Housing market hit bottom: former RealtyTrac exec
by LIZ ENOCHS
Friday, September 30th, 2011, 4:23 pm
The U.S. housing market hit bottom this year and will remain flat until 2014, when it will start to slowly recover, said Rick Sharga, an executive vice president with Carrington Mortgage Holdings.
"We’re looking at a catfish recovery," he told attendees at the Asian Real Estate Association of America conference in San Francisco Friday, saying the market will bump along the bottom for some time before starting to revive.
More than a million foreclosure actions that should have taken place this year have not yet moved forward, and that delay pushes a resolution of the housing market’s problems into next year and beyond, he said, citing data from RealtyTrac, where Sharga served as a senior vice president until this week.
"We can’t expect to see home price appreciation until we work through these distressed assets," he said.
Since 2005, there’s only been one quarter in which U.S. banks have sold more properties than they’ve taken back through foreclosure, leaving a huge overhang of real estate-owned assets that need to be cleared out.
Banks hold about 800,000 REOs, and three-quarters of those are not listed for sale, said Sharga. Another 800,000 homes are in foreclosure and 1.5 million loans are delinquent.
This "shadow inventory" will slow down a housing market recovery, he said, as monthly foreclosure numbers will remain elevated through 2012 and REO inventories will stay high through 2013.
Even with the continuing distress in the housing market, the country is not likely to enter a double-dip recession, said Eugenio Aleman, a director and senior economist at Wells Fargo & Co (WFC: 24.12 -3.48%).
Although U.S. workers have suffered as the nation has lost 9 million jobs over a two-year period, the manufacturing and service sectors are expanding, he noted.
"The rest of the economy is not booming, but it’s doing fine," said Aleman. Wells Fargo is projecting that the U.S. economy will expand over the next few years, but at anemic rates: 1.6% this year, 1.4% in 2012 and 1.9% in 2013.
"We are standing firm," said Aleman of Wells Fargo's economic forecast. "We are not going to go into a recession."
Source: Housingwire.com
Friday, September 30, 2011
Fewer Loan Modifications Completed- O.C. Register
The nation’s mortgage lenders modified fewer mortgages to help keep delinquent borrowers in their homes this past summer, even though mortgage starts and sales increased, a new survey shows.
Lenders have been working to modify loans of borrowers who have fallen behind on payments by lowering monthly payments, lowering interest rates or in some cases by reducing the amount owed.
Hope Now, a coalition of loan servicers, investors and counselors, reported that loan mods fell nationwide to 55,828 in August.
That compares to monthly averages ranging from 84,000 to 115,000 loans modified a month in the previous nine months.
In addition, Hope Now reported:
221,746 loans were made in the third quarter ending in August.
That’s down from 345,197 loan mods made in the fourth quarter of 2010.
Lenders have modified nearly 4.9 million loans for homeowners since Hope Now began gathering data in 2007.
Of those, only 791,399, or 16.3%, of the loans were modified under the federal Home Affordable Modification Program, or HAMP.
Completed foreclosure sales increased 5% in August to 68,000, compared to 65,000 in July.
Foreclosure starts increased by 18% to 218,000 in August, up from 185,000 in July.
Read More from the Article Source: http://mortgage.ocregister.com/2011/09/30/fewer-loan-modifications-completed/48523/
Lenders have been working to modify loans of borrowers who have fallen behind on payments by lowering monthly payments, lowering interest rates or in some cases by reducing the amount owed.
Hope Now, a coalition of loan servicers, investors and counselors, reported that loan mods fell nationwide to 55,828 in August.
That compares to monthly averages ranging from 84,000 to 115,000 loans modified a month in the previous nine months.
In addition, Hope Now reported:
221,746 loans were made in the third quarter ending in August.
That’s down from 345,197 loan mods made in the fourth quarter of 2010.
Lenders have modified nearly 4.9 million loans for homeowners since Hope Now began gathering data in 2007.
Of those, only 791,399, or 16.3%, of the loans were modified under the federal Home Affordable Modification Program, or HAMP.
Completed foreclosure sales increased 5% in August to 68,000, compared to 65,000 in July.
Foreclosure starts increased by 18% to 218,000 in August, up from 185,000 in July.
Read More from the Article Source: http://mortgage.ocregister.com/2011/09/30/fewer-loan-modifications-completed/48523/
Thursday, September 29, 2011
Why Is JPMorgan Chase Paying Up To $ 30,000 For Short Sale ?
Why Is JPMorgan Chase Paying Up to $30,000 for Short Sales?
Posted on19 April 2011.
Apparently Chase has been aggressively pursuing homeowners to enroll in their Short Sale Outreach Program. They are sending letters to certain mortgagors, offering up to $30,000 to people who are behind on their mortgages, to try to short sell the property, rather than letting it go to foreclosure. They promise to give approval within a short period of time, and to forgive any deficiency. There is one catch, the mortgage has to be owned by Chase (not merely serviced by Chase).Why would they do this? Because they understand the math involved in a foreclosure. The mortgagee (holder of the mortgage) usually loses a huge amount of money if the property goes to foreclosure. In Florida, the average time from beginning to end of a foreclosure is over 600 days! [Editor’s note: nationally, the average is over 500 days.] That's almost two years worth of interest lost, real estate taxes and legal fees that have to be paid and association dues owed.
When you include the deterioration to the property, the loss in value overall, lenders are lucky to recoup 50% of the money owed on any foreclosure. The average price discount on a short sale is 12%, while on an REO it is 25%. It is much cheaper to pay the delinquent homeowner to get out, than to go through the entire foreclosure process.
The real question is why are they not being as aggressive on the loans which they service? Again, they understand the math involved. Since it is not their money being lost in the process (they already sold the loan to an investor, who is taking the loss), there is little incentive to stop the bleeding. And, the financial remuneration involved in servicing the loans actually goes up once a loan becomes delinquent.
As the servicer of a loan, a bank gets paid a small percentage (usually about 0.25%) of the principal balance of the loan, to take in the monthly payments, and distribute the money (taxes, insurance, interest, principal). But, when a loan becomes delinquent, they raise the percentage (to over 0.5% - doubling their income), charge late fees and make money on force-placing insurance. This means that if they encouraged modifications or short sales of these loans, servicing income would decrease dramatically (since the principal balance of the loans they service would decrease). Instead, the longer a property remains delinquent, the more money they earn.
But wait, how can they be making money when no payments are coming in? Because their servicing agreements state that they are entitled to be paid first out of any proceeds from the sale of the property. So, when the property is finally foreclosed, all of their fees (together with interest on any money they had to front) gets paid to them first, with anything left over going to the investors.
Chase's program only underscores what many inside the industry have always known. If borrowers and investors could directly deal with each other to modify or allow a short sale, the real estate industry would recover much faster. However, it would mean that banks would not be able to make as much profit, so they do everything possible to keep the communication lines cut. [Bank of America, alone, reported a profit of $2 billion in the 2011 first quarter.
Source: Shortsaledailynews
Home Price Declines, Tight Lending Standards Blocked 2.3M Refinances - Fed Study
Home Price Declines, Tight Lending Standards Blocked 2.3M Refinances - Fed Study
By Alan Zibel
Published September 22, 2011
|WASHINGTON -(Dow Jones)- Tight mortgage-lending standards and dramatic declines in home prices prevented more than two million U.S. homeowners from refinancing last year, the Federal Reserve said Thursday in a new study.
The annual report underscores the difficulties that policymakers have had over the past two years in encouraging more Americans to refinance their mortgages and take advantage of ultra-low rates.
The report found that about 2.3 million homeowners would have been able to refinance their loans were it not for strict underwriting standards enacted after the housing bubble burst, and for home price declines that left millions of Americans owing more on their properties than their homes are worth. About 4.5 million of refinances were made last year, the study said.
The report analyzed data from more than 7,900 mortgage lenders, which are required to report detailed data on mortgage lending to the Fed and other regulators under the Home Mortgage Disclosure Act. In total, 7.9 million home mortgages--including refinances, home purchases and other loans--were made last year by the institutions analyzed in the report. That was down from 9 million in 2009 and a peak of 15.6 million in 2005.
The White House in 2009 launched an initiative called the Home Affordable Refinance Program that allows borrowers whose properties have declined in value to refinance without putting down more cash. It has enrolled about 830,000 homeowners, far fewer than expected. The Obama administration and regulators have been working on ways to expand access to that program.
The report comes as maximum size of loans that can be backed by government-controlled mortgage companies Fannie Mae (FNMA), Freddie Mac (FMCC) and the Federal Housing Administration is scheduled to decline at the end of the month. The new limits vary by location, but will drop to $625,500 in expensive markets such as New York, Los Angeles and Washington from the current $729,750.
The Fed study concluded that only a small number of loans are likely to be impacted by this change. It calculated that only about 1.3% of purchase and refinance loans guaranteed by Fannie and Freddie made last year would have been impacted had those lower limits been in effect.
Copyright © 2011 Dow Jones Newswires
By Alan Zibel
Published September 22, 2011
|WASHINGTON -(Dow Jones)- Tight mortgage-lending standards and dramatic declines in home prices prevented more than two million U.S. homeowners from refinancing last year, the Federal Reserve said Thursday in a new study.
The annual report underscores the difficulties that policymakers have had over the past two years in encouraging more Americans to refinance their mortgages and take advantage of ultra-low rates.
The report found that about 2.3 million homeowners would have been able to refinance their loans were it not for strict underwriting standards enacted after the housing bubble burst, and for home price declines that left millions of Americans owing more on their properties than their homes are worth. About 4.5 million of refinances were made last year, the study said.
The report analyzed data from more than 7,900 mortgage lenders, which are required to report detailed data on mortgage lending to the Fed and other regulators under the Home Mortgage Disclosure Act. In total, 7.9 million home mortgages--including refinances, home purchases and other loans--were made last year by the institutions analyzed in the report. That was down from 9 million in 2009 and a peak of 15.6 million in 2005.
The White House in 2009 launched an initiative called the Home Affordable Refinance Program that allows borrowers whose properties have declined in value to refinance without putting down more cash. It has enrolled about 830,000 homeowners, far fewer than expected. The Obama administration and regulators have been working on ways to expand access to that program.
The report comes as maximum size of loans that can be backed by government-controlled mortgage companies Fannie Mae (FNMA), Freddie Mac (FMCC) and the Federal Housing Administration is scheduled to decline at the end of the month. The new limits vary by location, but will drop to $625,500 in expensive markets such as New York, Los Angeles and Washington from the current $729,750.
The Fed study concluded that only a small number of loans are likely to be impacted by this change. It calculated that only about 1.3% of purchase and refinance loans guaranteed by Fannie and Freddie made last year would have been impacted had those lower limits been in effect.
Copyright © 2011 Dow Jones Newswires
Wednesday, September 28, 2011
Allow underwater borrowers to refinance, Fed's Rosengren says
Allow underwater borrowers to refinance, Fed's Rosengren says
by KERRI PANCHUK
With that in mind, the Fed Bank CEO said he supports policies that would allow homeowners who are underwater on their mortgages to refinance their loans. "Clearly getting more money into the hands of homeowners who spend it could help to fuel GDP growth," he said. "This would reduce one of the impediments to a more significant effect from the monetary policy actions taken to date."
Rosengren's Wednesday speech at the Economic Outlook Seminar in Stockholm, Sweden, focused entirely on housing and how its failure to robustly return in the wake of the recession led to an anemic recovery not experienced in previous downturns.
While low interest rates are forced deeper to spur lending, Rosengren explained this scenario is not working in an economy where many borrowers have fixed rates and homes underwater are keeping them from refinancing. "The characteristics of a country’s mortgage finance market determine the impact that will come from a change in the rates directly influenced by monetary policy," Rosengren said. "In the U.S., most homes are financed by 30-year fixed-rate mortgages, so a fall in long-term interest rates really only affects existing homeowners to the extent they refinance. As a result, the U.S. gets less effect from the movement of short-term, monetary policy interest rates compared to countries where the primary mortgage financing instruments are floating-rate loans."
Rosengren said real estate is hitting all sectors of the economy since many financial firms have exposure to the sluggish real estate sector through direct lending mechanisms or the acquisition of mortgage-backed securities."As a result, declines in real estate prices can have a substantial impact on the capital of financial institutions, which impacts their ability to finance not only the housing sector, but also other sectors of the economy," Rosengren said.
The inability to refinance existing loans paradigm is reinforced by tighter underwriting guidelines that are keeping borrowers from taking advantage of lower interest rates.
Rosengren stressed that no recovery can be fueled without restoration of the housing market. Residential investment grew more than 30% in the first years of past recoveries, while in the recent recovery, residential investment actually fell in the first two years following the end of the recession.
"More than one observer has commented that we are seeing a different pattern this time that equates almost to a “negative feedback loop," said Rosengren. "High unemployment leads to risk aversion, which decreases demand for new housing. But without construction activity we are not seeing the typical uptick in housing-related jobs."
Source: Housingwire
Rosengren's Wednesday speech at the Economic Outlook Seminar in Stockholm, Sweden, focused entirely on housing and how its failure to robustly return in the wake of the recession led to an anemic recovery not experienced in previous downturns.
While low interest rates are forced deeper to spur lending, Rosengren explained this scenario is not working in an economy where many borrowers have fixed rates and homes underwater are keeping them from refinancing. "The characteristics of a country’s mortgage finance market determine the impact that will come from a change in the rates directly influenced by monetary policy," Rosengren said. "In the U.S., most homes are financed by 30-year fixed-rate mortgages, so a fall in long-term interest rates really only affects existing homeowners to the extent they refinance. As a result, the U.S. gets less effect from the movement of short-term, monetary policy interest rates compared to countries where the primary mortgage financing instruments are floating-rate loans."
Rosengren said real estate is hitting all sectors of the economy since many financial firms have exposure to the sluggish real estate sector through direct lending mechanisms or the acquisition of mortgage-backed securities."As a result, declines in real estate prices can have a substantial impact on the capital of financial institutions, which impacts their ability to finance not only the housing sector, but also other sectors of the economy," Rosengren said.
The inability to refinance existing loans paradigm is reinforced by tighter underwriting guidelines that are keeping borrowers from taking advantage of lower interest rates.
Rosengren stressed that no recovery can be fueled without restoration of the housing market. Residential investment grew more than 30% in the first years of past recoveries, while in the recent recovery, residential investment actually fell in the first two years following the end of the recession.
"More than one observer has commented that we are seeing a different pattern this time that equates almost to a “negative feedback loop," said Rosengren. "High unemployment leads to risk aversion, which decreases demand for new housing. But without construction activity we are not seeing the typical uptick in housing-related jobs."
Source: Housingwire
Tuesday, September 27, 2011
First-Time Buyers Losing Interest in Short Sales
The uncertainties and the long waiting time have caused many homebuyers to stay away from short sale despite the average 27 % discount. Rather, investors and homebuyers prefer REO which are cheaper and do not need to wait. It is uncommon for homebuyers placing multiple offers on shor sale listings with the intention of staying with one. Here is the latest recap of this trend:
First-Time Buyers Losing Interest in Short Sales
First-Time Buyers Losing Interest in Short Sales
J P Morgan Chase the leader in HAFA short sale program.
JPMorgan Chase Has Completed the Most HAFA Deals
Posted on 06 July 2011.
Since the launch of the Home Affordable Foreclosure Alternatives (HAFA) program in April 2010, JPMorgan Chase has completed more short sales and deeds-in-lieu of foreclosure through HAFA than any other mortgage servicer. That being said, there's still room for improvement as Chase's top-ranking number of HAFA deals is just 2,686, according to the Treasury Department.
Wells Fargo ranked second with 2,400 completed; Bank of America was third with 1,600. It seems the top 10 mortgage servicers also canceled approximately 600K trials because of a redefault, borrower ineligibility or insufficient documentation. Another 1.5 million distressed homeowners were denied from even entering the trial period.
The numbers also reveal that mortgage servicers are completing nearly 10 times as many private short sales and deeds-in-lieu.
Source: Short Sale Dailynews
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