to get a home loan.
When interest rates on the adjustable-rate mortgages finally climbed, many borrowers began falling behind on their payments, leading to the first wave of delinquencies and defaults.
At the start of 2008, with the U.S. economy weakening and job losses multiplying, the defaults began to spread as millions of Americans with plain-vanilla prime mortgages also ran into trouble making their payments. In some cases, borrowers found they had paid inflated prices for homes they could no longer afford. Others got into trouble by or borrowing against the equity in their homes. According to the Federal Reserve, Americans withdrew more than $1.1 trillion of equity from homes in 2006 and 2007.
By the end of 2008, with home values plunging, one in six homeowners found themselves underwater—owing more on their homes than they were worth. Borrowers, even those with stable jobs, began to see such negative equity as a reason to stop making their payments. That triggered the third wave of the foreclosure crisis: the strategic default.
The Obama administration is working with banks to head off future defaults and stanch the foreclosure wave by modifying mortgages. The federal programs have so far disappointed. The Home Affordable Modification Program, for example, was launched in the summer of 2009 with the intention of modifying three million to four million loans. So far, it has provided permanent help to fewer than 450,000 struggling borrowers.
Here are six stories of people caught in the foreclosure crisis, by circumstance or choice—from those who fell victim to hard times to others who squandered equity on cash purchases.
The crisis looks set to continue. Another four million people are in danger of losing their homes, according to the Mortgage Bankers Association. And until foreclosures are cleared, the housing market is unlikely to recover.
The foreclosures have had a silver lining for one group of Americans: Many families locked out of the housing market during the boom can now afford to buy.
—Robbie Whelan
Loan Choice Proved Costly
When Ghislaine Apollon emigrated from Haiti to the U.S. in 1974, she dreamed of owning a home. In 1997, after years of scraping by, she bought a fixer-upper in the Queens section of New York City.
Her original $147,000 mortgage was affordable on her income of about $1,600 a month from working in a hospital linen department, she said. Ms. Apollon then made some costly choices. First, she refinanced several times and took out large amounts of cash, pushing her loan balance to nearly $400,000. And the last time she refinanced she ended up with an option adjustable-rate mortgage, which lets borrowers select from different payment choices. Ms. Apollon, like many borrowers, opted to pay the minimum, which adds to the balance.
Option ARMs have become the focus of state investigations and lawsuits by borrowers who believe they were misinformed about the loan's complicated structure.
Consumer advocates say such option ARMs have proven a problem nationwide. "Every option ARM that we've seen has been delinquent," said Farida Rampersaud, director of the Foreclosure Prevention Services Program at the Ridgewood Bushwick Senior Citizens Council Inc. in Brooklyn, N.Y. "In most instances, the homeowner doesn't understand the nature of the product."
Trouble for Ms. Apollon started almost as soon as she moved into the single-story home. The ceiling leaked; the basement flooded several times. She refinanced several times to fund repairs, ratcheting up her monthly payments each time.
Ms. Apollon refinanced a final time in 2007 with Countrywide Financial Corp., which was acquired by Bank of America in 2008. This time, she wasn't looking to pull out money, but to get into a mortgage with more affordable payments. Ms. Apollon said she was stunned when she realized the consequences of her decision to make minimum payments: After a few years, "my mortgage went up and up and up" to $1,700 a month.
Realizing she would have to pay much more than that a month to start reducing her loan balance, Ms. Apollon sought a loan modification. She is being helped by Neighborhood Housing Services of Jamaica, a nonprofit.She wants a plain fixed-rate mortgage that doesn't grow.
Lenders aren't granting nearly as many loan modifications as consumer advocates would like, but Ms. Apollon has a few things in her favor. Under a 2008 settlement with several state attorneys-general over charges of predatory lending by Countrywide, Bank of America agreed to modify the terms of certain subprime and option ARM mortgages.The bank said it reviewed Ms. Apollon for that program in August 2009, but "her financial situation did not support a modification."
She was denied a modification under a government program earlier this year and stopped making payments in October. Bank of America said it was reviewing her request for a modification.
Ms. Apollon -- who receives extra income by renting part of the home to a relative -- has been depositing $1,600 a month into an account to get her mortgage back on track if she's granted a modification and to show that "I'm willing to pay," she said.
—Dawn Wotapka
Lost: A Business, Then a House
Like other people whose fortunes were tied to real estate, Sidney Banner has suffered a one-two punch from the downturn.
In 2008, he lost his small, family-run commercial-mortgage brokerage business, when tighter lending requirements made it difficult to finance sales of commercial properties.
This month, the 84-year-old Mr. Banner and his wife lost their 3,200-square-foot home in an affluent section of Boca Raton, Fla. They've moved into an 880-square-foot rental apartment in a modest neighborhood of Palm Beach County, cutting their monthly housing expenses from $2,600 to $400.
Mr. Banner bought his house 22 years ago for $296,000. By 2007, the house was valued at $429,000. Like many other homeowners at the time, Mr. Banner tapped the equity in his home by taking out a $250,000 loan. He used the money to try to keep his business afloat as the real-estate market unraveled.
A year later, Mr. Banner defaulted on his first and second mortgages; the value of his home fell to $350,000. It is now scheduled for auction in January at a foreclosure sale.
"When things were good, making payments was easy," Mr. Banner said. "But now I've cut down to the bone, to the point that we can live on Social Security payments."
Many former mortgage brokers have been able to find new jobs working for banks and other companies. But Mr. Banner typifies one problem facing older Americans: the difficulty of finding employment. Only about 6.1 million of the 38 million Americans aged 65 or older were employed in 2009, according to the Bureau of Labor Statistics.
For two years, Mr. Banner and his wife received $1,200 a month in unemployment payments, in addition to their $3,200 social-security checks. The unemployment payments have now run out, so Mr. Banner said he was going back to work. He hopes to start a company brokering small commercial-real-estate loans to borrowers he finds through online advertising and Craigslist.
Mr. Banner said the foreclosure may have been a blessing in disguise: "My wife and I are both very much more relaxed now that we walked away from this enormous responsibility, and all these people calling us every day, looking for something they're not going to get."
—Robbie Whelan
After the Good Life Goes Sour
Like many Americans who saw their home values shoot up during the housing boom, Christine Carr found lots of ways to spend her equity windfall.
A decade ago, she and her husband paid nearly $180,000 for a three-bedroom home in Dallas, N.C., outside Charlotte. Their income easily covered the $1,100 monthly mortgage payment.
In 2006, after discovering the house's value had skyrocketed by $100,000, the couple took out a second mortgage and got cash. They bought a $70,000 camper, took a cruise to Alaska and vacationed in Belize. The new loan added $698 to the couple's monthly payment.
"We had a ball," she said.
Three years later, her husband moved out and stopped contributing to the mortgage payments, she said. Then she lost her job as a consulting firm's marketing manager. In April 2009, Ms. Carr put the house on the market for about $235,000. With no income, Ms. Carr, now divorced, didn't qualify for a loan modification, which would have lowered her mortgage payment.
In July 2009, she asked the lender, Bank of America, to let her hand over the home to avoid the foreclosure process. But the two sides couldn't come to terms.
With no interest from buyers, Ms. Carr stopped making payments that August. "It was a gut-wrenching decision," the 46-year-old woman said. "I was raised to live up to my commitments."
These days, she receives a monthly statement that details the swelling late fees and penalties for both of her loans. Although she found work in March this year, Ms. Carr said she had no intention of paying: She has moved to a rental and her Dallas home sits abandoned. The luxury camper was sold for "a lot less" than the purchase price, she said.
Ms. Carr said she felt guilty but was ready to move on. "It makes me sick to my stomach sometimes, just thinking about it," she said. "But once you make the decision, you stick with it."
—Dawn Wotapka
Housing Nightmare Is a Dream for Some
Last year, Bret Sands and his fiancee, Fysah Thomas, shared a cramped $600-a-month studio apartment. Today, they're living in a Seattle lakefront property with three bedrooms, hardwood floors and a spiral staircase.
"This is a freaking dream house," said Mr. Sands. still giddy months after purchasing the home in March.
If there's an upside to the foreclosure crisis, it is largely enjoyed by people like Mr. Sands and Ms. Thomas: They can now afford to buy. He's a surveyor of marine vessels and she's the lead vocalist in a band. Both watched the mid-decade housing boom pass them by, thinking they'd never be able to join.
Then the bubble burst. According to the Case-Shiller Home Price Indices, prices in Seattle through October were about 25% off their July 2007 peak—with single-family homes now selling at a median price of $481,000, according to the local multiple listing service.
In 2008, Mr. Sands, age 34, started to see the stock market falter and grew worried about his retirement savings account. He took $60,000 out of the account, and with an eye on plummeting home prices, he and Ms. Thomas decided to buy a house.
They never intended to buy a foreclosure but nothing else fit their budget.
After two months and about 30 tours with SeattleHome.com real estate broker Sam DeBord they found their house. It went into foreclosure when its owner's restaurant went belly up. Ms. Thomas saw it during a random web search. The couple paid $232,000 for a house that in 2007 had been appraised at $300,000. One of its main attractions: It sits among much larger, half-million-dollar homes along Angle Lake.
"We wouldn't have been able to afford a house if the market hadn't dropped," Mr. Sands said.
With help from friends and Ms. Thomas's carpenter father, they have embarked on renovations: paint, French doors, new bathroom, new kitchen.
Because the house needed so much work, Mr. Sands kept a lot of his cash to pay for renovations. He put about $9,000 down under a loan insured by the Federal Housing Administration.
"It should be an inspiration to any other people like us," Ms. Thomas said. "Being able to buy a home is one of the most important decisions you can make."
—Mitra Kalita
Falling Value Ruled Out Refinancing
Kelli Kobor and her husband thought they were making a safe investment in 2004 when they made a $350,000 down payment on the $1.3 million purchase of their five-bedroom Dutch colonial in Kenilworth, Ill., a wealthy suburb on Chicago's North Shore.
Ms. Kobor and her husband have no other debt. They never refinanced or took out a second mortgage. But like many other Americans, they ran into trouble making their mortgage payments last year after Ms. Kobor's husband lost his job and later found a new one that paid much less.
Their home had fallen in value, wiping out any equity and making it impossible to refinance. Ms. Kobor wasn't eligible for the government's loan-modification programs because her loan was too large; her mortgage servicer offered a six-month interest-rate reduction that tacked the payment shortfall onto their loan.
Tired of feeling "strung along," they ultimately surrendered the home to the bank in what's known as a deed-in-lieu of foreclosure, and moved out in August. They now rent a three-bedroom ranch-style home in Deerfield, about 10 miles away.
Moving her family was a "very difficult choice, a very difficult transition," says Ms. Kobor, 43. She still takes her son to play with his best friend and former neighbor. "Every time I drop him off," she says, "I have to look at my house." The home was listed for sale last month at $749,000.
While Ms. Kobor felt vindicated that "there was recognition by the bank that the value had dropped considerably," she says it was also maddening because the bank "wouldn't ever negotiate with us. They took this thing that we actually prized and they practically threw it away."
Ms. Kobor and her husband are saving to buy another home, although this time they'll approach home ownership differently. They will take out a smaller loan, one they can repay within 10 or 15 years. "We will never leverage up like that again," she says.
But the biggest surprise over losing her house is that "our lives are so much better now," Ms. Kobor says. "The relief of knowing that we are not in a bottomless hole that we'll never be able to climb out of—psychologically, it has been great."
More borrowers need to "wise up," she says, and realize that the government and the banks aren't likely to help them. "People who are in our situation, we're told, 'Save your house,' " she says. But the crisis has taught her that "what's much more important is saving your family, saving your sanity, saving your financial future."
—Nick Timiraos
Seeing the Allure of 'Can Pay, Won't Pay'
When Chris Hanson bought his $875,000 luxury condominium in Scottsdale, Ariz., four years ago, he could afford the $90,000 down payment.
He said he had no difficulty paying the $5,000 monthly mortgage on the three-bedroom unit, which has floor-to-ceiling windows and views of Camelback Mountain. The condo is in a gated complex with a gym and pool.
And, true to his word, he didn't miss a single payment—until last month. Concluding that the home, now worth about half of what he paid, won't recover its value for at least 10 years, Mr. Hanson decided to walk away.
"It's a no-brainer once you do the math," said the 27-year-old real-estate investor.
He plans to let the lender foreclose on the home and rent an even nicer unit in either the same complex or one nearby, which he figures will cost less than half of his monthly mortgage payment.
Borrowers like Mr. Hanson represent the latest—and for lenders the most troubling—wave of the foreclosure crisis. When the housing downturn began, economists and industry executives believed homeowners would walk away from underwater properties only after a financial shock—a job loss or divorce.
Mr. Hanson's case illustrates the growing risk that borrowers in hard-hit housing markets will "strategically" default, even when they can afford to stay in the homes. Nearly one-third of homeowners in Arizona, and half of those in Nevada, owe more than 125% of the value of their homes, according to CoreLogic Inc., a real-estate data firm.
Mortgage-finance giant Fannie Mae has threatened to withhold credit for up to seven years from people who carry out strategic defaults and to pursue their assets in states that allow for deficiency judgments.
Mr. Hanson said that he felt little moral obligation to make his payments because he felt banks' shoddy lending practices were primarily responsible for fueling the housing boom and bust. Financial institutions often have no problem defaulting on soured commercial real-estate investments, he said.
Mr. Hanson runs an investment firm that buys up foreclosed properties and resells them. He said the company buys two to three homes a week at prices ranging from $15,000 to $1 million; they've recently expanded into distressed multifamily homes. He said he realized months ago his home would take years to recover its value but decided only six weeks ago to stop making payments.
He worried that wrecking his sterling 800 credit score would make it harder to run his business. But, in the end, he said he decided it was worth the risk.
"It's actually really relieving," Mr. Hanson said.
—Nick Timiraos
URL to original article: http://www.housingwire.com/2010/12/29/faces-of-the-home-foreclosure-crisis
Wednesday, December 29, 2010
Lenders initiate 500,000 short sales through Equator in one year
by JON PRIOR
Lenders initiated more than 500,000 short sales on Equator's automated platform in one year of operation, the technology provider said Tuesday.
The company said it has seen "substantial growth" in its short sale operations, including a platform built specifically for the government's Home Affordable Foreclosure Alternatives program, which launched in April to provide incentives to servicers for short sales and deeds-in-lieu of foreclosure.
Equator reported initiated short sales, meaning not all have closed. Short sales can be a long and tedious process as borrowers, servicers, lenders and investors must all agree on the terms of sale instead of foreclosing. Data from the Congressional Oversight Panel suggested lenders are moving most of their short sales out of the HAFA program and into their own programs. According to COP, the Treasury Department has spent only $4.3 million through the program, translating to roughly 661 closed transactions in eight months.
Still, Equator Chief Operating Officer John Vella said lenders have initiated 140,000 HAFA short sales, with more than one-third coming in the fourth quarter.
"Our Short Sale and HAFA Workstations continue to provide servicers with a viable foreclosure alternative by generating faster responses and decisions, thereby offering impressive cost savings," Vella said.
Equator also provides another platform that facilitates REO sales. Through it, lenders assign REO properties to real estate agents who have signed up to the program for a fee. Since it launched in 2003, Equator reported that more than $100 billion in assets have been sold on this platform.
The company plans to release several new modules in 2011 in an effort to bridge a complete "end-to-end" default suite.
URL to original article: http://www.housingwire.com/2010/12/28/lenders-initiate-500000-short-sales-through-equator-in-one-year
Lenders initiated more than 500,000 short sales on Equator's automated platform in one year of operation, the technology provider said Tuesday.
The company said it has seen "substantial growth" in its short sale operations, including a platform built specifically for the government's Home Affordable Foreclosure Alternatives program, which launched in April to provide incentives to servicers for short sales and deeds-in-lieu of foreclosure.
Equator reported initiated short sales, meaning not all have closed. Short sales can be a long and tedious process as borrowers, servicers, lenders and investors must all agree on the terms of sale instead of foreclosing. Data from the Congressional Oversight Panel suggested lenders are moving most of their short sales out of the HAFA program and into their own programs. According to COP, the Treasury Department has spent only $4.3 million through the program, translating to roughly 661 closed transactions in eight months.
Still, Equator Chief Operating Officer John Vella said lenders have initiated 140,000 HAFA short sales, with more than one-third coming in the fourth quarter.
"Our Short Sale and HAFA Workstations continue to provide servicers with a viable foreclosure alternative by generating faster responses and decisions, thereby offering impressive cost savings," Vella said.
Equator also provides another platform that facilitates REO sales. Through it, lenders assign REO properties to real estate agents who have signed up to the program for a fee. Since it launched in 2003, Equator reported that more than $100 billion in assets have been sold on this platform.
The company plans to release several new modules in 2011 in an effort to bridge a complete "end-to-end" default suite.
URL to original article: http://www.housingwire.com/2010/12/28/lenders-initiate-500000-short-sales-through-equator-in-one-year
Backlog on failed HAMP trials grows 22% since July
by JON PRIOR
The largest servicers participating in the Home Affordable Modification Program have not taken action on 266,136 delinquent mortgages that have either been canceled out of loan modification trials or never qualified for one as of October. This backlog has increased 22% since the 218,246 reported in July.
The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Since then, servicers have started 1.4 million trials and converted 549,620 three-month trials into permanent status as of November, according to Treasury data.
The program's performance, considered underwhelming to most, has been hampered by a backlog of trials formed during the early months of the program when servicers would hurry borrowers into a trial and gather documentation later. As of November, roughly 50,000 borrowers have been in a trial for more than six months, but servicers have worked that number down from 69,000 in October, and new guidelines were put in place to gather all documentation before the trial stage.
But as of October, servicers reported more than 1.5 million canceled trials or loans that never qualified for one, according to the latest Treasury data. Trials are canceled either because the bank never received the documents, the borrower redefaulted or was deemed ineligible for the program.
More than one-third of these loans are put through an alternative modification. In fact, nearly a half of the 562,222 canceled trials received a modification through the lenders' own programs. Others go through short sale, deed-in-lieu, an informal payment plan, or foreclosure.
Servicers started foreclosures on 208,998, or 13%, of these canceled trials and rejected applications.
But every month since July, servicers have added to the backlog of these loans that are still pending action. Bank of America (BAC: 13.31 -0.22%) still has not taken action on 73,185, the most of any servicer. JPMorgan Chase (JPM: 42.42 -0.45%) follows with 60,612, and CitiMortgage, the servicing arm of Citigroup (C: 4.78 0.00%) holds 60,531. None could be reached for immediate comment.
Tim Massad, acting assistant secretary for financial stability at the Treasury, said in a briefing with reporters earlier in December that servicers simply weren't prepared for the scope of the foreclosure crisis, allowing for backlogs to form in understaffed operations.
"It's been clear all along that the servicers were not equipped to handle this problem," Massad said.
URL to original article: http://www.housingwire.com/2010/12/28/backlog-on-failed-hamp-trials-grows-22-since-august
The largest servicers participating in the Home Affordable Modification Program have not taken action on 266,136 delinquent mortgages that have either been canceled out of loan modification trials or never qualified for one as of October. This backlog has increased 22% since the 218,246 reported in July.
The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Since then, servicers have started 1.4 million trials and converted 549,620 three-month trials into permanent status as of November, according to Treasury data.
The program's performance, considered underwhelming to most, has been hampered by a backlog of trials formed during the early months of the program when servicers would hurry borrowers into a trial and gather documentation later. As of November, roughly 50,000 borrowers have been in a trial for more than six months, but servicers have worked that number down from 69,000 in October, and new guidelines were put in place to gather all documentation before the trial stage.
But as of October, servicers reported more than 1.5 million canceled trials or loans that never qualified for one, according to the latest Treasury data. Trials are canceled either because the bank never received the documents, the borrower redefaulted or was deemed ineligible for the program.
More than one-third of these loans are put through an alternative modification. In fact, nearly a half of the 562,222 canceled trials received a modification through the lenders' own programs. Others go through short sale, deed-in-lieu, an informal payment plan, or foreclosure.
Servicers started foreclosures on 208,998, or 13%, of these canceled trials and rejected applications.
But every month since July, servicers have added to the backlog of these loans that are still pending action. Bank of America (BAC: 13.31 -0.22%) still has not taken action on 73,185, the most of any servicer. JPMorgan Chase (JPM: 42.42 -0.45%) follows with 60,612, and CitiMortgage, the servicing arm of Citigroup (C: 4.78 0.00%) holds 60,531. None could be reached for immediate comment.
Tim Massad, acting assistant secretary for financial stability at the Treasury, said in a briefing with reporters earlier in December that servicers simply weren't prepared for the scope of the foreclosure crisis, allowing for backlogs to form in understaffed operations.
"It's been clear all along that the servicers were not equipped to handle this problem," Massad said.
URL to original article: http://www.housingwire.com/2010/12/28/backlog-on-failed-hamp-trials-grows-22-since-august
At housing court, final pleas to head off evictions
Source: The Boston Globe
In the midst of the holiday season, no one wanted to be here.
Yet hundreds of people — homeowners, tenants, landlords — mobbed the fifth floor of Boston Housing Court on a recent Thursday, shuffling into courtrooms on what is unofficially known as eviction day.
The homeowners facing eviction have already lost their houses to foreclosure but will not move willingly, clinging to a desperate hope that they can stave off eviction and find a way to buy back their homes.
The prospects are dim. Few, if any, can even afford a lawyer.
If foreclosure is the final chapter of homeownership, a court eviction hearing is the weary epilogue.
Just two years ago, hearings involving foreclosed homeowners were relatively rare, occurring once a month or less. But soaring foreclosures, which have continued to rise in recent months, have flooded the court with such eviction requests.
On this Thursday at Boston Housing Court, there were nearly 30 cases, involving people from many walks of life, from a single working mother to a 75-year-old retiree to a city police officer.
Some manage to postpone eviction, while others are not so lucky.
Joan Williamson, a 44-year-old housekeeper at a Sheraton hotel, appeared in court for the third time to fight eviction from her Dorchester home, which she lost in March because she could no longer stretch her $32,000-a-year salary to make the $3,200-a-month mortgage payments.
By then, she had been in the house for four years. Leaving meant uprooting her two teenage daughters and her pregnant stepdaughter, who lives with them. It also meant abandoning the yard where her 5-year-old grandson, who lives in a nearby housing project, plays ball each day.
Each time she goes to court, she worries it will be the day her family is forced from their home. For now, after gaining another postponement, she still has hope that Boston Community Capital, an agency that buys foreclosed houses and sells them back to their former owners, will help. She prays the agency will accept her case.
“I been drained,’’ she said in a thick Jamaican accent. “I been senseless.’’
Usually, foreclosure is a kind of death sentence for homeowners. While state law protects renters living in foreclosed apartments from sudden eviction, banks are under no legal obligation to let former owners stay. After the auction, residents get notices from the banks giving them 72 hours to move or face court-ordered evictions.
Thursdays in Boston Housing Court are when former homeowners confront that cold legal reality. People sit jam-packed in a hushed, standing-room-only courtroom. Judge Jeffrey M. Winik breaks the quiet by offering a few words of encouragement before the hearings start.
“It can be very scary and sometimes people get tongue-tied,’’ Winik said. “Do the best you can.’’
Marshall Cooper Jr., a 75-year-old retiree, has been doing all he can to keep his home since he lost it to foreclosure in March. When the bank held the auction on his front lawn, Cooper found an old bullhorn from his daughter’s cheerleading days and tried to drive away potential buyers by heckling them.
He has been to court four times to fight eviction. On this day, his case takes five minutes. A judge postpones it until Jan. 6.
Cooper, retired from Polaroid Corp., fell behind on his mortgage payments when his loan was adjusted from an already steep 11.3 percent interest rate to 17.3 percent. His payments ballooned to $2,291 from $1,210 a month, which his pension and Social Security could not cover. He, too, hopes that Boston Community Capital will buy the house and sell it back to him.
“This is my home,’’ Cooper said. “I’m not going nowhere.’’
Boston Community Capital has won national attention for helping homeowners, so far raising more than $30 million to help foreclosed homeowners buy back their homes at more affordable terms. But the agency cannot help everyone. Banks foreclosed on more than 13,000 homeowners in Boston and Revere this year alone. BCC plans to help about 2,000 buy back their homes in these communities over the next five years.
“The problem is huge,’’ said BCC’s executive director, Elyse Cherry. “My guess is that at the end of the day we can deal with about 20 percent of it.’’
In the busy housing court, lawyers dart from courtroom to courtroom. Some represent banks, while others from Greater Boston Legal Services offer free advice to people facing eviction. David Grossman, director of Harvard Law School’s legal aid bureau, which also provides free services, is there, too. For him, even a postponed eviction counts as “a win.’’
The process is “filled with false hope and starts and stops,’’ he said. “And sometimes dead ends.’’
At the end of the day, Jeanette Forde, a working single mother, stood before Judge Winik. Grossman stood at her side.
For the last two years, she has fought to hold onto her foreclosed Mattapan home, where she still lives with her three daughters and four grandchildren. For a while, her chances looked good. Boston Community Capital agreed to buy the house and when the bank accepted the offer, Forde announced the news to cheers at a community meeting.
Then, the bank suddenly notified Forde it had found another buyer for her house and terminated the agreement.
Her eviction became official in a minutes-long hearing. The judge asked if she understood she would have to leave the house by Jan. 31. Forde said she did.
Outside the courtroom, her eyes brimmed with tears.
“I was just trying to save my home,’’ she said.
URL to original article: http://www.housingwire.com/2010/12/28/at-housing-court-final-pleas-to-head-off-evictions
In the midst of the holiday season, no one wanted to be here.
Yet hundreds of people — homeowners, tenants, landlords — mobbed the fifth floor of Boston Housing Court on a recent Thursday, shuffling into courtrooms on what is unofficially known as eviction day.
The homeowners facing eviction have already lost their houses to foreclosure but will not move willingly, clinging to a desperate hope that they can stave off eviction and find a way to buy back their homes.
The prospects are dim. Few, if any, can even afford a lawyer.
If foreclosure is the final chapter of homeownership, a court eviction hearing is the weary epilogue.
Just two years ago, hearings involving foreclosed homeowners were relatively rare, occurring once a month or less. But soaring foreclosures, which have continued to rise in recent months, have flooded the court with such eviction requests.
On this Thursday at Boston Housing Court, there were nearly 30 cases, involving people from many walks of life, from a single working mother to a 75-year-old retiree to a city police officer.
Some manage to postpone eviction, while others are not so lucky.
Joan Williamson, a 44-year-old housekeeper at a Sheraton hotel, appeared in court for the third time to fight eviction from her Dorchester home, which she lost in March because she could no longer stretch her $32,000-a-year salary to make the $3,200-a-month mortgage payments.
By then, she had been in the house for four years. Leaving meant uprooting her two teenage daughters and her pregnant stepdaughter, who lives with them. It also meant abandoning the yard where her 5-year-old grandson, who lives in a nearby housing project, plays ball each day.
Each time she goes to court, she worries it will be the day her family is forced from their home. For now, after gaining another postponement, she still has hope that Boston Community Capital, an agency that buys foreclosed houses and sells them back to their former owners, will help. She prays the agency will accept her case.
“I been drained,’’ she said in a thick Jamaican accent. “I been senseless.’’
Usually, foreclosure is a kind of death sentence for homeowners. While state law protects renters living in foreclosed apartments from sudden eviction, banks are under no legal obligation to let former owners stay. After the auction, residents get notices from the banks giving them 72 hours to move or face court-ordered evictions.
Thursdays in Boston Housing Court are when former homeowners confront that cold legal reality. People sit jam-packed in a hushed, standing-room-only courtroom. Judge Jeffrey M. Winik breaks the quiet by offering a few words of encouragement before the hearings start.
“It can be very scary and sometimes people get tongue-tied,’’ Winik said. “Do the best you can.’’
Marshall Cooper Jr., a 75-year-old retiree, has been doing all he can to keep his home since he lost it to foreclosure in March. When the bank held the auction on his front lawn, Cooper found an old bullhorn from his daughter’s cheerleading days and tried to drive away potential buyers by heckling them.
He has been to court four times to fight eviction. On this day, his case takes five minutes. A judge postpones it until Jan. 6.
Cooper, retired from Polaroid Corp., fell behind on his mortgage payments when his loan was adjusted from an already steep 11.3 percent interest rate to 17.3 percent. His payments ballooned to $2,291 from $1,210 a month, which his pension and Social Security could not cover. He, too, hopes that Boston Community Capital will buy the house and sell it back to him.
“This is my home,’’ Cooper said. “I’m not going nowhere.’’
Boston Community Capital has won national attention for helping homeowners, so far raising more than $30 million to help foreclosed homeowners buy back their homes at more affordable terms. But the agency cannot help everyone. Banks foreclosed on more than 13,000 homeowners in Boston and Revere this year alone. BCC plans to help about 2,000 buy back their homes in these communities over the next five years.
“The problem is huge,’’ said BCC’s executive director, Elyse Cherry. “My guess is that at the end of the day we can deal with about 20 percent of it.’’
In the busy housing court, lawyers dart from courtroom to courtroom. Some represent banks, while others from Greater Boston Legal Services offer free advice to people facing eviction. David Grossman, director of Harvard Law School’s legal aid bureau, which also provides free services, is there, too. For him, even a postponed eviction counts as “a win.’’
The process is “filled with false hope and starts and stops,’’ he said. “And sometimes dead ends.’’
At the end of the day, Jeanette Forde, a working single mother, stood before Judge Winik. Grossman stood at her side.
For the last two years, she has fought to hold onto her foreclosed Mattapan home, where she still lives with her three daughters and four grandchildren. For a while, her chances looked good. Boston Community Capital agreed to buy the house and when the bank accepted the offer, Forde announced the news to cheers at a community meeting.
Then, the bank suddenly notified Forde it had found another buyer for her house and terminated the agreement.
Her eviction became official in a minutes-long hearing. The judge asked if she understood she would have to leave the house by Jan. 31. Forde said she did.
Outside the courtroom, her eyes brimmed with tears.
“I was just trying to save my home,’’ she said.
URL to original article: http://www.housingwire.com/2010/12/28/at-housing-court-final-pleas-to-head-off-evictions
Tuesday, December 28, 2010
50 Cent's mansion: a half-million-a-year money pit?
Source: Hartford Courant
Think your house is a money pit?
You've got nothing on rapper 50 Cent and his sprawling, 17-acre estate in Farmington, which has been on the market for three years with no takers.
Keeping up the property costs about $450,000 a year, covering everything from taxes and insurance right down to winterizing the sprinkler system and replacing burned out exterior light bulbs, according to estimates from area real estate brokers.
Add in the cost of occasional big-ticket items like roofs, furnace and painting and annual costs would easily top a half-million dollars.
All for a 50,000-square-foot house the size of a low-rise office building in suburbs. The mansion made headlines last week when a couple of guys broke in, highlighting the fact that the property isn't even occupied much of the time.
But it costs money full-time, just to keep it in showing condition on the chance that someone wants to buy it. The hefty maintenance bill would be enough to run as many as 100 apartments in West Hartford where scores of people live year-round.
"That's not quite a city block, but it's a neighborhood," said Marc Gottesdiener, a longtime Hartford apartment owner and appraiser. "It's mind-boggling for just one house."
Rob Giuffria, a broker with Prudential Premier Homes in Farmington, said the mansion with its 21 bedrooms and 37 bathrooms isn't likely to be shown more than once in 60 days.
"All this is just to hold the property," Giuffria said of the costs.
Giuffria estimates that the biggest chunk— $175,000 — is for round-the-clock security, a cost that may well go up after two intruders scaled a fence last week and broke into the compound. One was apprehended drinking a bottle of wine.
Heidi Picard-Ramsay, an agent with William Raveis in Avon who has the listing, concurred with the high cost of upkeep, but said it is all handled by G-Unit, the New York company 50 Cent co-founded. G-Unit did not return a telephone call seeking comment on the actual costs.
Property taxes run $98,000 a year, and policies that insure the property likely carry hefty premiums of at least $30,000 annually, Giuffria said.
Grounds maintenance requires at least one-full time groundskeeper and probably some part-time help at a cost of about $48,000 a year. Then there are the specialists: an arborist at $4,000 a year; an electrician to maintain exterior lighting, at $1,000 a year; a plumber to winterize the sprinkler system for another $1,000. The indoor and outdoor pools add at least another $3,000.
Inside, there's the cleaning bill of $2,000 a month, but that's the least of it. Gas heat can run as much as $5,000 a month in winter, while air conditioning likely sets the rapper back $8,000 a month during the summer.
50 Cent, whose real name is Curtis James Jackson III, bought the property for $4.1 million, but reportedly spent between $6 and $10 million on renovations. The mega-mansion also has been owned by boxer Mike Tyson and was built by real estate swindler Benjamin Sisti.
The rapper first put the property on the market in 2007 with an asking price of $18.5 million. It has since been reduced three times to $9,999,999, the price as of a month ago.
"It's the antithesis of his upbringing," Gottesdiener said. "He was brought up in tough times, his family scraping money together. The money to maintain such a residence is extremely ludicrous compared with his upbringing."
Picard-Ramsay said there has been some interest following the recent price reduction, but gawkers need not bother: a full background check on financials ferrets out those who can't afford the price tag.
The size, location and asking price will continue to make the property, which also includes a gym, billiard rooms, racquetball courts and a disco with a "dancing room" featuring stripper poles, a tough sell, Giuffria said.
There's no estimate on how much it costs to polish those stripper poles.
URL to original article: http://www.housingwire.com/2010/12/28/50-cents-mansion-a-half-million-a-year-money-pit
Think your house is a money pit?
You've got nothing on rapper 50 Cent and his sprawling, 17-acre estate in Farmington, which has been on the market for three years with no takers.
Keeping up the property costs about $450,000 a year, covering everything from taxes and insurance right down to winterizing the sprinkler system and replacing burned out exterior light bulbs, according to estimates from area real estate brokers.
Add in the cost of occasional big-ticket items like roofs, furnace and painting and annual costs would easily top a half-million dollars.
All for a 50,000-square-foot house the size of a low-rise office building in suburbs. The mansion made headlines last week when a couple of guys broke in, highlighting the fact that the property isn't even occupied much of the time.
But it costs money full-time, just to keep it in showing condition on the chance that someone wants to buy it. The hefty maintenance bill would be enough to run as many as 100 apartments in West Hartford where scores of people live year-round.
"That's not quite a city block, but it's a neighborhood," said Marc Gottesdiener, a longtime Hartford apartment owner and appraiser. "It's mind-boggling for just one house."
Rob Giuffria, a broker with Prudential Premier Homes in Farmington, said the mansion with its 21 bedrooms and 37 bathrooms isn't likely to be shown more than once in 60 days.
"All this is just to hold the property," Giuffria said of the costs.
Giuffria estimates that the biggest chunk— $175,000 — is for round-the-clock security, a cost that may well go up after two intruders scaled a fence last week and broke into the compound. One was apprehended drinking a bottle of wine.
Heidi Picard-Ramsay, an agent with William Raveis in Avon who has the listing, concurred with the high cost of upkeep, but said it is all handled by G-Unit, the New York company 50 Cent co-founded. G-Unit did not return a telephone call seeking comment on the actual costs.
Property taxes run $98,000 a year, and policies that insure the property likely carry hefty premiums of at least $30,000 annually, Giuffria said.
Grounds maintenance requires at least one-full time groundskeeper and probably some part-time help at a cost of about $48,000 a year. Then there are the specialists: an arborist at $4,000 a year; an electrician to maintain exterior lighting, at $1,000 a year; a plumber to winterize the sprinkler system for another $1,000. The indoor and outdoor pools add at least another $3,000.
Inside, there's the cleaning bill of $2,000 a month, but that's the least of it. Gas heat can run as much as $5,000 a month in winter, while air conditioning likely sets the rapper back $8,000 a month during the summer.
50 Cent, whose real name is Curtis James Jackson III, bought the property for $4.1 million, but reportedly spent between $6 and $10 million on renovations. The mega-mansion also has been owned by boxer Mike Tyson and was built by real estate swindler Benjamin Sisti.
The rapper first put the property on the market in 2007 with an asking price of $18.5 million. It has since been reduced three times to $9,999,999, the price as of a month ago.
"It's the antithesis of his upbringing," Gottesdiener said. "He was brought up in tough times, his family scraping money together. The money to maintain such a residence is extremely ludicrous compared with his upbringing."
Picard-Ramsay said there has been some interest following the recent price reduction, but gawkers need not bother: a full background check on financials ferrets out those who can't afford the price tag.
The size, location and asking price will continue to make the property, which also includes a gym, billiard rooms, racquetball courts and a disco with a "dancing room" featuring stripper poles, a tough sell, Giuffria said.
There's no estimate on how much it costs to polish those stripper poles.
URL to original article: http://www.housingwire.com/2010/12/28/50-cents-mansion-a-half-million-a-year-money-pit
Monday, December 27, 2010
Foreclosures still dragging down housing, economy
Source: NPR
The housing market has remained at the center of the nation's economic troubles throughout 2010. The housing market started the year flat on its back, and it's ending the year in nearly the same condition.
Home sales are still depressed, home-building remains near a 50-year low, and home prices are still about 30 percent below their peak.
Part of the problem this year has clearly been high unemployment. But the ongoing foreclosure crisis also keeps glutting the market with unsold homes. Meanwhile, the government's efforts to prevent foreclosures over the past year were a pretty big disappointment to many people.
A Homeowner's Struggle With The Foreclosure Prevention Program
Debra Dahlmer, 55, has lived in her home in Gloucester, Mass., for most of her life. Over the years, most of the family has worked at the nearby Gorton's frozen fish processing plant.
But back in 2008, Dahlmer's husband passed away. She never missed a mortgage payment. But she could see she was running out of money and would soon fall behind.
"I just found when the life insurance was gone, and with the medical expenses, I just couldn't do it," Dahlmer says.
She is a diabetic and is legally blind in one eye. Dahlmer also has such limited sight in the other eye that she has to read with a magnifying glass pressed tight against her face.
The prospect of losing her home was scary, especially since her 80-year-old mother lives downstairs.
"Where would my mom go?" Dahlmer says. "Where would I go?" She worried about being on the street.
But Dahlmer has guaranteed income because she's on disability, and she has a tenant living in part of the house. With the rental income, and the outstanding balance of the mortgage on the house, she appears to be a perfect candidate for President Obama's foreclosure prevention program, called the Home Affordable Modification Program (HAMP).
HAMP was supposed to help up to 4 million Americans keep their homes. But it's only assisted a small fraction of that number.
Dahlmer's situation offers a case study in the program's failures. Despite her efforts over the past year, she hasn't been able to obtain a permanent fix — in the form of a more affordable mortgage payment — approved through the program.
She's been working through her lender, Bank of America. But that has turned into a paperwork nightmare.
"I thought a big business was supposed to know what they’re doing," Dahlmer says.
A Frustrating Pattern: Banks Losing Documents
Like many other homeowners, Dahlmer says she's been tearing her hair out faxing in proof of income and tax documents, only to have the bank lose them.
For her that's especially hard because of her vision problems. Still, she takes notes about the process in huge print with a black magic marker.
Over the past year, she's repeatedly asked call center workers what's going on. She says they tell her, " 'I'm sorry, but you haven’t sent in the documentation.' "
Dahlmer says she has sent in all the documentation. But it gets lost again in a never-ending cycle. The bank then asks for something they never asked for before.
"It just goes on and on," she says.
Dahlmer says she's been getting all kinds of foreclosure-related junk mail, and that's getting her very nervous again.
After NPR contacted Bank of America, the bank says they're looking into Dahlmer's case and hope to resolve it within a few weeks.
Sharp Criticism From A Government Oversight Panel
A congressional oversight panel this year has been harshly critical of the Treasury Department for failing to enforce the agreements the major banks made to take part in the administration's HAMP program.
All of the major banks have been having similar problems — losing documents and rejecting homeowners who appear to qualify for unknown reasons. Hundreds of thousands of homeowners are now falling out of the federal program.
"The foreclosure modification effort has been a real mess," says Mark Zandi, the chief economist of Moody's Analytics. With millions of people facing foreclosure, he acknowledges that it's been a very difficult challenge for the banks. But, he says, "even considering that, it just hasn't gone well."
A Housing Bottom In 2011
Despite all these problems, Zandi thinks housing is finally approaching a turning point. He expects the market to bottom out in 2011.
"It's been a five-year road south, and it's been a complete cratering of the market," he says. "But I think 2011 marks the end of that crash."
Zandi says there are some more housing price declines ahead, as all these foreclosures continue to glut the market with millions of homes at fire-sale prices.
But by next summer, he expects prices to start stabilizing, with some price growth in 2012.
Access To Credit, Fannie And Freddie's Future
Another big issue for the housing market this year was access to credit. Interest rates have been very low by historical standards. But many people can't qualify for those low rates.
"This is one of the variables that we have to correct," says Brian Chappelle, a mortgage consultant with Potomac Partners.
He thinks the pendulum has swung too far and lenders are being too tightfisted. One problem, he says, is that Fannie Mae and Freddie Mac, the government-backed mortgage giants, have been in a wrestling match with lenders of all sizes — forcing them to buy back loans that have gone bad.
Some of this wrangling is good for taxpayers because it saves them money. But Chappelle says it's got the banks nervous and less willing to make new loans.
In 2011, Congress will debate what to do with Fannie and Freddie. Right now, the government is using them to prop up the housing market. But all sides want to see a major overhaul of the government's role in housing.
URL to original article: http://www.housingwire.com/2010/12/27/foreclosures-still-dragging-down-housing-economy
The housing market has remained at the center of the nation's economic troubles throughout 2010. The housing market started the year flat on its back, and it's ending the year in nearly the same condition.
Home sales are still depressed, home-building remains near a 50-year low, and home prices are still about 30 percent below their peak.
Part of the problem this year has clearly been high unemployment. But the ongoing foreclosure crisis also keeps glutting the market with unsold homes. Meanwhile, the government's efforts to prevent foreclosures over the past year were a pretty big disappointment to many people.
A Homeowner's Struggle With The Foreclosure Prevention Program
Debra Dahlmer, 55, has lived in her home in Gloucester, Mass., for most of her life. Over the years, most of the family has worked at the nearby Gorton's frozen fish processing plant.
But back in 2008, Dahlmer's husband passed away. She never missed a mortgage payment. But she could see she was running out of money and would soon fall behind.
"I just found when the life insurance was gone, and with the medical expenses, I just couldn't do it," Dahlmer says.
She is a diabetic and is legally blind in one eye. Dahlmer also has such limited sight in the other eye that she has to read with a magnifying glass pressed tight against her face.
The prospect of losing her home was scary, especially since her 80-year-old mother lives downstairs.
"Where would my mom go?" Dahlmer says. "Where would I go?" She worried about being on the street.
But Dahlmer has guaranteed income because she's on disability, and she has a tenant living in part of the house. With the rental income, and the outstanding balance of the mortgage on the house, she appears to be a perfect candidate for President Obama's foreclosure prevention program, called the Home Affordable Modification Program (HAMP).
HAMP was supposed to help up to 4 million Americans keep their homes. But it's only assisted a small fraction of that number.
Dahlmer's situation offers a case study in the program's failures. Despite her efforts over the past year, she hasn't been able to obtain a permanent fix — in the form of a more affordable mortgage payment — approved through the program.
She's been working through her lender, Bank of America. But that has turned into a paperwork nightmare.
"I thought a big business was supposed to know what they’re doing," Dahlmer says.
A Frustrating Pattern: Banks Losing Documents
Like many other homeowners, Dahlmer says she's been tearing her hair out faxing in proof of income and tax documents, only to have the bank lose them.
For her that's especially hard because of her vision problems. Still, she takes notes about the process in huge print with a black magic marker.
Over the past year, she's repeatedly asked call center workers what's going on. She says they tell her, " 'I'm sorry, but you haven’t sent in the documentation.' "
Dahlmer says she has sent in all the documentation. But it gets lost again in a never-ending cycle. The bank then asks for something they never asked for before.
"It just goes on and on," she says.
Dahlmer says she's been getting all kinds of foreclosure-related junk mail, and that's getting her very nervous again.
After NPR contacted Bank of America, the bank says they're looking into Dahlmer's case and hope to resolve it within a few weeks.
Sharp Criticism From A Government Oversight Panel
A congressional oversight panel this year has been harshly critical of the Treasury Department for failing to enforce the agreements the major banks made to take part in the administration's HAMP program.
All of the major banks have been having similar problems — losing documents and rejecting homeowners who appear to qualify for unknown reasons. Hundreds of thousands of homeowners are now falling out of the federal program.
"The foreclosure modification effort has been a real mess," says Mark Zandi, the chief economist of Moody's Analytics. With millions of people facing foreclosure, he acknowledges that it's been a very difficult challenge for the banks. But, he says, "even considering that, it just hasn't gone well."
A Housing Bottom In 2011
Despite all these problems, Zandi thinks housing is finally approaching a turning point. He expects the market to bottom out in 2011.
"It's been a five-year road south, and it's been a complete cratering of the market," he says. "But I think 2011 marks the end of that crash."
Zandi says there are some more housing price declines ahead, as all these foreclosures continue to glut the market with millions of homes at fire-sale prices.
But by next summer, he expects prices to start stabilizing, with some price growth in 2012.
Access To Credit, Fannie And Freddie's Future
Another big issue for the housing market this year was access to credit. Interest rates have been very low by historical standards. But many people can't qualify for those low rates.
"This is one of the variables that we have to correct," says Brian Chappelle, a mortgage consultant with Potomac Partners.
He thinks the pendulum has swung too far and lenders are being too tightfisted. One problem, he says, is that Fannie Mae and Freddie Mac, the government-backed mortgage giants, have been in a wrestling match with lenders of all sizes — forcing them to buy back loans that have gone bad.
Some of this wrangling is good for taxpayers because it saves them money. But Chappelle says it's got the banks nervous and less willing to make new loans.
In 2011, Congress will debate what to do with Fannie and Freddie. Right now, the government is using them to prop up the housing market. But all sides want to see a major overhaul of the government's role in housing.
URL to original article: http://www.housingwire.com/2010/12/27/foreclosures-still-dragging-down-housing-economy
Double dip is looming for Phoenix home prices
Source: The Arizona Republic
Metro Phoenix home prices are headed for a new low, if they haven't already hit it.
Median prices for the sale of existing homes have been falling since June, when a federal homebuyer tax credit expired and an increase in foreclosures helped drive down prices that had been steady for nearly a year.
A new low would create a double dip in a market that has already been on a harrowing ride.
Prices rose to about $250,000 during the boom of 2004-06 and then collapsed amid a mortgage crisis and an economic recession. They bottomed out at $119,900 in April 2009, according to the Information Market, a real-estate research firm.
Home prices ticked up after that, and the median hovered around $130,000 until last summer. Then, they fell again.
At the end of November, Phoenix's median resale-home price hit $121,500, the lowest it has been since April 2009. The median price measures single-family home sales as well as condominiums.
A median price below $119,900, the previous low, would constitute what observers call a double dip, and some measures of home prices signal that is already here:
- The Arizona Regional Multiple Listing Service, a database run for real-estate agents showing homes for sale and the prices they sell for, analyzes pending purchase agreements scheduled to close in a given month and creates an index predicting future sales prices. That index shows the median home price falling to $115,000 in December.
- Housing analyst Mike Orr, publisher of the "Cromford Report," tracks Phoenix-area home sales by price per square foot. His analysis showed the median per-square-foot price for a home sold in the region fell to $82.10 in October, the same level it was in April 2009. The price has been bumping along at $82 to $83 since then.
Orr says this dip won't be nearly as dramatic as the previous decline.
"The sharp relapse (of home prices) fueled by the end of the tax credit is now over," Orr said. "I expect a long, slow recovery in 2011."
Future declines
Hopes for a recovery in metro Phoenix's housing market began in April of last year.
But although prices rose some and then remained steady, the end of summer 2010 made it clear that the homebuyer tax credit had been propping up the market. The credit expired in June.
During the past two months, foreclosures fell, but the decline was likely only temporary. Bank of America had placed a moratorium on foreclosures because of questions over its record-keeping. That freeze expired last week, and Phoenix-area foreclosures could climb by at least 1,000 a month through the spring as BofA restarts its process.
A large increase in the number of foreclosure homes for sale could put more downward pressure on prices because lenders are selling these homes for bargain prices.
Recovery
There are positive indicators for metro Phoenix's housing market.
Investors continue to buy many of the region's foreclosure homes, keeping the supply of lower-priced houses from soaring. The job market is slowly improving, and although mortgage rates climbed in the past week, they are still lower than a year ago. Pending sales show home prices ticking up slightly in January.
The Arizona Regional Multiple Listing Service's figures forecast the Valley's median home price climbing from $115,000 this month to $118,000 in January.
Housing-market watchers say foreclosures could begin to level off and even drop next summer if the job market continues to improve, more loan modifications and short sales are successful, and BofA's excess-foreclosure inventory works its way through the process.
"Future declines in metro Phoenix home prices will be modest, more of a slip than a plunge," said Tom Ruff, an Information Market analyst. "The big drops are behind the market."
URL to original article: http://www.housingwire.com/2010/12/21/double-dip-is-looming-for-phoenix-home-prices
Metro Phoenix home prices are headed for a new low, if they haven't already hit it.
Median prices for the sale of existing homes have been falling since June, when a federal homebuyer tax credit expired and an increase in foreclosures helped drive down prices that had been steady for nearly a year.
A new low would create a double dip in a market that has already been on a harrowing ride.
Prices rose to about $250,000 during the boom of 2004-06 and then collapsed amid a mortgage crisis and an economic recession. They bottomed out at $119,900 in April 2009, according to the Information Market, a real-estate research firm.
Home prices ticked up after that, and the median hovered around $130,000 until last summer. Then, they fell again.
At the end of November, Phoenix's median resale-home price hit $121,500, the lowest it has been since April 2009. The median price measures single-family home sales as well as condominiums.
A median price below $119,900, the previous low, would constitute what observers call a double dip, and some measures of home prices signal that is already here:
- The Arizona Regional Multiple Listing Service, a database run for real-estate agents showing homes for sale and the prices they sell for, analyzes pending purchase agreements scheduled to close in a given month and creates an index predicting future sales prices. That index shows the median home price falling to $115,000 in December.
- Housing analyst Mike Orr, publisher of the "Cromford Report," tracks Phoenix-area home sales by price per square foot. His analysis showed the median per-square-foot price for a home sold in the region fell to $82.10 in October, the same level it was in April 2009. The price has been bumping along at $82 to $83 since then.
Orr says this dip won't be nearly as dramatic as the previous decline.
"The sharp relapse (of home prices) fueled by the end of the tax credit is now over," Orr said. "I expect a long, slow recovery in 2011."
Future declines
Hopes for a recovery in metro Phoenix's housing market began in April of last year.
But although prices rose some and then remained steady, the end of summer 2010 made it clear that the homebuyer tax credit had been propping up the market. The credit expired in June.
During the past two months, foreclosures fell, but the decline was likely only temporary. Bank of America had placed a moratorium on foreclosures because of questions over its record-keeping. That freeze expired last week, and Phoenix-area foreclosures could climb by at least 1,000 a month through the spring as BofA restarts its process.
A large increase in the number of foreclosure homes for sale could put more downward pressure on prices because lenders are selling these homes for bargain prices.
Recovery
There are positive indicators for metro Phoenix's housing market.
Investors continue to buy many of the region's foreclosure homes, keeping the supply of lower-priced houses from soaring. The job market is slowly improving, and although mortgage rates climbed in the past week, they are still lower than a year ago. Pending sales show home prices ticking up slightly in January.
The Arizona Regional Multiple Listing Service's figures forecast the Valley's median home price climbing from $115,000 this month to $118,000 in January.
Housing-market watchers say foreclosures could begin to level off and even drop next summer if the job market continues to improve, more loan modifications and short sales are successful, and BofA's excess-foreclosure inventory works its way through the process.
"Future declines in metro Phoenix home prices will be modest, more of a slip than a plunge," said Tom Ruff, an Information Market analyst. "The big drops are behind the market."
URL to original article: http://www.housingwire.com/2010/12/21/double-dip-is-looming-for-phoenix-home-prices
Friday, December 24, 2010
Structured finance downgrades, defaults slow as 2010 ends: S&P
by JON PRIOR
URL to original article: http://www.housingwire.com/2010/12/21/structured-finance-downgrades-defaults-slow-as-2010-ends-sp
November downgrades and defaults on residential and commercial mortgage-backed securities slowed to levels not seen since 2007, according to a report from Standard & Poor's.
The housing market's collapse sparked downgrades from the credit rating agency to a peak at the beginning of 2010 when S&P made more than 12,000 downgrades on RMBS and collateralized debt obligations backed by the securities in January alone. Default rates on the collateral beneath the structured finance deals reached a peak of 10% in November 2009, climbing from a 2.8% low a year earlier. (Click on chart to expand.)
But the global economic outlook began to change in late 2009 and continued into 2010. This stabilized credit spreads for and improved the performance of underlying collateral. Downgrades began to decline after January to roughly 1,000 in November. Default rates recovered as well, dropping back down to 2.9% as of November, according to S&P.
But, according to S&P, struggles remain despite an improving economy. Cumulative defaults on structured securities reached $809 billion at the end of November. Of that, just more than half was originally rated triple A, the highest investment grade S&P can give a structured deal.
"Because the credit performance of structured finance collateral tends to lag the overall economy, however, credit stabilization will continue to face a headwind of persistent high levels of unemployment and a weak labor market, which will likely continue to pressure the sector's overall credit performance going forward," S&P said.
URL to original article: http://www.housingwire.com/2010/12/21/structured-finance-downgrades-defaults-slow-as-2010-ends-sp
Wednesday, December 22, 2010
MBA: mortgage applications down 18.6% last week
by JASON PHILYAW
Mortgage application volume continues to decline with a huge drop last week, as interest rates remain on an upward swing and demand for refinancings plummets.
The Mortgage Bankers Association said its market composite index decreased 18.6% for the week ended Dec. 17 on a seasonally adjusted basis. Unadjusted, the index fell 20% from the prior week.
Refinancing applications have decreased for six consecutive weeks and volume is at the lowest point since the end of April after another 24.6% drop last week. The seasonally adjusted purchase index fell 2.5% last week. The unadjusted purchase index declined 4.9% and was 8.4% lower than a year earlier.
"Refinance application volume dropped sharply this week as mortgage rates held near six month highs," according to Michael Fratantoni, MBA vice president of research and economics. "Purchase applications fell for a second week, with the level of applications little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months.
In four-week moving averages, the seasonally adjusted market index is down 9.8%, the purchase index is down 1.2% and the refinance index is down 12.7%. The refinancing share of all mortgage applications fell to the lowest point since early June at 72.3% down from 76.7% the week earlier.
The average interest rate for a 30-year fixed mortgage has risen steadily for a month and is now at 4.85%, according to the MBA, up slightly from 4.84% the week before. The average rate for a 15-year fixed mortgage also rose a bit last week to 4.22% from 4.21% a week earlier.
URL to original article: http://www.housingwire.com/2010/12/22/mba-mortgage-applications-down-18-6-last-week
Mortgage application volume continues to decline with a huge drop last week, as interest rates remain on an upward swing and demand for refinancings plummets.
The Mortgage Bankers Association said its market composite index decreased 18.6% for the week ended Dec. 17 on a seasonally adjusted basis. Unadjusted, the index fell 20% from the prior week.
Refinancing applications have decreased for six consecutive weeks and volume is at the lowest point since the end of April after another 24.6% drop last week. The seasonally adjusted purchase index fell 2.5% last week. The unadjusted purchase index declined 4.9% and was 8.4% lower than a year earlier.
"Refinance application volume dropped sharply this week as mortgage rates held near six month highs," according to Michael Fratantoni, MBA vice president of research and economics. "Purchase applications fell for a second week, with the level of applications little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months.
In four-week moving averages, the seasonally adjusted market index is down 9.8%, the purchase index is down 1.2% and the refinance index is down 12.7%. The refinancing share of all mortgage applications fell to the lowest point since early June at 72.3% down from 76.7% the week earlier.
The average interest rate for a 30-year fixed mortgage has risen steadily for a month and is now at 4.85%, according to the MBA, up slightly from 4.84% the week before. The average rate for a 15-year fixed mortgage also rose a bit last week to 4.22% from 4.21% a week earlier.
URL to original article: http://www.housingwire.com/2010/12/22/mba-mortgage-applications-down-18-6-last-week
Monday, December 20, 2010
US role in housing market makes it harder to predict end of crisis
Source: The Philadelphia Inquirer
The housing downturn that began in 2005, 2006, or 2007, depending on location, has tested the mettle of the economists whose job it is to figure out when and how the crisis will end.
Some economists argue, and with considerable justification, that government interference in the real estate market has made predicting the date of recovery from difficult to impossible.
That government interference manifested itself primarily in the Federal Reserve's purchase of mortgages from Fannie Mae and Freddie Mac, which affected interest rates until the program ended March 31.
The federal tax credits for home buyers, which boosted sales for more than a year, added to the confusion. The tax benefit kicked housing sales into gear; the end of the credit put the housing market back on life support.
"We misjudged the impact of the two tax credits," said economist Patrick Newport of IHS Global Insight Inc. "We expected the credits to both shift demand and increase sales and starts. It appears that the tax credits mostly shifted activity."
The level of interference is now much lower, and a clearer picture of the market is emerging, allowing economists, as well as civilians, the opportunity to predict with a bit more accuracy.
The "when" remains difficult to pin down, although the nonprofessionals - typical homeowners and renters - believe they have the answer.
Recovery will occur anywhere from 2012 to 2015 and even later, according to most of the 2,000 homeowners and renters surveyed by Harris Interactive in November.
The survey, commissioned by real estate search engine Trulia and foreclosure-tracker RealtyTrac Inc., found that just 4 percent thought the market had recovered already.
"Sellers and buyers are tamping down their expectations for a swift recovery in the housing market and bracing themselves for a long, slow climb back to a healthy real estate market," said Trulia chief executive officer Peter Flint.
"Government incentives have come and gone, and historic lows in interest rates have done little to spur recovery," he said.
From the responses, Flint says consumers have a "What's next?" attitude, "since they have lost faith in banks and their government to make good decisions."
What it will take for a market turnaround is a much easier question to have answered by the economists.
"On the face of it, getting the housing market to recover is quite easy, since it's well-established what drives housing," said economist Kevin Gillen, vice president of Econsult Inc., of Philadelphia.
That is, "You take a reasonable level of home building costs, combine household income growth with job growth, throw in a good dash of accessible mortgage credit, and - Presto! - you have a robust housing market," Gillen said.
All the government needs to do is reduce unemployment, grow the economy and keep inflation - and hence interest rates - in check, and housing will begin to recover.
"Of course, this should remind you of Steve Martin's old routine about his foolproof two-step plan to make a million dollars tax-free. 'Step One: Get your hands on a million dollars,' " Gillen said.
So, given that unemployment rose in recent weeks, credit remains tight for buyers as well as the typical home builder, and 30-year fixed-interest rates have risen in the last few weeks from a record low 4.17 percent to 4.61 Thursday, Martin's way is still the better bet.
Rates rose, says Freddie Mac chief economist Frank Nothaft, "after Europe made strides in its debt situation," allowing investors to leave the security of U.S. Treasury debt, causing bond yields and mortgage rates to rise.
"Key macroeconomic drivers of the economy - such as income growth, unemployment rate, and inflation - will affect the performance of the housing and mortgage markets in 2011," he said.
"Economic recovery should accelerate gradually over the year, with the second half of 2011 exhibiting more growth and job creation than the early part of the year," Nothaft said.
Employment is important because potential home buyers need a job, income, and savings to qualify for a mortgage, he said.
Improved consumer confidence is another, since if consumers are worried about their economic future, or whether house prices will fall, then they will be reluctant to buy.
Nothaft believes 30-year fixed rates will stay below 5 percent in 2011 and home prices will bottom in the first half and rise 1 percent for the year, combining to keep homeownership affordable.
With rising rates, and because most people able to refinance have done so already, mortgage originations will drop in 2011, although there will be an increase in loans to buy houses, he said.
Conventional wisdom says, since housing's bust led the United States into this downturn, then a true recovery cannot begin until housing recovers first.
"The problem with the housing sector is that, historically, it isn't so much an input to the economy, as an outcome of it," Nothaft said. "When the economy is generally doing well, so too is housing, but the reverse is not so clear."
Government intervention simply delayed further house-price declines, "while at the same time, blowing the taxpayers' money," Econsult's Kevin Gillen said.
"The government should tend to reducing the national debt, lowering and simplifying the tax burden, promoting job growth, and keeping the currency and macroeconomy sound," Gillen said.
"If it takes care of that, housing will eventually take care of itself."
URL to original article: http://www.housingwire.com/2010/12/13/u-s-role-in-housing-market-makes-it-harder-to-predict-end-of-crisis
The housing downturn that began in 2005, 2006, or 2007, depending on location, has tested the mettle of the economists whose job it is to figure out when and how the crisis will end.
Some economists argue, and with considerable justification, that government interference in the real estate market has made predicting the date of recovery from difficult to impossible.
That government interference manifested itself primarily in the Federal Reserve's purchase of mortgages from Fannie Mae and Freddie Mac, which affected interest rates until the program ended March 31.
The federal tax credits for home buyers, which boosted sales for more than a year, added to the confusion. The tax benefit kicked housing sales into gear; the end of the credit put the housing market back on life support.
"We misjudged the impact of the two tax credits," said economist Patrick Newport of IHS Global Insight Inc. "We expected the credits to both shift demand and increase sales and starts. It appears that the tax credits mostly shifted activity."
The level of interference is now much lower, and a clearer picture of the market is emerging, allowing economists, as well as civilians, the opportunity to predict with a bit more accuracy.
The "when" remains difficult to pin down, although the nonprofessionals - typical homeowners and renters - believe they have the answer.
Recovery will occur anywhere from 2012 to 2015 and even later, according to most of the 2,000 homeowners and renters surveyed by Harris Interactive in November.
The survey, commissioned by real estate search engine Trulia and foreclosure-tracker RealtyTrac Inc., found that just 4 percent thought the market had recovered already.
"Sellers and buyers are tamping down their expectations for a swift recovery in the housing market and bracing themselves for a long, slow climb back to a healthy real estate market," said Trulia chief executive officer Peter Flint.
"Government incentives have come and gone, and historic lows in interest rates have done little to spur recovery," he said.
From the responses, Flint says consumers have a "What's next?" attitude, "since they have lost faith in banks and their government to make good decisions."
What it will take for a market turnaround is a much easier question to have answered by the economists.
"On the face of it, getting the housing market to recover is quite easy, since it's well-established what drives housing," said economist Kevin Gillen, vice president of Econsult Inc., of Philadelphia.
That is, "You take a reasonable level of home building costs, combine household income growth with job growth, throw in a good dash of accessible mortgage credit, and - Presto! - you have a robust housing market," Gillen said.
All the government needs to do is reduce unemployment, grow the economy and keep inflation - and hence interest rates - in check, and housing will begin to recover.
"Of course, this should remind you of Steve Martin's old routine about his foolproof two-step plan to make a million dollars tax-free. 'Step One: Get your hands on a million dollars,' " Gillen said.
So, given that unemployment rose in recent weeks, credit remains tight for buyers as well as the typical home builder, and 30-year fixed-interest rates have risen in the last few weeks from a record low 4.17 percent to 4.61 Thursday, Martin's way is still the better bet.
Rates rose, says Freddie Mac chief economist Frank Nothaft, "after Europe made strides in its debt situation," allowing investors to leave the security of U.S. Treasury debt, causing bond yields and mortgage rates to rise.
"Key macroeconomic drivers of the economy - such as income growth, unemployment rate, and inflation - will affect the performance of the housing and mortgage markets in 2011," he said.
"Economic recovery should accelerate gradually over the year, with the second half of 2011 exhibiting more growth and job creation than the early part of the year," Nothaft said.
Employment is important because potential home buyers need a job, income, and savings to qualify for a mortgage, he said.
Improved consumer confidence is another, since if consumers are worried about their economic future, or whether house prices will fall, then they will be reluctant to buy.
Nothaft believes 30-year fixed rates will stay below 5 percent in 2011 and home prices will bottom in the first half and rise 1 percent for the year, combining to keep homeownership affordable.
With rising rates, and because most people able to refinance have done so already, mortgage originations will drop in 2011, although there will be an increase in loans to buy houses, he said.
Conventional wisdom says, since housing's bust led the United States into this downturn, then a true recovery cannot begin until housing recovers first.
"The problem with the housing sector is that, historically, it isn't so much an input to the economy, as an outcome of it," Nothaft said. "When the economy is generally doing well, so too is housing, but the reverse is not so clear."
Government intervention simply delayed further house-price declines, "while at the same time, blowing the taxpayers' money," Econsult's Kevin Gillen said.
"The government should tend to reducing the national debt, lowering and simplifying the tax burden, promoting job growth, and keeping the currency and macroeconomy sound," Gillen said.
"If it takes care of that, housing will eventually take care of itself."
URL to original article: http://www.housingwire.com/2010/12/13/u-s-role-in-housing-market-makes-it-harder-to-predict-end-of-crisis
Thursday, December 16, 2010
Foreigners flock to Florida real estate bargains
Source: AFP
Foreign tourists who for years have crowded Florida's shopping malls to buy clothes and electronics, are now flocking to real estate offices to snatch up apartments and homes at bargain-basement prices.
The investors, mainly from Europe and Latin America, are jostling over apartments in Miami's trendy South Beach neighborhood selling for 70,000-100,000 dollars, and in less exclusive areas to the north where they start at around 50,000.
"The buying opportunities are maybe the best ever. Who knows if we'll see prices again like today's in Miami Beach," Keys Real Estate agent Michelle Iglesias told AFP.
Property prices in Miami have fallen by almost half (47 percent) since the real estate bubble peaked in 2006, according to Standard & Poor's Case-Shiller 20-City Home Price index.
Analysts predict that real estate market prices will not increase until the banks get rid of all their foreclosed properties and there are more jobs in the region.
"Unemployment is still high. People are afraid of losing their homes and credit is hard to get," said Standard & Poor's vice president Maureen Maitland.
In and around Miami, banks each month repossess about 5,000 properties, including apartments and commercial real estate, for delinquent mortgage payments, according to real estate brokerage Codovultures Realty, which has 250,000 such properties on its books across southern Florida.
But foreign investors have kept prices from plunging even further, the Miami Association of Realtors said in its November report.
"The international buyers continue to fuel market strengthening, we continue to observe positive signs," said association president Oliver Ruiz.
Beatriz Lamanda, from Venezuela, bought two apartments north of Miami Beach for 80,000 dollars.
"I'd rather put my money in real estate than leave it in the bank. In a few years I'll make a nice bundle because the prices are going to go up, no question," she told AFP.
In the "Icon," a three-building apartment complex by French designer Philippe Stark in Brickell, Miami's newest financial district, apartments are selling for 250,000 dollars, down from 370,000 two years ago.
"We've sold 350 units in the last few months. Most of the buyers are international, from countries like Venezuela, Argentina and Brazil and also Colombia, Italy, Mexico and Canada," Fortune International's Alejandra Castillo told AFP.
Foreclosed properties owned by banks in the area go for less than 100,000 dollars, and two-bedroom, two-bathroom apartments for as little as 130,000.
Daniel Lemin came from France on a three-day business trip and promptly sought a real estate broker to look over some apartments.
"It's a great time for investing, and while I wait for prices to go up, I've got an apartment in Miami I can use or rent out," he added.
URL to original article: http://www.housingwire.com/2010/12/14/foreigners-flock-to-florida-real-estate-bargains
Foreign tourists who for years have crowded Florida's shopping malls to buy clothes and electronics, are now flocking to real estate offices to snatch up apartments and homes at bargain-basement prices.
The investors, mainly from Europe and Latin America, are jostling over apartments in Miami's trendy South Beach neighborhood selling for 70,000-100,000 dollars, and in less exclusive areas to the north where they start at around 50,000.
"The buying opportunities are maybe the best ever. Who knows if we'll see prices again like today's in Miami Beach," Keys Real Estate agent Michelle Iglesias told AFP.
Property prices in Miami have fallen by almost half (47 percent) since the real estate bubble peaked in 2006, according to Standard & Poor's Case-Shiller 20-City Home Price index.
Analysts predict that real estate market prices will not increase until the banks get rid of all their foreclosed properties and there are more jobs in the region.
"Unemployment is still high. People are afraid of losing their homes and credit is hard to get," said Standard & Poor's vice president Maureen Maitland.
In and around Miami, banks each month repossess about 5,000 properties, including apartments and commercial real estate, for delinquent mortgage payments, according to real estate brokerage Codovultures Realty, which has 250,000 such properties on its books across southern Florida.
But foreign investors have kept prices from plunging even further, the Miami Association of Realtors said in its November report.
"The international buyers continue to fuel market strengthening, we continue to observe positive signs," said association president Oliver Ruiz.
Beatriz Lamanda, from Venezuela, bought two apartments north of Miami Beach for 80,000 dollars.
"I'd rather put my money in real estate than leave it in the bank. In a few years I'll make a nice bundle because the prices are going to go up, no question," she told AFP.
In the "Icon," a three-building apartment complex by French designer Philippe Stark in Brickell, Miami's newest financial district, apartments are selling for 250,000 dollars, down from 370,000 two years ago.
"We've sold 350 units in the last few months. Most of the buyers are international, from countries like Venezuela, Argentina and Brazil and also Colombia, Italy, Mexico and Canada," Fortune International's Alejandra Castillo told AFP.
Foreclosed properties owned by banks in the area go for less than 100,000 dollars, and two-bedroom, two-bathroom apartments for as little as 130,000.
Daniel Lemin came from France on a three-day business trip and promptly sought a real estate broker to look over some apartments.
"It's a great time for investing, and while I wait for prices to go up, I've got an apartment in Miami I can use or rent out," he added.
URL to original article: http://www.housingwire.com/2010/12/14/foreigners-flock-to-florida-real-estate-bargains
Wednesday, December 15, 2010
Canadians now owe more than Americans
Source: Bloomberg
Canada’s top economic officials yesterday urged households to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years.
Bank of Canada Governor Mark Carney, Finance Minister Jim Flaherty and Prime Minister Stephen Harper said in separate public appearances that they are concerned about rising debt. The ratio of household debt to disposable income in Canada was 1.48 in the third quarter according to Statistics Canada, exceeding the U.S. level of 1.47.
“Our parents were more inclined to pay off that mortgage as soon as possible, and some Canadians are not as inclined to do that now,” Flaherty told reporters yesterday. “I encourage them to do it.”
The comments by the policy makers underscore government concern that debt levels in Canada could threaten the recovery if borrowing costs rise and households struggle to pay their bills. Canada has relied on regulatory steps to rein in mortgage borrowing, most recently in February, and Flaherty said yesterday he is prepared to take additional measures if needed.
“The fear is that were we to see sharp rises in interest rates or were we to see sharp rises in unemployment, that a significant number of people might not be able to afford their debt obligations,” Flaherty said.
In Canada, where banks largely escaped the global financial crisis and continued to lend even as credit dried up elsewhere, low interest rates have encouraged consumers to take on debt.
Limits to Divergence
Carney, 45, left the benchmark target rate at 1 percent this month to gauge the global recovery after three earlier increases, while the U.S. Federal Reserve has kept its benchmark rate in a range of zero to 0.25 percent since December 2008. Carney said in a Sept. 24 interview on CNBC that “there are limits to the divergence that there can be between Canada and the United States.”
While Canada’s economic recovery could be threatened in the future by elevated debt levels, higher Canadian interest rates could also cause the Canadian dollar to appreciate. Speaking to reporters after a speech in Toronto, Carney noted that the bank had flagged as a risk to the economy that “persistent strength of the Canadian dollar” and weak productivity could crimp exports and hinder Canada’s recovery.
“To some extent that risk is being realized, which is one of the things we will have to assess as we sit down in January,” Carney said, referring to the bank’s next interest rate decision and monetary policy report.
Boxed In
“The Bank of Canada is in a bit of a box, given where the Fed is and where the Canadian dollar is,” said Doug Porter, deputy chief economist with BMO Capital markets in Toronto.
Canada’s dollar rose for the fifth consecutive day today to post the longest winning streak in more than a month. The currency has gained 2.2 percent this month versus the U.S. dollar. The Canadian dollar rose 0.3 percent to C$1.0047 per U.S. dollar at 1:19 a.m. in Toronto, from C$1.0074 yesterday. One Canadian dollar bought 99.53 U.S. cents.
Measures to restrain lending taken earlier this year included changes for government-backed mortgages that forced buyers to meet standards for five-year, fixed-rate mortgages even if they opt for variable rates. Limits on refinancing were made stricter and down payment rules were tightened.
The proportion of Canadians in a stretched financial position “has grown significantly,” Carney said in his speech -- entitled “Living with Low for Long” -- adding that authorities continue to monitor households’ finances.
Watching Closely
“The level of vulnerabilities of households remains high” Carney said at the press conference. “The authorities are cooperating closely, we are continuing to monitor the situation closely.”
“We have debt levels that are unprecedented in this country,” Carney said in an interview broadcast today on BNN Television. “We are in uncharted territory.”
To be sure, Harper said his government cannot “exaggerate” the degree with which it can control borrowing.
“We are a free country and people are entitled to make their own financial decisions,” Harper said. “This is a matter that is of concern to the government, we continue to warn Canadian households that interest rates are unlikely to go down.”
URL to original article: http://www.housingwire.com/2010/12/14/canadians-now-owe-more-than-americans
Canada’s top economic officials yesterday urged households to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years.
Bank of Canada Governor Mark Carney, Finance Minister Jim Flaherty and Prime Minister Stephen Harper said in separate public appearances that they are concerned about rising debt. The ratio of household debt to disposable income in Canada was 1.48 in the third quarter according to Statistics Canada, exceeding the U.S. level of 1.47.
“Our parents were more inclined to pay off that mortgage as soon as possible, and some Canadians are not as inclined to do that now,” Flaherty told reporters yesterday. “I encourage them to do it.”
The comments by the policy makers underscore government concern that debt levels in Canada could threaten the recovery if borrowing costs rise and households struggle to pay their bills. Canada has relied on regulatory steps to rein in mortgage borrowing, most recently in February, and Flaherty said yesterday he is prepared to take additional measures if needed.
“The fear is that were we to see sharp rises in interest rates or were we to see sharp rises in unemployment, that a significant number of people might not be able to afford their debt obligations,” Flaherty said.
In Canada, where banks largely escaped the global financial crisis and continued to lend even as credit dried up elsewhere, low interest rates have encouraged consumers to take on debt.
Limits to Divergence
Carney, 45, left the benchmark target rate at 1 percent this month to gauge the global recovery after three earlier increases, while the U.S. Federal Reserve has kept its benchmark rate in a range of zero to 0.25 percent since December 2008. Carney said in a Sept. 24 interview on CNBC that “there are limits to the divergence that there can be between Canada and the United States.”
While Canada’s economic recovery could be threatened in the future by elevated debt levels, higher Canadian interest rates could also cause the Canadian dollar to appreciate. Speaking to reporters after a speech in Toronto, Carney noted that the bank had flagged as a risk to the economy that “persistent strength of the Canadian dollar” and weak productivity could crimp exports and hinder Canada’s recovery.
“To some extent that risk is being realized, which is one of the things we will have to assess as we sit down in January,” Carney said, referring to the bank’s next interest rate decision and monetary policy report.
Boxed In
“The Bank of Canada is in a bit of a box, given where the Fed is and where the Canadian dollar is,” said Doug Porter, deputy chief economist with BMO Capital markets in Toronto.
Canada’s dollar rose for the fifth consecutive day today to post the longest winning streak in more than a month. The currency has gained 2.2 percent this month versus the U.S. dollar. The Canadian dollar rose 0.3 percent to C$1.0047 per U.S. dollar at 1:19 a.m. in Toronto, from C$1.0074 yesterday. One Canadian dollar bought 99.53 U.S. cents.
Measures to restrain lending taken earlier this year included changes for government-backed mortgages that forced buyers to meet standards for five-year, fixed-rate mortgages even if they opt for variable rates. Limits on refinancing were made stricter and down payment rules were tightened.
The proportion of Canadians in a stretched financial position “has grown significantly,” Carney said in his speech -- entitled “Living with Low for Long” -- adding that authorities continue to monitor households’ finances.
Watching Closely
“The level of vulnerabilities of households remains high” Carney said at the press conference. “The authorities are cooperating closely, we are continuing to monitor the situation closely.”
“We have debt levels that are unprecedented in this country,” Carney said in an interview broadcast today on BNN Television. “We are in uncharted territory.”
To be sure, Harper said his government cannot “exaggerate” the degree with which it can control borrowing.
“We are a free country and people are entitled to make their own financial decisions,” Harper said. “This is a matter that is of concern to the government, we continue to warn Canadian households that interest rates are unlikely to go down.”
URL to original article: http://www.housingwire.com/2010/12/14/canadians-now-owe-more-than-americans
Tuesday, December 14, 2010
Strategic defaulters opt to continue paying on second liens
by KERRY CURRY
Borrowers who strategically default on their first mortgage often continue to pay on home equity lines of credit, according to a new white paper from two authors with the Philadelphia Federal Reserve.
The authors, Julapa Jagtiani and William W. Lang, said they wanted to take a closer look at the little-studied phenomenon of strategic default behavior as it relates to first- and second-lien mortgages.
“Predicting mortgage losses has become more difficult with the increase in strategic default behavior and the increase in loan modifications,” the paper said.
“Focusing on mortgage defaults, our results indicate that the default rate for first mortgages far exceeded those of the second-lien mortgages during the financial crisis. This behavior was not observed in the pre-financial crisis period (i.e., the booming period of 2004-2006)."
About 20% of borrowers in the process of foreclosure due to defaults on the first mortgage kept their second-lien mortgage current. Among those who defaulted on their second-lien mortgages, about 80% also defaulted on their first-lien mortgage.
Data for the study came from a large random sample of individual credit records drawn at the end of each quarter from Equifax, a national credit bureau. The authors only studied consumers who had one first mortgage and at least one home equity line of credit or home equity loan over the period beginning in the fourth quarter of 2004 and ending in the second quarter of 2010. The study merged the Equifax data with another database of loan-level data from LPS Applied Analytics.
The data contradict the hypothesis that consumers would strategically default on a second lien and keep their first lien current to reduce their monthly payment and thus avoid a foreclosure, the white paper said. Instead, a far larger number of households do the opposite; that is, they default on their first lien — thus risking a foreclosure — while keeping their underwater second-lien mortgages current.
The reason?
The authors hypothesized that borrowers have incentives to keep their second lien current — after having stopped paying their first mortgage — in order to maintain their access to credit through the HELOC.
The study also found that the size of the unused line of credit is an important factor. Homeowners with larger credit lines are less likely to default, as they are motivated to maintain their access to the credit line.
Like other studies and white papers, this one also found that negative equity is a big driver in strategic default.
“A large portion of first mortgages with estimated LTV (loan-to-value) ratios greater than 100% is still current, but the continued willingness and ability of these homeowners to make their mortgage payments is subject to great uncertainty,” the authors wrote.
The paper also noted that banks are not punishing borrowers who default on their first mortgages by limiting access to their home equity lines of credit. That could be due to poor risk management practices or lack of timely updates on consumer's risk scores, the paper said.
“Most of the HELOC lines were not increased or decreased after the borrowers defaulted on their first mortgages,” the paper said. “About 90% of the lines remain unchanged even after three quarters following first mortgage default. Interestingly, a small percentage (3% to 6%) of these borrowers had their HELOC lines increased.”
Lenders have the right to foreclose in defaults of first- or second-lien mortgages.
Given the large number of current homeowners with negative equity, there are likely a large number of borrowers who could default on their home equity loans without being forced into foreclosure, the paper noted.
“The data indicate, however, that borrowers rarely engage in this strategy even though it appears to be viable."
Although homeowners could default on their second-lien mortgages, lower their mortgage payment, and stay in the home, the loan contract stays valid and unpaid interest payments would keep accumulating. Should the house be sold, the second-lien creditor would be eligible for the recovery after the first-lien creditor is paid, the paper said.
URL to original article: http://www.housingwire.com/2010/12/14/strategic-defaulters-opt-to-continue-paying-on-second-liens
Borrowers who strategically default on their first mortgage often continue to pay on home equity lines of credit, according to a new white paper from two authors with the Philadelphia Federal Reserve.
The authors, Julapa Jagtiani and William W. Lang, said they wanted to take a closer look at the little-studied phenomenon of strategic default behavior as it relates to first- and second-lien mortgages.
“Predicting mortgage losses has become more difficult with the increase in strategic default behavior and the increase in loan modifications,” the paper said.
“Focusing on mortgage defaults, our results indicate that the default rate for first mortgages far exceeded those of the second-lien mortgages during the financial crisis. This behavior was not observed in the pre-financial crisis period (i.e., the booming period of 2004-2006)."
About 20% of borrowers in the process of foreclosure due to defaults on the first mortgage kept their second-lien mortgage current. Among those who defaulted on their second-lien mortgages, about 80% also defaulted on their first-lien mortgage.
Data for the study came from a large random sample of individual credit records drawn at the end of each quarter from Equifax, a national credit bureau. The authors only studied consumers who had one first mortgage and at least one home equity line of credit or home equity loan over the period beginning in the fourth quarter of 2004 and ending in the second quarter of 2010. The study merged the Equifax data with another database of loan-level data from LPS Applied Analytics.
The data contradict the hypothesis that consumers would strategically default on a second lien and keep their first lien current to reduce their monthly payment and thus avoid a foreclosure, the white paper said. Instead, a far larger number of households do the opposite; that is, they default on their first lien — thus risking a foreclosure — while keeping their underwater second-lien mortgages current.
The reason?
The authors hypothesized that borrowers have incentives to keep their second lien current — after having stopped paying their first mortgage — in order to maintain their access to credit through the HELOC.
The study also found that the size of the unused line of credit is an important factor. Homeowners with larger credit lines are less likely to default, as they are motivated to maintain their access to the credit line.
Like other studies and white papers, this one also found that negative equity is a big driver in strategic default.
“A large portion of first mortgages with estimated LTV (loan-to-value) ratios greater than 100% is still current, but the continued willingness and ability of these homeowners to make their mortgage payments is subject to great uncertainty,” the authors wrote.
The paper also noted that banks are not punishing borrowers who default on their first mortgages by limiting access to their home equity lines of credit. That could be due to poor risk management practices or lack of timely updates on consumer's risk scores, the paper said.
“Most of the HELOC lines were not increased or decreased after the borrowers defaulted on their first mortgages,” the paper said. “About 90% of the lines remain unchanged even after three quarters following first mortgage default. Interestingly, a small percentage (3% to 6%) of these borrowers had their HELOC lines increased.”
Lenders have the right to foreclose in defaults of first- or second-lien mortgages.
Given the large number of current homeowners with negative equity, there are likely a large number of borrowers who could default on their home equity loans without being forced into foreclosure, the paper noted.
“The data indicate, however, that borrowers rarely engage in this strategy even though it appears to be viable."
Although homeowners could default on their second-lien mortgages, lower their mortgage payment, and stay in the home, the loan contract stays valid and unpaid interest payments would keep accumulating. Should the house be sold, the second-lien creditor would be eligible for the recovery after the first-lien creditor is paid, the paper said.
URL to original article: http://www.housingwire.com/2010/12/14/strategic-defaulters-opt-to-continue-paying-on-second-liens
Los Angeles homeowners take to the streets to protest foreclosure abuses
Source: The Huffington Post (blog)
As the economy continues to hurt working families, and Congress takes its orders from corporate America, many people are asking: where's the progressive protest movement that will galvanize public attention, challenge the undue influence of the Tea Party, and focus public anger on big business?
Throughout American history, progressive protest movements have started with local actions and spread to other places as the word spreads, momentum builds, media pays attention, and politicians wake up.
No issue gets at corporate America's inordinate influence than the epidemic of home foreclosures. In response, a David vs. Goliath battle is developing this holiday season between hard-working families facing foreclosure and banking giants such as Wells Fargo and JP Morgan Chase.
Fed up with Wall Street's stranglehold on our political system, community groups around the country are mounting a protest movement to stop the epidemic of foreclosures. They expect that a wave of protests across the country will help focus public anger, mobilize angry homeowners, force banks to halt the evictions and pressure local, state and national politicians to adopt stronger laws to hold banks accountable for consumer abuses.
For example, in Los Angeles next Thursday, December 16, members of the Alliance of Californians for Community Empowerment (ACCE) -- a statewide community organizing group -- will sponsor a demonstration at a major bank that will include civil disobedience and probably arrests.
The Los Angeles action is part of a burgeoning national movement to reign in the political power of the banking industry -- the corporate sector most responsible for the current recession. Along with ACCE, groups such as National Peoples Action, the PICO national organizing network, and the Service Employees International Union (SEIU) are mobilizing actions demanding that banks change their practices.
"A small group of rich, greedy bankers crashed the economy and got bailed out by tax payers," explained Peggy Mears, a Fontana homeowner and ACCE campaign leader. "Now the banks are making unprecedented profits. At a time of year when banks are distributing outrageous bonuses to the their top executives, they are kicking more and more families out of their homes. This has to stop."
Despite record profits -- due in large part to the federal bail-outs -- banks are not only pushing families out of their homes but are also refusing to make loans to businesses to create jobs.
Polls show that there is widespread public anger against Wall Street. Americans generally support strong bank reform measures -- consumer protections, requirements that banks renegotiate mortgages for families facing foreclosure, limits on the size of banks (so that they are not "too big to fail"), and new regulations against Wall Street gambling with default swaps and derivatives.
The shake-out of the American economy has left a handful of large banks at the pinnacle of the American corporate power structure. As a growing number of banks have collapsed and been gobbled up by larger institutions, the top six banks -- Bank of America, Wells Fargo, CitiGroup, JP Morgan Chase, Goldman Sachs, and Morgan Stanley) control 79% of total assets ($9.4 trillion out of $12 trillion).
Those six mega-banks are on pace to pay out $143 billion in bonuses and compensation to their top executives this year, which is higher than any year on record except 2007.
Nationwide, about three million families are facing foreclosure this year and 500,000 families have already been pushed out of their homes. Many of them are innocent victims of fraud, deception, and predatory practices. The largest banks are the biggest culprits, responsible for most of the foreclosures.
Despite the new financial reform bill passed in Congress last summer, and the Obama administration's efforts to encourage banks to renegotiate delinquent mortgages with homeowners (though only a voluntary basis), the financial industry continues to abuse homeowners.
Working class and middle class homeowners are facing holiday lockouts from their homes. In California, over 15,000 families face foreclosure every month.
Thursday's protest in LA is part of what the ACCE Home Defenders League is calling Stand Up for the American Dream Day. Families facing foreclosure and/or eviction over the next month will "move in" to a local bank building accompanied by a broad coalition of supporters from the religious community, labor unions, and community groups. Their goal is to put a human face on the failure of big banks to assist hardworking homeowners that are about to lose their homes over the holidays.
One of these families is headed by William and Esperanza Casco, owners of a small business. They've raised their three children in their Long Beach home of 17 years. When their bank, Washington Mutual, was being acquired by JP Morgan Chase, a paperwork error led to the Cascos being offered a lowered payment that they did not need. One day the Cascos received a notice that they were over $50,000 in arrears, even though they never missed a payment. Two months ago, the bank sold their home. Now the Cascos are now facing the prospect of being evicted over the holidays.
Like many families facing foreclosure, the Cascos did nothing wrong. They have the ability and desire to pay off their loans, and they followed all the rules, but their banks are ignoring them.
Now, many of these families are fighting back. They won't let their homes -- their most important investment and source of security -- be taken because banks are changing the rules or messing up the paperwork.
The six banking giants have ignored growing calls for policy changes. The activists are not only targeting the nation's largest banks, but also pushing for stronger laws to protect consumers.
They want to expand local court programs that require lenders to participate in mediation with homeowners. In California and elsewhere, the program has helped homeowners avoid foreclosure by getting lenders to agree to permanent loan modifications. ACCE is advocating legislation in California to require banks to negotiate with homeowners to modify loans before they can begin foreclosure proceedings. ACCE is also part of a growing national movement demanding that banks reduce mortgage principal for homeowners who are "under water" -- whose mortgages are worth less than their homes' values because of the unprecedented drop in home prices.
The ACCE protest will begin at 11:30 am on Thursday, December 16th. To find out details, e-mail ACCE organizer Peter Kuhns at pkuhns@calorganize.org.
URL to original article: http://www.housingwire.com/2010/12/13/los-angeles-homeowners-take-to-the-streets-to-protest-foreclosure-abuses
As the economy continues to hurt working families, and Congress takes its orders from corporate America, many people are asking: where's the progressive protest movement that will galvanize public attention, challenge the undue influence of the Tea Party, and focus public anger on big business?
Throughout American history, progressive protest movements have started with local actions and spread to other places as the word spreads, momentum builds, media pays attention, and politicians wake up.
No issue gets at corporate America's inordinate influence than the epidemic of home foreclosures. In response, a David vs. Goliath battle is developing this holiday season between hard-working families facing foreclosure and banking giants such as Wells Fargo and JP Morgan Chase.
Fed up with Wall Street's stranglehold on our political system, community groups around the country are mounting a protest movement to stop the epidemic of foreclosures. They expect that a wave of protests across the country will help focus public anger, mobilize angry homeowners, force banks to halt the evictions and pressure local, state and national politicians to adopt stronger laws to hold banks accountable for consumer abuses.
For example, in Los Angeles next Thursday, December 16, members of the Alliance of Californians for Community Empowerment (ACCE) -- a statewide community organizing group -- will sponsor a demonstration at a major bank that will include civil disobedience and probably arrests.
The Los Angeles action is part of a burgeoning national movement to reign in the political power of the banking industry -- the corporate sector most responsible for the current recession. Along with ACCE, groups such as National Peoples Action, the PICO national organizing network, and the Service Employees International Union (SEIU) are mobilizing actions demanding that banks change their practices.
"A small group of rich, greedy bankers crashed the economy and got bailed out by tax payers," explained Peggy Mears, a Fontana homeowner and ACCE campaign leader. "Now the banks are making unprecedented profits. At a time of year when banks are distributing outrageous bonuses to the their top executives, they are kicking more and more families out of their homes. This has to stop."
Despite record profits -- due in large part to the federal bail-outs -- banks are not only pushing families out of their homes but are also refusing to make loans to businesses to create jobs.
Polls show that there is widespread public anger against Wall Street. Americans generally support strong bank reform measures -- consumer protections, requirements that banks renegotiate mortgages for families facing foreclosure, limits on the size of banks (so that they are not "too big to fail"), and new regulations against Wall Street gambling with default swaps and derivatives.
The shake-out of the American economy has left a handful of large banks at the pinnacle of the American corporate power structure. As a growing number of banks have collapsed and been gobbled up by larger institutions, the top six banks -- Bank of America, Wells Fargo, CitiGroup, JP Morgan Chase, Goldman Sachs, and Morgan Stanley) control 79% of total assets ($9.4 trillion out of $12 trillion).
Those six mega-banks are on pace to pay out $143 billion in bonuses and compensation to their top executives this year, which is higher than any year on record except 2007.
Nationwide, about three million families are facing foreclosure this year and 500,000 families have already been pushed out of their homes. Many of them are innocent victims of fraud, deception, and predatory practices. The largest banks are the biggest culprits, responsible for most of the foreclosures.
Despite the new financial reform bill passed in Congress last summer, and the Obama administration's efforts to encourage banks to renegotiate delinquent mortgages with homeowners (though only a voluntary basis), the financial industry continues to abuse homeowners.
Working class and middle class homeowners are facing holiday lockouts from their homes. In California, over 15,000 families face foreclosure every month.
Thursday's protest in LA is part of what the ACCE Home Defenders League is calling Stand Up for the American Dream Day. Families facing foreclosure and/or eviction over the next month will "move in" to a local bank building accompanied by a broad coalition of supporters from the religious community, labor unions, and community groups. Their goal is to put a human face on the failure of big banks to assist hardworking homeowners that are about to lose their homes over the holidays.
One of these families is headed by William and Esperanza Casco, owners of a small business. They've raised their three children in their Long Beach home of 17 years. When their bank, Washington Mutual, was being acquired by JP Morgan Chase, a paperwork error led to the Cascos being offered a lowered payment that they did not need. One day the Cascos received a notice that they were over $50,000 in arrears, even though they never missed a payment. Two months ago, the bank sold their home. Now the Cascos are now facing the prospect of being evicted over the holidays.
Like many families facing foreclosure, the Cascos did nothing wrong. They have the ability and desire to pay off their loans, and they followed all the rules, but their banks are ignoring them.
Now, many of these families are fighting back. They won't let their homes -- their most important investment and source of security -- be taken because banks are changing the rules or messing up the paperwork.
The six banking giants have ignored growing calls for policy changes. The activists are not only targeting the nation's largest banks, but also pushing for stronger laws to protect consumers.
They want to expand local court programs that require lenders to participate in mediation with homeowners. In California and elsewhere, the program has helped homeowners avoid foreclosure by getting lenders to agree to permanent loan modifications. ACCE is advocating legislation in California to require banks to negotiate with homeowners to modify loans before they can begin foreclosure proceedings. ACCE is also part of a growing national movement demanding that banks reduce mortgage principal for homeowners who are "under water" -- whose mortgages are worth less than their homes' values because of the unprecedented drop in home prices.
The ACCE protest will begin at 11:30 am on Thursday, December 16th. To find out details, e-mail ACCE organizer Peter Kuhns at pkuhns@calorganize.org.
URL to original article: http://www.housingwire.com/2010/12/13/los-angeles-homeowners-take-to-the-streets-to-protest-foreclosure-abuses
Monday, December 13, 2010
Woman's foreclosure nightmare: 'Like a black hole'
Source: NPR
State prosecutors from all 50 states are investigating the country's largest banks, to learn whether they have been foreclosing on thousands of Americans improperly.
The banks say they do not seize people's houses without justification. But NPR has uncovered a case that might suggest otherwise. In fact, the homeowner in this case was actually the victim of a scam run by one of the bank's very own employees. But despite that, the bank moved to foreclose anyway.
Six Years Of Stress
The banks say they've been doing all they can to work with homeowners to avoid foreclosures. But don't tell that to Rachel Keyser from Deerfield, N.H.
"I can't tell you the emptiness," she says about dealing with the threat of foreclosure. "I mean, my knees started to shake, my stomach got into a knot."
Keyser's been on the verge of losing her home for years now. And she says the reason is that one of Countrywide's own employees ran a scam on her, and stole a lot of money.
It all started way back in 2004, before Bank of America bought Countrywide.
Just a few months after she bought her house, Keyser says, a loan officer at the local Countrywide office called her and pushed her to refinance.
"He didn't ask for me to come to the office or anything like that," she recalls. "We had a couple of phone calls, and he came to the house. So this guy walked in with another very nervous-looking fellow who was supposedly a real estate person."
Keyser is a single mom and an art teacher. She'd already been a homeowner. And she put down a $100,000 down payment when she bought the house.
But she readily admits that she's not very sophisticated with legal paperwork, and was probably too gullible.
She says the Countrywide agent got her to sign a bunch of papers. It turns out that he was running what's called an equity-stripping scheme, where he got her to borrow more money — and he put it in his own pocket.
Asked how much money he took from her, Keyser says, "$165,000 — the entire equity of the house."
Loan Scam Sparks An Inquiry
Keyser's story is backed up by documents from a state of New Hampshire Banking Commission investigation. She called the authorities, and the state eventually barred these con artists from doing business in New Hampshire. NPR spoke with three other homeowners who fell victim to the same scam.
In Keyser's case, her mortgage payments went to a bogus shell company — Countrywide never got the money. So she wound up way behind on her house's mortgage.
Keyser says she's been trying to explain all this for years now — first to Countrywide, and then Bank of America after Countrywide collapsed and Bank of America bought it.
But when she tries to explain that she was the victim of fraud, she says, "They don't want to hear it. They don't believe me. They don't want to hear it."
So Keyser and her daughter have been living in limbo, not knowing if they're about to be put out of their house. Her daughter, Sydney, says they dealt with debt collectors the entire time she was in high school.
"That's how it's been for years," Sydney says, "just constant stress, and then, you know, you try not to talk about it. And then eventually, some phone call comes up, and it's just like — OK, time to cry now ... time to get angry. That's just been life."
Rachel Keyser says her life savings is tied up in the house.
Instead Of Help — More Confusion
You would think that since the bank's own employee ran this scam, Keyser might be at the front of the line for people deserving to get some help avoiding foreclosure. But she hasn't been able to get that help.
This summer, Bank of America finally moved to foreclose and seize her home. That was in July.
"It literally was like a black hole opened up from under my feet," Keyser says, "and if I were the kind of woman that would crumble ... I would have crumbled."
Instead, she decided to fight the bank, with the help of a local attorney.
The lawyer, B.J. Branch, says he literally ran to the courthouse the day before the house was to be auctioned off and persuaded a judge to grant an emergency injunction.
"If I hadn't, her house would have been sold," Branch says, "and undoing a foreclosure, once it's occurred, is a nightmare even worse than trying to get it stopped."
Bank of America says it is now working on a loan modification for Rachel Keyser to keep her in her home.
Narrowly Avoiding A Foreclosure
NPR actually first contacted Bank of America about Keyser's case more than eight months ago. And bank representatives said then that they would look into it.
Keyser signed an agreement with the bank that temporarily lowered her payments while she tried to work out a permanent fix.
But it was in the middle of that period — when Keyser was making those payments, and when the bank had pledged in writing not to take her house — that Bank of America moved to foreclose on her anyway.
"It was very crazy," Branch says. "The bottom line is that no one — no one — could answer any questions here."
Branch pulls out his file on the case, including checks that prove Keyser was making the payments as agreed. He's even saved phone messages from the bank telling him the house was not going to be foreclosed on.
In one recording, an official from the bank says, "Hi Mr. Branch ... I'm just calling to let you know that the foreclosure has been postponed. There is no new foreclosure sale date set."
Listening to the message, Branch says, "That was not an accurate statement."
After all, Branch says, he has documents showing that a new foreclosure date had been set. And the bank then moved ahead to foreclose.
"I mean, this is pretty impressive — in terms of the incompetence," he says.
For its part, Bank of America says that it is investigating what happened in Keyser's case. The bank also says that during the foreclosure crisis, it has hired more staff and has thousands of employees now working with homeowners to help them try to avoid foreclosure.
And the bank stresses that it is working with Rachel Keyser to modify her loan so she can keep her house.
URL to original article: http://www.housingwire.com/2010/12/13/womans-foreclosure-nightmare-like-a-black-hole
State prosecutors from all 50 states are investigating the country's largest banks, to learn whether they have been foreclosing on thousands of Americans improperly.
The banks say they do not seize people's houses without justification. But NPR has uncovered a case that might suggest otherwise. In fact, the homeowner in this case was actually the victim of a scam run by one of the bank's very own employees. But despite that, the bank moved to foreclose anyway.
Six Years Of Stress
The banks say they've been doing all they can to work with homeowners to avoid foreclosures. But don't tell that to Rachel Keyser from Deerfield, N.H.
"I can't tell you the emptiness," she says about dealing with the threat of foreclosure. "I mean, my knees started to shake, my stomach got into a knot."
Keyser's been on the verge of losing her home for years now. And she says the reason is that one of Countrywide's own employees ran a scam on her, and stole a lot of money.
It all started way back in 2004, before Bank of America bought Countrywide.
Just a few months after she bought her house, Keyser says, a loan officer at the local Countrywide office called her and pushed her to refinance.
"He didn't ask for me to come to the office or anything like that," she recalls. "We had a couple of phone calls, and he came to the house. So this guy walked in with another very nervous-looking fellow who was supposedly a real estate person."
Keyser is a single mom and an art teacher. She'd already been a homeowner. And she put down a $100,000 down payment when she bought the house.
But she readily admits that she's not very sophisticated with legal paperwork, and was probably too gullible.
She says the Countrywide agent got her to sign a bunch of papers. It turns out that he was running what's called an equity-stripping scheme, where he got her to borrow more money — and he put it in his own pocket.
Asked how much money he took from her, Keyser says, "$165,000 — the entire equity of the house."
Loan Scam Sparks An Inquiry
Keyser's story is backed up by documents from a state of New Hampshire Banking Commission investigation. She called the authorities, and the state eventually barred these con artists from doing business in New Hampshire. NPR spoke with three other homeowners who fell victim to the same scam.
In Keyser's case, her mortgage payments went to a bogus shell company — Countrywide never got the money. So she wound up way behind on her house's mortgage.
Keyser says she's been trying to explain all this for years now — first to Countrywide, and then Bank of America after Countrywide collapsed and Bank of America bought it.
But when she tries to explain that she was the victim of fraud, she says, "They don't want to hear it. They don't believe me. They don't want to hear it."
So Keyser and her daughter have been living in limbo, not knowing if they're about to be put out of their house. Her daughter, Sydney, says they dealt with debt collectors the entire time she was in high school.
"That's how it's been for years," Sydney says, "just constant stress, and then, you know, you try not to talk about it. And then eventually, some phone call comes up, and it's just like — OK, time to cry now ... time to get angry. That's just been life."
Rachel Keyser says her life savings is tied up in the house.
Instead Of Help — More Confusion
You would think that since the bank's own employee ran this scam, Keyser might be at the front of the line for people deserving to get some help avoiding foreclosure. But she hasn't been able to get that help.
This summer, Bank of America finally moved to foreclose and seize her home. That was in July.
"It literally was like a black hole opened up from under my feet," Keyser says, "and if I were the kind of woman that would crumble ... I would have crumbled."
Instead, she decided to fight the bank, with the help of a local attorney.
The lawyer, B.J. Branch, says he literally ran to the courthouse the day before the house was to be auctioned off and persuaded a judge to grant an emergency injunction.
"If I hadn't, her house would have been sold," Branch says, "and undoing a foreclosure, once it's occurred, is a nightmare even worse than trying to get it stopped."
Bank of America says it is now working on a loan modification for Rachel Keyser to keep her in her home.
Narrowly Avoiding A Foreclosure
NPR actually first contacted Bank of America about Keyser's case more than eight months ago. And bank representatives said then that they would look into it.
Keyser signed an agreement with the bank that temporarily lowered her payments while she tried to work out a permanent fix.
But it was in the middle of that period — when Keyser was making those payments, and when the bank had pledged in writing not to take her house — that Bank of America moved to foreclose on her anyway.
"It was very crazy," Branch says. "The bottom line is that no one — no one — could answer any questions here."
Branch pulls out his file on the case, including checks that prove Keyser was making the payments as agreed. He's even saved phone messages from the bank telling him the house was not going to be foreclosed on.
In one recording, an official from the bank says, "Hi Mr. Branch ... I'm just calling to let you know that the foreclosure has been postponed. There is no new foreclosure sale date set."
Listening to the message, Branch says, "That was not an accurate statement."
After all, Branch says, he has documents showing that a new foreclosure date had been set. And the bank then moved ahead to foreclose.
"I mean, this is pretty impressive — in terms of the incompetence," he says.
For its part, Bank of America says that it is investigating what happened in Keyser's case. The bank also says that during the foreclosure crisis, it has hired more staff and has thousands of employees now working with homeowners to help them try to avoid foreclosure.
And the bank stresses that it is working with Rachel Keyser to modify her loan so she can keep her house.
URL to original article: http://www.housingwire.com/2010/12/13/womans-foreclosure-nightmare-like-a-black-hole
Mortgage rates are all in your head
Source: CNBC
It's like home buyers today are suffering from post-traumatic stress disorder.
It's like home buyers today are suffering from post-traumatic stress disorder.
The housing crash, foreclosure crisis and banking scandals have all combined to make buyers more sensitive than ever before.
That's why the slightest fluctuation in mortgage interest rates have huge emotional power today.
"I think some people get a little fearful of what the higher payment might mean to them but they don’t' realize how minimal the difference might be," notes Eric Gates, President of Apex Home Loans in Rockville, MD.
In fact, Gates did a little math for me on the change in your monthly payment at different interest rates, if you buy a $200,000 home (just above the national median) with 20 percent down.
- 4.25%: $787.10
- 4.5%: $810.70
- 4.75%: $834.64
- 5.0%: $858.91
"Keep in mind that difference is mainly interest which is tax deductible. So, someone paying an extra $24 a month in interest who is in a 25% tax bracket is really only paying an extra $18 a month after the tax write off of the extra interest," Gates adds. Yes, cutting the mortgage interest deduction is currently being debated as a deficit-reducer, but the proposal is to reduce the cap from $1 million to $500,000, so it's not going to affect the buyers I'm using as an example here.
The fact is that we're talking less than $100 a month, for a full percentage point increase.
Obviously big cities or in-demand housing markets, where home prices are far higher than the national average, will see bigger jumps in their monthly payments, but if they're able to afford the higher priced home, the change in monthly payment would likely be comparable in its impact on their overall budget.
So why, then, do mortgage purchase applications fall every time rates go up slightly and the opposite when they go down??
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The answer is that it is largely emotional. Home buyers seem to ignore what they can afford and focus instead on what they think they somehow deserve in today's badly beaten market.
"Instead of focusing on what's my payment going to be, they see that their friend got 4.25 and they want that same rate and 4.5 isn't 4.25 and they think 'that's not good enough'," says Gates, who has seen that happen more than once. Fear of unemployment also looms large, so buyers are much more careful with monthly payment calculations, even trying to make sure that if they are out of work temporarily they can still make the payments and not go into default.
URL to original article: http://www.housingwire.com/2010/12/06/mortgage-rates-are-all-in-your-head
Friday, December 10, 2010
Jobless claims fell nearly 4% last week
by JASON PHILYAW
Initial jobless claims fell nearly 4% last week to 421,000 after coming in at the lowest level in two years a few weeks ago.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Dec. 4 decreased by 17,000 from the previous week's upwardly revised figure of 438,000.
Despite the drop, weekly claims remain stubbornly higher than 400,000. Most economists believe jobless claims lower than that threshold indicate the economy is expanding and jobs growth is strengthening.
Analysts surveyed by Econoday expected jobless claims to decline to 425,000 with a range of estimates from 370,000 to 435,000. A Briefing.com survey projected new claims of 420,000 last week, and economists polled by MarketWatch expected 425,000 new claims.
The four-week moving average declined by 4,000 to 427,500 claims and is now at the lowest point in more than two years. The seasonally adjusted insured unemployment rate fell to 3.2% for the week ended Nov. 27, down from 3,4% the previous week. The total number of people receiving some sort of federal unemployment benefits was nearly 8.3 million for the week ended Nov. 13, according to the Labor Department.
Last week, the department's Bureau of Labor Statistics said unemployment rose to 9.8% from 9.6% in November, despite a 39,000 gain in nonfarm payroll jobs.
URL to original article: http://www.housingwire.com/2010/12/09/jobless-claims-fell-nearly-4-last-week
Initial jobless claims fell nearly 4% last week to 421,000 after coming in at the lowest level in two years a few weeks ago.
The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Dec. 4 decreased by 17,000 from the previous week's upwardly revised figure of 438,000.
Despite the drop, weekly claims remain stubbornly higher than 400,000. Most economists believe jobless claims lower than that threshold indicate the economy is expanding and jobs growth is strengthening.
Analysts surveyed by Econoday expected jobless claims to decline to 425,000 with a range of estimates from 370,000 to 435,000. A Briefing.com survey projected new claims of 420,000 last week, and economists polled by MarketWatch expected 425,000 new claims.
The four-week moving average declined by 4,000 to 427,500 claims and is now at the lowest point in more than two years. The seasonally adjusted insured unemployment rate fell to 3.2% for the week ended Nov. 27, down from 3,4% the previous week. The total number of people receiving some sort of federal unemployment benefits was nearly 8.3 million for the week ended Nov. 13, according to the Labor Department.
Last week, the department's Bureau of Labor Statistics said unemployment rose to 9.8% from 9.6% in November, despite a 39,000 gain in nonfarm payroll jobs.
URL to original article: http://www.housingwire.com/2010/12/09/jobless-claims-fell-nearly-4-last-week
Fitch sees 10% drop in home prices in 2011, negative outlook for MBS
by JASON PHILYAW
Fitch Ratings expects another 10% decline in home prices in 2011, as the supply of distressed properties continues to weigh down the housing market.
Accordingly, analysts maintained the agency's negative outlook for the residential mortgage-backed securities space and said 53% of all investment-grade RMBS rated by Fitch have a negative outlook. The number of downgrades will once again outpace upgrades in RMBS, but not as severely as the past few years, according to analysts.
Fitch said the robo-signing debacle plaguing loan servicers, loan buyback pressures hitting mortgage lenders and a handful of other macroeconomic issues cause analysts to "remain cautious" regarding a sustainable stabilization for the market.
"Key factors that will continue to weight on performance include negative equity for recent vintage collateral, lower loan modification volume, and slightly higher loss severities," analysts said.
Fitch also said the market for commercial mortgage-backed securities should improve next year, as property market fundamentals have turned the corner. Still loan performance within the CMBS space will begin to diverge from the fundamentals next year because of asset-specific tenant rollover and high leverage, according to analysts.
Analysts said vacancies have peaked in many of the largest metropolitan areas of the country while rents have reached bottom indicating some stabilization. But the lack of construction financing over the past three years skews those gains, meaning "it will be some time before income growth is seen."
URL to original article: http://www.housingwire.com/2010/12/09/fitch-sees-10-drop-in-home-prices-in-2011-negative-outlook-for-mbs
Fitch Ratings expects another 10% decline in home prices in 2011, as the supply of distressed properties continues to weigh down the housing market.
Accordingly, analysts maintained the agency's negative outlook for the residential mortgage-backed securities space and said 53% of all investment-grade RMBS rated by Fitch have a negative outlook. The number of downgrades will once again outpace upgrades in RMBS, but not as severely as the past few years, according to analysts.
Fitch said the robo-signing debacle plaguing loan servicers, loan buyback pressures hitting mortgage lenders and a handful of other macroeconomic issues cause analysts to "remain cautious" regarding a sustainable stabilization for the market.
"Key factors that will continue to weight on performance include negative equity for recent vintage collateral, lower loan modification volume, and slightly higher loss severities," analysts said.
Fitch also said the market for commercial mortgage-backed securities should improve next year, as property market fundamentals have turned the corner. Still loan performance within the CMBS space will begin to diverge from the fundamentals next year because of asset-specific tenant rollover and high leverage, according to analysts.
Analysts said vacancies have peaked in many of the largest metropolitan areas of the country while rents have reached bottom indicating some stabilization. But the lack of construction financing over the past three years skews those gains, meaning "it will be some time before income growth is seen."
URL to original article: http://www.housingwire.com/2010/12/09/fitch-sees-10-drop-in-home-prices-in-2011-negative-outlook-for-mbs
Thursday, December 9, 2010
Consumer spending to spur US economy in 2011: Wells Fargo
Source: International Business Times
The U.S. economy will begin to show signs of improvement in 2011 as major indicators such as housing and consumer spending begin to improve by mid-2011, according to an annual outlook report from Wells Fargo.
Consumer spending, which is one of the main components of GDP growth, will turn positive, even if it is not as strong as during the pre-recession period, the report said.
"Consumer spending, representing the majority of aggregate demand in the economy, will benefit from a streak of positive, yes positive, employment reports by mid-2011, lower unemployment rates and rising real personal income," the report added.
Consumer spending accounts for about 70 percent of total GDP growth and was 2.6 percent in the third quarter, marginally better than 2.2 percent seen in the previous quarter.
However, the core consumer spending remained weak at 0.8 percent and much of the demand was satisfied through a rise in imports, rather than domestic production.
Many households are "right-sizing their debt load," after the massive credit crunch and this behavior is likely to persist for several more years, Wells Fargo said.
The lack of clarity in the employment situation has made many people wary about making big investments like houses. Unemployment rate is hovering around 9.8 percent in November, after staying constant at 9.6 percent for the past three months.
The U.S. government believes the second round of quantitative easing announced early in November will help reduce the unemployment rate by half a percentage point by 2012.
Even by this reduction, the unemployment rate is quite high, leaving over 13 million people unemployed in the U.S. Given such high rates, people continue to keep a watch on their purse strings, as their savings and 401(k)s were severely depleted during the recession.
HOUSING
"In 2011, we expect trends in commercial and residential real estate, two areas of the economy that have been significant drags on headline growth, to turn positive for the first time since the beginning of the recession," Wells Fargo said in the report.
Housing has been one of the major causes of the economic slowdown as well as a bane of the economic recovery. Home sales saw some growth in 2009, boosted by the homebuyer tax credit. But since the credit expired in April, sales peaked and have been on a rollercoaster ever since.
Housing starts touched an 18-month low in October and existing home sales also dropped during the month, following two months of increases.
However, pending home sales rose during October, contrary to expectations of a drop.
Wells Fargo expects housing starts to gain momentum breaking 700,000 in 2011, mainly due to gains in employment, consumer income and favorable demographic trends.
Mortgage rates are also expected to remain low and housing affordability would remain high.
However, the return to the boom years seen before 2007 is still quite some time away, given the various uncertain factors surrounding the sector. Some economists argue that the housing sector might not touch those high levels again given the new constraints on loans and mortgages.
Commercial real estate is also expected to begin to grow by the second half of 2011.
U.S. commercial real estate prices rose 2 percent in November and are up 32 percent from its recent lows.
INFLATION CONCERNS
Low inflation has been the main concern for the U.S. government, spurring the QE2.
The U.S. GDP grew 2.5 percent in the third quarter, following a rise of 1.7 percent in the second. But this is not enough to stop the economy from sinking into deflation. Core inflation during October saw the smallest rise on record at 0.9 percent.
Some economists believe inflation will slip further and perhaps touch zero in 2011.
However, Wells Fargo said it expects "core" inflation to rise one percent in the year ahead. The QE2 has further weakened the dollar and led to a rise in dollar-denominated commodity prices.
Weak consumer demand has prevented producers from passing on these higher costs to customers, resulting in moderate corporate profit growth, the report said.
Further policy changes will also be dictated by the results of November's midterm elections.
"Our expectation is that these results will translate into further tax cuts, restrained spending, and less support for state and local governments," Wells Fargo said.
URL to original article: http://www.housingwire.com/2010/12/09/consumer-spending-to-spur-us-economy-in-2011-wells-fargo
The U.S. economy will begin to show signs of improvement in 2011 as major indicators such as housing and consumer spending begin to improve by mid-2011, according to an annual outlook report from Wells Fargo.
Consumer spending, which is one of the main components of GDP growth, will turn positive, even if it is not as strong as during the pre-recession period, the report said.
"Consumer spending, representing the majority of aggregate demand in the economy, will benefit from a streak of positive, yes positive, employment reports by mid-2011, lower unemployment rates and rising real personal income," the report added.
Consumer spending accounts for about 70 percent of total GDP growth and was 2.6 percent in the third quarter, marginally better than 2.2 percent seen in the previous quarter.
However, the core consumer spending remained weak at 0.8 percent and much of the demand was satisfied through a rise in imports, rather than domestic production.
Many households are "right-sizing their debt load," after the massive credit crunch and this behavior is likely to persist for several more years, Wells Fargo said.
The lack of clarity in the employment situation has made many people wary about making big investments like houses. Unemployment rate is hovering around 9.8 percent in November, after staying constant at 9.6 percent for the past three months.
The U.S. government believes the second round of quantitative easing announced early in November will help reduce the unemployment rate by half a percentage point by 2012.
Even by this reduction, the unemployment rate is quite high, leaving over 13 million people unemployed in the U.S. Given such high rates, people continue to keep a watch on their purse strings, as their savings and 401(k)s were severely depleted during the recession.
HOUSING
"In 2011, we expect trends in commercial and residential real estate, two areas of the economy that have been significant drags on headline growth, to turn positive for the first time since the beginning of the recession," Wells Fargo said in the report.
Housing has been one of the major causes of the economic slowdown as well as a bane of the economic recovery. Home sales saw some growth in 2009, boosted by the homebuyer tax credit. But since the credit expired in April, sales peaked and have been on a rollercoaster ever since.
Housing starts touched an 18-month low in October and existing home sales also dropped during the month, following two months of increases.
However, pending home sales rose during October, contrary to expectations of a drop.
Wells Fargo expects housing starts to gain momentum breaking 700,000 in 2011, mainly due to gains in employment, consumer income and favorable demographic trends.
Mortgage rates are also expected to remain low and housing affordability would remain high.
However, the return to the boom years seen before 2007 is still quite some time away, given the various uncertain factors surrounding the sector. Some economists argue that the housing sector might not touch those high levels again given the new constraints on loans and mortgages.
Commercial real estate is also expected to begin to grow by the second half of 2011.
U.S. commercial real estate prices rose 2 percent in November and are up 32 percent from its recent lows.
INFLATION CONCERNS
Low inflation has been the main concern for the U.S. government, spurring the QE2.
The U.S. GDP grew 2.5 percent in the third quarter, following a rise of 1.7 percent in the second. But this is not enough to stop the economy from sinking into deflation. Core inflation during October saw the smallest rise on record at 0.9 percent.
Some economists believe inflation will slip further and perhaps touch zero in 2011.
However, Wells Fargo said it expects "core" inflation to rise one percent in the year ahead. The QE2 has further weakened the dollar and led to a rise in dollar-denominated commodity prices.
Weak consumer demand has prevented producers from passing on these higher costs to customers, resulting in moderate corporate profit growth, the report said.
Further policy changes will also be dictated by the results of November's midterm elections.
"Our expectation is that these results will translate into further tax cuts, restrained spending, and less support for state and local governments," Wells Fargo said.
URL to original article: http://www.housingwire.com/2010/12/09/consumer-spending-to-spur-us-economy-in-2011-wells-fargo
Attorney sentenced for role in mortgage frauds
Source: Pittsburgh Post-Gazette
An attorney involved in several local mortgage fraud cases, including some involving Beechview developer Bernardo Katz, was sentenced in federal court today to 57 months in prison.
John Chaffo Jr. of Murrysville was the lawyer involved in 57 fraudulent property sale closings from 2000 through 2007, Assistant U.S. Attorney Brendan Conway told Senior U.S. District Judge Donetta W. Ambrose, who oversaw the July trial at which he was found guilty of 11 of 13 counts. "He obviously committed this massive mortgage fraud and he violated his fiduciary obligations to the bank," Mr. Conway said. "He violated every ethics rule in the book."
Mr. Chaffo's attorney, James A. Wymard, countered that the fraudulent closings represented just a few percent of the defendant's 300 closings per year, and that he never charged more than his standard $300 to $500 rate. "He didn't make any money off of this thing," Mr. Wymard said.
The fraud couldn't have occurred, said Mr. Conway, without an attorney who "allayed the fears of many of the people involved, so they signed [mortgage] documents to their detriment."
The date of Mr. Chaffo's imprisonment will be set by the federal Bureau of Prisons. After his prison term, he will serve three years of supervised release. The sentence was based on the judge's finding that Mr. Chaffo was responsible for between $1 million and $2.5 million in losses by banks -- a figure lower than the prosecution's calculation that he caused $4.5 million in losses.
Mr. Chaffo was convicted of wire fraud and conspiracy for serving as the attorney at closings involving the following: Mr. Katz, who is now a fugitive; mortgage broker Michael Dokmanovich, who was sentenced to 41 months in prison; landlord John Orth, who was sentenced to 15 months in prison; and other buyers and sellers.
The group conspired to inflate the values of properties, exaggerate the creditworthiness of buyers, create the illusion of down payments and thereby get otherwise unjustifiable mortgages from banks.
URL to original article: http://www.housingwire.com/2010/12/08/attorney-sentenced-for-role-in-mortgage-frauds
An attorney involved in several local mortgage fraud cases, including some involving Beechview developer Bernardo Katz, was sentenced in federal court today to 57 months in prison.
John Chaffo Jr. of Murrysville was the lawyer involved in 57 fraudulent property sale closings from 2000 through 2007, Assistant U.S. Attorney Brendan Conway told Senior U.S. District Judge Donetta W. Ambrose, who oversaw the July trial at which he was found guilty of 11 of 13 counts. "He obviously committed this massive mortgage fraud and he violated his fiduciary obligations to the bank," Mr. Conway said. "He violated every ethics rule in the book."
Mr. Chaffo's attorney, James A. Wymard, countered that the fraudulent closings represented just a few percent of the defendant's 300 closings per year, and that he never charged more than his standard $300 to $500 rate. "He didn't make any money off of this thing," Mr. Wymard said.
The fraud couldn't have occurred, said Mr. Conway, without an attorney who "allayed the fears of many of the people involved, so they signed [mortgage] documents to their detriment."
The date of Mr. Chaffo's imprisonment will be set by the federal Bureau of Prisons. After his prison term, he will serve three years of supervised release. The sentence was based on the judge's finding that Mr. Chaffo was responsible for between $1 million and $2.5 million in losses by banks -- a figure lower than the prosecution's calculation that he caused $4.5 million in losses.
Mr. Chaffo was convicted of wire fraud and conspiracy for serving as the attorney at closings involving the following: Mr. Katz, who is now a fugitive; mortgage broker Michael Dokmanovich, who was sentenced to 41 months in prison; landlord John Orth, who was sentenced to 15 months in prison; and other buyers and sellers.
The group conspired to inflate the values of properties, exaggerate the creditworthiness of buyers, create the illusion of down payments and thereby get otherwise unjustifiable mortgages from banks.
URL to original article: http://www.housingwire.com/2010/12/08/attorney-sentenced-for-role-in-mortgage-frauds
Wednesday, December 8, 2010
MBA mortgage applications fell 0.9% last week
by JASON PHILYAW
Mortgage applications fell slightly last week, as demand for refinancings continues to decline although purchase applications rose for the third consecutive week.
The Mortgage Bankers Association said its market composite index increased 0.9% for the week ended Dec. 3 on a seasonally adjusted basis. Unadjusted the index rose 22.8% from the prior week, which including Thanksgiving.
Refinancing and purchase applications continue to diverge, according to the MBA. The purchase index rose another 1.8% last week while refinancings dropped 1.4%. The purchase index is at highest level since early May and the refinancing index is at its lowest point since June. The unadjusted purchase applications index rose 21.3% from the previous week and was 12% lower than a year earlier.
In four-week moving averages, the seasonally adjusted market index is down 8%, the purchase index is up 2.8% and the refinance index is down 10.9%. The refinancing share of all mortgage applications rose last week to 75.2% from 74.9% the week earlier.
The average interest rate for a 30-year fixed mortgage has risen steadily for about a month and is now at 4.66%, according to the MBA, up from 4.56% the week before. The average rate for a 15-year fixed mortgage also rose last week to 3.98% from 3.91% a week earlier.
On Tuesday, Zillow reported the 30-year, fixed-rate mortgage is at the highest point in five months, with an increase of 20 basis points to 4.5% from the week prior, according to the company's mortgage marketplace weekly update.
URL to original article: http://www.housingwire.com/2010/12/08/mba-mortgage-application-fell-0-9-last-week
Mortgage applications fell slightly last week, as demand for refinancings continues to decline although purchase applications rose for the third consecutive week.
The Mortgage Bankers Association said its market composite index increased 0.9% for the week ended Dec. 3 on a seasonally adjusted basis. Unadjusted the index rose 22.8% from the prior week, which including Thanksgiving.
Refinancing and purchase applications continue to diverge, according to the MBA. The purchase index rose another 1.8% last week while refinancings dropped 1.4%. The purchase index is at highest level since early May and the refinancing index is at its lowest point since June. The unadjusted purchase applications index rose 21.3% from the previous week and was 12% lower than a year earlier.
In four-week moving averages, the seasonally adjusted market index is down 8%, the purchase index is up 2.8% and the refinance index is down 10.9%. The refinancing share of all mortgage applications rose last week to 75.2% from 74.9% the week earlier.
The average interest rate for a 30-year fixed mortgage has risen steadily for about a month and is now at 4.66%, according to the MBA, up from 4.56% the week before. The average rate for a 15-year fixed mortgage also rose last week to 3.98% from 3.91% a week earlier.
On Tuesday, Zillow reported the 30-year, fixed-rate mortgage is at the highest point in five months, with an increase of 20 basis points to 4.5% from the week prior, according to the company's mortgage marketplace weekly update.
URL to original article: http://www.housingwire.com/2010/12/08/mba-mortgage-application-fell-0-9-last-week
Tuesday, December 7, 2010
Obama panel rejects debt deficit proposal, mortgage tax deduction limit
by JON PRIOR
President Obama's commission voted 11-7 against a proposal Friday to cut nearly $4 trillion from the U.S. deficit with measures such as limiting the mortgage-interest tax deduction.
The proposal needed approval from 14 of the 18 lawmakers on the National Commission on Fiscal Responsibility in order for it to reach Congress, but it only received 11 votes. Those in favor of the proposal were starkly bipartisan with five Republicans, five Democrats and one independent voting in favor.
The commission proposed the mortgage-interest tax deduction to be limited to principal residences only and eligible mortgages be capped at $500,000 instead of the current $1 million cap. It also proposed a 12% nonrefundable mortgage-interest tax credit for all taxpayers.
But the industry reacted immediately and strongly, condemning any consideration of limiting one of the biggest incentives for purchasing a home at a time when the market sorely lacked demand. The National Association of Realtors said any changes would have pushed home prices down another 15%.
Sen. Richard Durbin (D-Ill.) who voted in favor of the proposal admitted it called for stark changes.
"I think the cuts in this proposal are too deep and too fast," Durbin said.
Sen. Michael Crapo (R-Idaho) said the plan deserves "immediate and aggressive" attention from Congress.
"The fact that we did not hit 14 should not be an indication that there is not powerful support behind this plan," Crapo said.
Rep. Xavier Becerra (D-Calif.) who voted against the proposal also called for further action.
"The last chapter has not been written. I hope that one of the chapters in this book on fiscal and financial responsibility target that which got us into this mess," Becerra said.
Erskine Bowles, the commission's co-chairman and former chief of staff to President Clinton, also said further work would be done.
"This report is merely the first step," Bowles said.
URL to original article: http://www.housingwire.com/2010/12/03/obama-panel-rejects-debt-deficit-proposal-mortgage-tax-deduction-limit
President Obama's commission voted 11-7 against a proposal Friday to cut nearly $4 trillion from the U.S. deficit with measures such as limiting the mortgage-interest tax deduction.
The proposal needed approval from 14 of the 18 lawmakers on the National Commission on Fiscal Responsibility in order for it to reach Congress, but it only received 11 votes. Those in favor of the proposal were starkly bipartisan with five Republicans, five Democrats and one independent voting in favor.
The commission proposed the mortgage-interest tax deduction to be limited to principal residences only and eligible mortgages be capped at $500,000 instead of the current $1 million cap. It also proposed a 12% nonrefundable mortgage-interest tax credit for all taxpayers.
But the industry reacted immediately and strongly, condemning any consideration of limiting one of the biggest incentives for purchasing a home at a time when the market sorely lacked demand. The National Association of Realtors said any changes would have pushed home prices down another 15%.
Sen. Richard Durbin (D-Ill.) who voted in favor of the proposal admitted it called for stark changes.
"I think the cuts in this proposal are too deep and too fast," Durbin said.
Sen. Michael Crapo (R-Idaho) said the plan deserves "immediate and aggressive" attention from Congress.
"The fact that we did not hit 14 should not be an indication that there is not powerful support behind this plan," Crapo said.
Rep. Xavier Becerra (D-Calif.) who voted against the proposal also called for further action.
"The last chapter has not been written. I hope that one of the chapters in this book on fiscal and financial responsibility target that which got us into this mess," Becerra said.
Erskine Bowles, the commission's co-chairman and former chief of staff to President Clinton, also said further work would be done.
"This report is merely the first step," Bowles said.
URL to original article: http://www.housingwire.com/2010/12/03/obama-panel-rejects-debt-deficit-proposal-mortgage-tax-deduction-limit
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