Friday, July 30, 2010

Section 502 May Return with Zero Down Payment Mortgages, 3.5% Guarantee Fee

by CHRISTINE RICCIARDI

The National Association of Realtors (NAR) announced Wednesday that legislation for the Section 502 single-family rural housing program under the Department of Agriculture is headed to President Obama's desk to be signed back into law.

The program allows 30-year originations primarily for low-income families to purchase households or renovate the ones they already own with no down payment at the time of application. Loans are guaranteed by the federal government.

The legislation for Section 502 will have a few changes, NAR reported. It increases the guarantee fee for borrowers to 3.5%, however the fee can also be financed.

Section 502 Rural Housing Services Single Family housing Guaranteed Loan Program, as it's formally called, was originally discontinued because in May because it had exhausted its existing funds of $13.1bn.

Zero downpayment policies are becoming more common. West Virginia just started a statewide program that allows residents to take out home purchasing originations for no money down at a 3.5% mortgage rate.

URL to Original Article:
http://www.housingwire.com/2010/07/29/section-502-may-return-with-zero-down-payment-mortgages-3-5-guarantee-fee

Housing policy must be set on sustainable basis

By Hank Paulson

The financial reform bill enacted last week is a significant step toward a much-needed modernization of our regulatory structure. It will provide tools to help mitigate and manage the next financial crisis. But the job remains unfinished until Congress addresses the housing policies that fueled the crisis -- a big part of which requires reforming and dramatically scaling back Fannie Mae and Freddie Mac, the two government-sponsored housing enterprises that brought our nation's financial system and our entire economy to the brink of collapse.

A significant root cause of the crisis was the combined weight of government policies promoting homeownership; these are apparent in the housing GSEs, the Federal Housing Administration (FHA), the Federal Home Loan Banks, the federal tax deduction for mortgage interest and various state programs. Homeownership was overstimulated to the point that it was unsustainable and dangerous to the broader economy.

The GSEs, now placed in conservatorship, and the FHA still provide a massive subsidy to our housing market, touching more than nine out of 10 new mortgages. When the housing market is clearly recovering -- and it is still far from robust -- we must have the fortitude to create a more level playing field between housing and other productive investments.

Fannie Mae and Freddie Mac should not be allowed to revert to their old form, crowding out private competition and putting taxpayers on the hook for failure while shareholders benefit from success. Reform should address the systemic risk they pose and should wean our mortgage finance system from its dependence on these institutions.

Any entity that Congress creates to serve a public policy goal of reducing mortgage costs cannot also be driven by shareholder returns. We must eliminate the inherent conflict between public purpose and private ownership that was destabilizing to the GSEs. Congress could eliminate that tension by restructuring Fannie and Freddie to create one or two private-sector entities that would purchase and securitize mortgages with a credit guarantee explicitly backed by the federal government and paid for by the new entity. These privately owned entities would be set up like public utilities and governed by a rate-setting commission that would establish a targeted rate of return.

Regulation for fiscal soundness would be essential, as would oversight to ensure that the quality of conforming loans remained high.

The best way to address the systemic risk posed by Fannie and Freddie is to shrink them by eliminating their investment portfolios -- and their huge debt loads that put the financial sector at risk and necessitated a costly public rescue.

We should go further and reduce the subsidy for homeownership that helped create the crisis. The central place of homeownership as part of the American dream reflects a bias of our society that is unlikely to simply end. Policymakers may well decide that we should continue to facilitate lower-cost mortgages through a subsidy to mortgage credit guarantors. Even so, the scope of the subsidy should be reduced by rationalizing and reducing the missions of the FHA and the successor(s) to Fannie and Freddie. I would recommend limiting the availability of the subsidy to smaller mortgages or lower-income buyers or both. And the price the government charges this new private-sector entity for its credit guarantee must be high enough to leave room for a robust private-sector mortgage market that serves taxpayers and homeowners equally.

The benefits of a reduced subsidy for homeownership are clear. But we cannot move toward this model until the housing market is stabilized and housing prices are likely to rise.

The GSEs are providing an enormous stimulus to the economy. Placing Fannie and Freddie in conservatorship was, in my view, the most effective of the stimulus efforts undertaken in the past two years. This stimulus was aimed squarely at the driver of our financial and economic crisis: the decline of home prices. Without public support, ensuring that mortgage financing was available during the worst moments of the financial crisis and the ensuing 22 months, the housing market would have ground to a halt, home prices would have spiraled downward, foreclosures would have skyrocketed, and financial institution balance sheets would have suffered greater losses, leading to a prolonged downturn and the loss of millions of additional jobs.

Home sales are still suffering despite record-low mortgage rates, and the availability of low-cost mortgage credit is vital to avoid a further housing decline that tips the economy back toward stagnation. It will take time to reach consensus on the government's proper role in subsidizing housing and how to replace the GSEs with a more stable construct that reduces risk to taxpayers and the economy. Given today's political climate, this will not be easy. And it will take real leadership from both parties to get it done. But this is vital, and the discussion must begin now.

URL to Original Article:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/29/AR2010072905007.html

Thursday, July 29, 2010

Government-led PSA Campaign Aims to Make Home Affordable

by CHRISTINE RICCIARDI

Education is the next federal strategy to prevent foreclosure to homeowners who can't keep up with their mortgages.

The Advertising Council, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury announced Wednesday the launch of a new public service announcement campaign designed to encourage homeowners struggling with their monthly mortgage payments to reach out to the government for help through the Making Home Affordable foreclosure prevention program.

The program, first established and introduced in February 2009, offers free help resources to eligible homeowners through the Federal Government. Since its initiation, Making Home Affordable has offered help to over 1.5m homeowners, 1.3m of which have started a trial plan.

“We are proud to partner with the Treasury and HUD on this critical campaign to educate Americans about free resources available to help them prevent foreclosures,” said Peggy Conlon, president and CEO of the Ad Council. “We hope Americans who are struggling will be empowered by these compelling PSAs and take simple actions to help them stay in their homes.”

The PSA campaign comes after a long list of other government implemented funds and programs to keep homeowners in their homes such as the Hardest Hit Fund and the Home Affordable Modification Program (HAMP). iServe Servicing CEO Richard Cimino told HousingWire in an interview that defaults and foreclosures drive the market price of the homes down. So keeping Americans in their homes with mortgages they can afford would limit the amount of both defaults and foreclosures, driving market prices up.

The Ad Council plans to distribute the PSAs, created by The Kapalan Thaler Group, to over 33,000 media outlets nationwide, including television, print, radio and web-based. Although the Ad Council did not state exactly when the PSAs will be aired, the videos are currently available for view at the Making Home Affordable Programs official website.

URL to Original Article:
http://www.housingwire.com/2010/07/28/psa-campaign-aims-to-make-home-affordable

Greek villas get 45% markdowns as crisis devalues island homes

By Sharon Smyth

A half-built villa on Mykonos, an island in the Aegean Sea known for its all-night beach parties, is being offered by brokers at Athens-based Ploumis Sotiropoulos OE for 2 million euros ($2.6 million) after the price was reduced by 500,000 euros. The same firm is seeking a buyer for a three-bedroom home on Corfu for 750,000 euros, down from an original asking price of 1.4 million euros. So far, no bidders have emerged.

"It's a scary place to invest right now," said Mike Braunholtz, a broker at Prestige Property Group, which markets properties on the Greek islands. "Things aren't going to improve until the economic picture becomes clearer."

Greece is counting on a 110 billion-euro bailout from the European Union and the International Monetary Fund to avert a default and end the nation's first recession since 1993. Prime Minister George Papandreou, having raised taxes and cut civil- service wages, is imposing luxury property taxes to convince voters that the wealthy also are helping foot the bill.

Papandreou's austerity package calls for an extra levy on properties valued at more than 5 million euros. Owners of homes worth more than 400,000 euros also will pay higher taxes.

The program puts pressure on homeowners and debt-laden developers to lower prices, said Ioannis Kaligiannakis, an Athens-based property analyst at Colliers International Hellas.

Greece, which borders Albania, the Republic of Macedonia, Bulgaria and Turkey, has more than 1,000 islands and the 10th- longest coastline in the world. The country attracts about 15 million visitors a year, according to data compiled by the Hellenic Statistical Authority.

Property declines have been smaller in Spain, Portugal and Italy. Prices for luxury homes have dropped 8 percent to 10 percent in Spain from the peak in 2008, according to Idealista.com, the country's largest real estate website.

The market is holding steady in Portugal, where 832 kilometers (517 miles) of coastline and the archipelagos of Madeira and Azores attract about 13 million tourists each year, said Liselore Ligtermoet, a Lisbon-based marketing manager at International Realty Group.

"We're not seeing bargain hunters here," Ligtermoet said.

Discounts also have been hard to find in Italy since the country emerged from recession in the third quarter of 2009, said Angelo Savioli, a director at Sotheby's International Realty in Rome. "Prices are actually rising in areas such as Rome, Venice, Milan and Florence," he said.

Greece plans to increase the so-called objective value it places on real estate for tax purposes next year. The system depends on an assessment of a property's value based on the area and amenities, rather than on the actual market value, which is usually higher.

State revenue will increase next year with the new program, Finance Minister George Papaconstantinou said on July 5.

"The tax overhaul is certainly a concern for property investors in Greece," said Liam Bailey, head of residential research at Knight Frank LLC in London. "These measures specifically target the rich, higher-end buyer."

Prestige is marketing a three-story, eight-bedroom villa with a swimming pool on Mykonos for 4.1 million euros, down from 5.5 million euros. More than a third of the island's 11,000 residents are foreigners, according to its official website.

Tom Hanks, the Oscar-winning star of "Forrest Gump" and producer of "My Big Fat Greek Wedding," and his wife, Rita Wilson, an actress whose father was born in Greece, have a property on Antiparos, according to a spokeswoman for the island's Community Council.

House prices on the mainland also are falling. Ploumis Sotiropoulos is helping sell a 450-square-meter (4,800-square- foot) villa in Ekali, a wealthy suburb of Athens where former Prime Minister Andreas Papandreou lived until his death in 1996, for 2 million euros. The asking price has dropped 48 percent.

"It's tough this year," said Giannis Ploumis, the chief executive officer of Ploumis Sotiropoulos.

"More properties are on the market and fewer buyers are willing to invest."

The economy will contract by about 4 percent this year and by 2.6 percent in 2011, according to estimates from the Greek Finance Ministry.

Greece is losing its cache with potential buyers "simply looking at other places," said Bailey of Knight Frank.

France is gaining in popularity as it offers plenty of bargains and the country's economic prospects make the market more attractive than Greece, Braunholtz said. The economy will grow 1.4 percent this year, according to analysts' estimates compiled by Bloomberg.

Prestige's website features a 12-bedroom French chateau near Toulouse for 477,000 euros and a nine-bedroom property about 15 minutes drive from Grenoble that's on the market for 1.9 million euros.

London is profiting from Greece's financial turmoil. In April, Greek buyers accounted for about 6 percent of all property purchases above 2 million pounds ($3 million) in the U.K. capital, according to Knight Frank. That was double the average of the past three years.

URL to Original Article:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/28/AR2010072800132.html

Wednesday, July 28, 2010

'Systemic risk' theory gains in stature as way to prevent the next bubble

By Howard Schneider

Americans might be counting on the day when home and retirement-fund values start to rise again, but anyone expecting to benefit from a future boom in prices should take note: Economic policymakers around the world are looking for ways to make sure that doesn't happen, or at least not with such intensity that it risks the kind of bust that usually follows.

In studying how to respond to the recent crisis and create a more stable system, central bankers, international officials and others have been focusing on a concept known as "systemic risk." That's the type of falling-domino problem that allowed mortgage defaults in the United States to lock up the global financial system because of the complex connections among banks, investment companies, insurers and other firms around the world.

The phenomenon is not fully understood.

"We sort of know vaguely what systemic risk is and what factors might relate to it. But to argue that it is a well-developed science at this point is overstating the fact," said Raghuram Rajan, a former International Monetary Fund chief economist and author of "Fault Lines," which explored the role of U.S. real estate and credit bubbles in the crisis.

A recent IMF paper described study of the field as "in its infancy." Still, some central bankers and regulators are devising ways to try to control systemic risk, and one of the things they are focusing on is its connection to fast run-ups in the prices of real estate or other investments, or a quick expansion of credit and lending.

When to step in?

Before the recent crisis, regulators assumed that markets with large numbers of people with enough information and the ability to move money freely could assess the risks of different investments and look out for themselves. That thinking guided U.S. policy under then-Federal Reserve Chairman Alan Greenspan, creating the conditions that allowed millions of Americans to buy homes and borrow money under loose credit terms. Sometimes consumers profited if they sold property at the right time, but sometimes they became saddled, along with their bankers, with unaffordable mortgages or houses that declined sharply in value.

But that approach did not adequately account for systemic risk. Policymakers in the United States and Europe and at organizations such as the IMF are discussing how government agencies could best step in when markets appear to get overheated.

It is not easy to tell the difference between a risky "bubble" and a healthy economic expansion, and confusing one for the other could mean slower growth and lost opportunities.

Yet the cost of the recent crisis in terms of lost production and high unemployment has convinced a broad array of officials, regulators and analysts that government should do more to "lean against" markets that are thought to be growing too fast, and in the process try to ensure that the United States, Europe and other key areas don't again surge in an unsustainable way -- or crash in the aftermath.

"The benefits of successfully moderating both phases of the credit and asset price cycle are clearly worth pursuing," the Switzerland-based Bank for International Settlement said in a recent report.

The BIS serves as a grouping of the world's major central banks, including the U.S. Federal Reserve, and is an influential voice in financial regulation.

The current discussion involves some of the basic principles of how markets should work in a post-crisis age. It throws open a range of sensitive questions such as whether the Fed and other central banks should use interest rates or other tools for such actions as restraining home prices that are judged to be rising too fast.

"I think there has been a massive change in the debate," said Andrew Smithers, founder of the London-based Smithers & Co. economic consultancy. "Simply ignoring asset prices is so demonstrably silly that it will not carry on either side of the Atlantic."

Although Fed Chairman Ben S. Bernanke and others speak warily about using interest rates or the other "very blunt" tools of the central bank to address problems in specific parts of the economy, he also has said he remains "open-minded" to the idea.

Other ideas under discussion include imposing higher capital requirements on banks under certain conditions to slow lending, as well as steps such as forcing potential home buyers to make larger down payments -- familiar to Asian regulators who have had to cope with rapid increases in real estate values.

A new bureaucracy

Overheated markets or dangerous levels of credit and borrowing are hardly pressing issues in the current climate, in which concern is centered on keeping a shaky recovery on track in the United States and Europe. But the attention given systemic risk is apparent in the new bureaucracy growing up around it.

The legislation signed into law last week by President Obama includes a Financial Stability Oversight Council, with powers to study and move against possible sources of systemic risk in the United States.

Europe is establishing a European Systemic Risk Board; the BIS has set up a Financial Stability Board to study and make recommendations about the issue; and the IMF has proposed a central role for itself in monitoring systemic risk on a global scale.

In recent papers, both the IMF and the BIS discussed the chance that a wrong policy choice might slow otherwise healthy economic growth. But they also said the depth of the recent downturn showed that central banks and other government agencies need to expand their traditional focus on such issues as inflation and employment, and to be more attuned to controlling systemic risk and ensuring general financial stability.

Central banks in the developed world have learned how to keep prices stable, but "there was a gaping hole in the system," which ignored financial stability concerns, IMF financial counselor Jose Vinals wrote in a recent essay. Although he said central banks need to keep inflation as their chief focus on monetary policy, he also called for "more 'leaning' in good times and the need for 'less cleaning' in bad times once bubbles explode."


URL to Original Article:
http://www.washingtonpost.com/wp-yn/content/story/2010/07/26/ST2010072605862.html

Apartment rentals surge on foreclosures, jobs

By Prashant Gopal

U.S. apartment landlords are seeing a surge in rentals as mounting foreclosures reduce homeownership and an improving job market for young adults encourages them to find their own places to live.

The number of occupied apartments increased by 215,000 in the 64 largest U.S. markets in the first half, according to MPF Research. That’s almost double the units added in all of 2009 and the most since the firm began tracking the data in 1992. The vacancy rate declined to 6.6 percent last month from 8.2 percent in December.

“Demand is pretty stunningly strong in the first half,” Greg Willett, a vice president at the Carrollton, Texas-based apartment-industry research firm, said in an interview.

Investors are betting the expanding ranks of renters will lead to earnings increases next year of about 5 percent to 10 percent or more for apartment real estate investment trusts such as Equity Residential and AvalonBay Communities Inc. UBS AG this month raised its rating on AvalonBay, Essex Property Trust Inc. and Post Properties Inc. to “neutral” from “sell.”

The change signifies a “less bearish” view on apartments, while acknowledging that “headwinds will remain,” according to the July 7 report by New York-based analysts Dustin Pizzo, Ross T. Nussbaum and Derek Bower.

“The apartment REITs have priced in the most growth within the broader REIT group and as such are most vulnerable if the economy slows and job growth does not begin to come through in a meaningful way,” they wrote.

The Bloomberg REIT Apartment Index has gained 28 percent this year, double the 14 percent advance in the broader Bloomberg REIT Index. The Standard & Poor’s Supercomposite Homebuilding Index has fallen 3.1 percent.

Job Growth

The economy’s recovery from the worst recession since the 1930s has revived hiring enough to stimulate demand for apartments. The growth hasn’t been enough to prevent more home foreclosures, which lift rental demand, or to lead to a sustained rebound in homebuying.

New jobs are the biggest driver of apartment occupancy. Employers began hiring again in January, adding an average of 147,000 jobs a month through June, according to the Labor Department. Employment for people 20 to 29 years old -- a key group for landlords -- rose in May and June on a year-over-year basis for the first time since the end of 2007.

While payroll growth has been modest compared with pre- recession levels, it may be enough to have persuaded some families sharing housing with relatives to get their own places, according to Mark Zandi, chief economist of Moody’s Analytics Inc. in West Chester, Pennsylvania.

Bunking With Brother

“Given how hard it is for families to live together for very long, they moved out as soon as they got a job or even thought they could find one,” he said in an e-mail.

Mike Odenthal moved to the New York area in January from San Diego in search of a communications job, sleeping on his younger brother’s couch in the Heights neighborhood of Jersey City, New Jersey. He moved out four months later after the condominium went up for sale, eager to live on his own and not wanting the sight of his possessions in the living room to discourage potential buyers.

“I was tired of depending on my family for housing,” said Odenthal, 27, who also stayed with his parents in Jersey City. “I can’t imagine doing that forever, and all retiring to Florida together.”

Odenthal found a roommate and moved July 1 to Manhattan’s Upper East Side, paying $700 a month for his share of the rent. The next morning he got an offer to work at a New York public relations firm.

Foreclosures Persist

Finances for homeowners didn’t improve fast enough to prevent more than 1.65 million foreclosure filings in the first half, an increase of 8 percent from the same period in 2009, RealtyTrac Inc., a data company in Irvine, California, said July 15. A record 269,962 U.S. homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010.

The U.S. homeownership rate fell to 66.9 percent in the second quarter, the lowest since 1999, the U.S. Census Bureau said today. The rate peaked at 69.2 percent in the fourth quarter of 2004.

“As homeownership continues to decline, people need to live somewhere,” said Henry Cisneros, who was President Bill Clinton’s housing secretary from 1993 to 1997 and is executive chairman of CityView, a real estate investment firm in Los Angeles that focuses on urban projects including apartments.

Sales Decline

The rate of new-home sales last month was the second-lowest on record, behind May, following the expiration of a government tax credit for homebuyers, the Commerce Department reported yesterday. Sales of previously owned homes fell 5.1 percent in June, the National Association of Realtors said last week.

“The rental market will be robust for the next few years,” Cisneros said.

Effective rents, or what tenants pay after concessions or breaks from landlords, increased 1.4 percent in the biggest markets in the first half, according to MPF Research. Rents may rise 4 percent to 6 percent in both 2011 and 2012, compared with a gain of about 2 percent this year, Willett said.

AvalonBay, which took a nine-month hiatus from construction in 2009, said in April it had seven communities under development and would increase rents for tenants renewing in the second quarter. It raised its forecast last month for second- quarter and 2010 earnings based on “improved operating trends.”

The Arlington, Virginia-based company’s funds from operations, a widely used measure of earnings, will rise 8 percent in 2011, according to the medial estimate of 20 analysts surveyed by Bloomberg.

Equity Residential

Equity Residential, based in Chicago, has pushed rents up by “high single digits” in all of its markets since January, Chief Executive Officer David Neithercut said in a June 11 interview.

Funds from operations in 2011 also will rise 8 percent, according to a survey of 22 analysts.

Landlords won’t be able to raise rents too aggressively because unemployment remains high at 9.5 percent and declines in home prices have made it no more expensive to buy than rent in about half of larger markets around the nation, Willett said.

Buy Versus Rent

In Atlanta, the median home price has fallen 37 percent to $110,100 from the peak in the third quarter of 2006, according to the National Association of Realtors. Assuming a 10 percent down payment and a 30-year mortgage at 5 percent, the monthly principal and interest cost is $532.

That compares with average monthly rents of $774 in the city, Willett said.

Riverstone Residential Group of Dallas, which manages 175,000 units in 30 markets around the country, reduced average concessions to about a half-month’s rent from about two months a year ago, CEO Walt Smith said. Vacancies have fallen below 5.9 percent in buildings that aren’t newly constructed, from 8.25 percent last year. Smith said he expects significant rent growth by 2012 as supply tightens with so few new units being built.

“Landlords are cautiously testing the strength of the submarket their property is in to see if the market will withstand small rent increases,” Smith said. “In most markets, they’ve been successful.”

URL to Original Article:
http://www.bloomberg.com/news/2010-07-27/apartment-rentals-surge-in-u-s-as-foreclosures-rise-job-growth-resumes.html

Tuesday, July 27, 2010

MIT-Harvard Study: Foreclosure drops house value by 27%

by KERRY CURRY

A foreclosure reduces the value of a house by 27%, on average, and accounts for a much steeper price drop than other forced sales, according to a study by an Massachusetts Institute of Technology (MIT) economist and two Harvard University researchers.

In comparison, when a house is sold after the death of an owner, the price drops 5% to 7% on average. When an owner declares bankruptcy, the value sinks 3%, according to the report.

The research, “Forced Sales and House Prices,” has been accepted for publication in the American Economic Review.

In the study, MIT economist Parag Pathak and Harvard researchers John Y. Campbell and Stefano Giglio examined 1.8m home sales in Massachusetts from 1987 through March 2009.

The researchers believe their discovery of the gaps between the price reductions is key to isolating the effects of foreclosures. Because the declines in value are so disparate, yet occur among comparable homes in the same times and places, the reductions in value are not all attributable to the same overarching economic conditions, the researchers believe.

“It’s not surprising that there is a discount due to foreclosure,” said Pathak. “But it is surprising that it’s so large.”

In addition, sellers trying to sell their non-distressed, occupied properties in a neighborhood that has a foreclosed home on the market will take a price hit, according to the report. The researchers estimated the value of a home drops by 1%, on average, if it is within roughly 250 feet of a foreclosed home. MIT said the paper represents the first time economists have been able to clearly quantify how much nearby foreclosures affects prices of inhabited homes.

“This can happen for multiple reasons,” Pathak said. First of all, he notes, “If you live near a foreclosed house, it may not be maintained.”

Neighborhood appearance enhances real estate value. Secondly, even without visible deterioration, such homes, when resold quickly for a discount, can affect neighborhood values because homebuyers and real estate brokers look at comparable sales when making an offer.

“First, houses are productive only when people are living in them,” the report said. “Owning an empty house is equivalent to throwing away the dividend on a financial asset. Second, houses are fragile assets that need maintenance, and are vulnerable to vandalism. Unoccupied houses are particularly vulnerable and expensive to protect. Third, short-term rental contracts involve high transactions costs, resulting from the moving costs of renters and the need of homeowners to protect their property against damage,” the report said.

Christopher Mayer, dean of the Columbia Business School in New York, said in a press release on MIT’s website that he believes the study will open up more research on whether foreclosures cause other foreclosures, a process he calls “contagion.”

Although the paper suggested only minor decreases in values of neighboring homes, Mayer questions whether there may be a tipping point “at which a neighborhood starts to fall apart.”

URL to Original Article:
http://www.housingwire.com/2010/07/26/mit-harvard-study-foreclosure-drops-house-value-by-27

Analysts Look for Slight June Uptick in New Home Sales; Supply Lowest Since 1970

by DIANA GOLOBAY

Analysts expect new home sales to total 310,000 units in June, up from May's record-low 300,000, according to outlook and commentary services firm Econoday.

The Census Bureau is scheduled to release its monthly new home sales data later this morning. The error ratio, however, could swing the new home sales into negative territory, month-on-month, as the possible range is listed between 280,000 to 350,000 home sales.

Months' supply of new homes on the market surged to 8.5 months in May, from 5.8 months in April, due to the drop in sales, Econoday noted in commentary. But the actual number of new homes on the market was down 1,000 in the month to an adjusted 213,000 — to its lowest level in 40 years, since 1970, the firm said.

Econoday noted that lower interest rates are likely to boost sales for the June data. Employment and income growth, however, also have an impact on the decision to buy housing.

URL to Original Article:
http://www.housingwire.com/2010/07/26/analysts-look-for-june-uptick-in-new-home-sales

Thursday, July 22, 2010

Is HAFA a Better Solution than HAMP?

by JON PRIOR

With the amount of canceled trial modifications in the Home Affordable Modification Program (HAMP) passing permanent conversions, some are anticipating that the Home Affordable Foreclosure Alternatives (HAFA) program will be more effective in keeping homeowners out of foreclosure.

The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Less than a year later, the Treasury launched HAFA to boost short sales for those who fail a HAMP modification. In order to receive a permanent modification through HAMP, borrowers must make three monthly payments during the trial period.

HAFA was designed to give borrowers who failed to make those payments a chance at a short sale or deed-in-lieu of foreclosure.

Through June, servicers participating in HAMP have converted 398,198 three-month trial modifications into permanent workouts on the mortgage. But according to that same report from the Treasury, servicers have canceled 520,814 trial modifications. Of those cancellations, 60% had been in trials for six months or more, and servicers are still completing reviews of nearly 166,000 modifications that have been in trials that long.

Based on survey data of the eight largest HAMP participants, the Treasury found that 45% of the canceled trials are in an alternate modification.

More failed HAMP modifications could enter HAFA after falling into delinquency after the conversion into permanent status. For modifications that have been permanent for more than six months, 6% have fallen into 60-plus day delinquency again. The default rate, or the percentage of modified loans that are now 90 or more days delinquent, is less than 2% at six months after the conversion.

Cary Sternberg, president of Excellen REO, an asset management firm and subsidiary of Titanium Solutions, said that HAMP was designed for those who want to stay in their home, but as prices continue to deteriorate, more homeowners are looking for a way out, either through short sale or deed-in-lieu.

“Then comes HAFA. In recognition of the fact that some borrowers simply could not make payments even if the payment were lower, a more dignified exit strategy was created,” Sternberg said.

The Treasury will not release data on the HAFA program until later in 2010, but many real estate firms and companies are adding staff to their short sale departments. Matt Vernon, REO and short sales executive at Bank of America, the bank with the largest amount of HAMP-eligible loans, said they are doing everything they can to facilitate short sales.

According to the Treasury, the intentions of HAMP and HAFA are very different. HAMP is for those who are committed to remaining in their home, while homeowners interested in HAFA have decided they no longer want to stay there. If they intend to stay in the home, they will work with their servicer to get into another modification program.

But Sternberg said in the end, HAFA is a better solution than HAMP.

“It is too early to tell what the success rate of the HAFA program will be, but I am betting it will be far better than HAMP,” Sternberg said. “HAMP is a Band-Aid, HAFA is an exit strategy.”

URL to Original Article:
http://www.housingwire.com/2010/07/21/is-hafa-a-better-solution-than-hamp

Mortgage defaults in California at 3-year low

By Alejandro Lazo, Los Angeles Times

The number of Californians entering foreclosure slid dramatically in the second quarter to a three-year low as the fallout from the worst of the housing crisis continued to abate.

Default notices, the first stage of the foreclosure process initiated by banks on troubled homeowners, plummeted 43.8% in the second quarter over the same period last year to 70,051, and 13.6% from the first three months of the year, research firm MDA DataQuick of San Diego said Wednesday.

Banks are pushing alternatives such as loan modification programs and short sales — in which a property is sold for less than the value of the mortgage — helping to reduce the number of people entering foreclosure. A modest recovery in home prices also means that fewer homeowners are likely to sink "underwater," a situation in which a property is worth less than its mortgage, considered to be a predictor of whether a homeowner will walk away.

"The most important thing is the housing market has stabilized, that house prices are up and not down anymore," said Kenneth Rosen, a professor at the UC Berkeley Haas School of Business. "People are now able to do a short sale, and they may not be as underwater as they were, so improving markets are really a good part of this.

"Banks stepped up their seizure of homes from people already ensnared in the repossession process in the second quarter, reflecting an effort by economically resurgent financial institutions to clear troubled loans off their books after having survived the depths of the banking crisis. Many of those loans went into default months ago, taking an average of 9.1 months to get through the process, DataQuick said.

The plunge in default notices was experienced throughout California, including places such as the troubled Inland Empire and the state's Central Valley, resulting in the fewest new defaults since the second quarter of 2007. Default notices peaked statewide in the first quarter of 2009, when 135,431 households received filings, contributing to a steep slide in prices as bank-owned houses sold at extreme discounts.

The least expensive regions of the state continued to be the places where people were most likely to receive notices of default. An analysis of the state's most affordable ZIP Codes by DataQuick, representing about 25% of the existing housing stock, found that these areas accounted for about 40.1% of all defaults in the second quarter.

Neighborhoods with a median sales price of less than $300,000 saw 10.6 default notices for every 1,000 homes compared with 2.9 for every 1,000 homes in areas with a median price above $800,000.

Lenders that originated loans receiving some of the highest number of default notices in the second quarter include many institutions that had been acquired during the banking crisis, including World Savings, with 2,982 loans, Washington Mutual, with 2,547, and Countrywide, with 2,532. Wells Fargo, which still exists, had 2,117 loans with default notices filed on them.

In Southern California, the number of default notices dropped 46.9% in the second quarter from the year-earlier period, and 15.23% from the first quarter. The county with the biggest decline in the second quarter was Riverside, with a 49.2% drop in default notices from the same quarter last year, and the county with the smallest decline was Ventura, with a 44.6% decline, underscoring the broad drop in default activity.

"We are now three-plus years into the housing crisis, and at this point of time we are seeing stabilization across the board," said Stuart Gabriel, director of UCLA's Ziman Center for Real Estate. "The stabilization is in fits and spurts … but it is evidenced in a variety of indicators.

"The mortgage meltdown made most subprime and nontraditional loans unavailable, and the bulk of mortgages in the intervening three years have been fixed-rate loans made to solid borrowers. These loans are generally performing better than the poorer-quality ones being flushed out of the system.

The Southland's housing recovery has held its ground for more than a year, even though sales in recent months have been fueled by federal and state tax incentives. Buyers have included first-time purchasers as well as investors packing courthouse steps to scoop up foreclosures and bidding up prices by tens of thousands of dollars in minutes.

Furthermore, some researchers are beginning to conclude that fewer homeowners may walk away from their properties than previously thought, said Richard Green, director of USC's Lusk Center for Real Estate.

"There are incentives to avoid default even if you are underwater," Green said, adding that people struggling to pay their mortgages may not be as ruthless in their financial decision-making as some experts had presumed they would be.

With banks booking big profits these days, they are facing increasing pressure from federal regulators to clean up their problem loans. Banks stepped up their repossession of homes statewide and in the Southland during the second quarter.The number of trustee's deeds — the last stage of foreclosure — filed on California properties increased 4.4% from the same quarter a year earlier, and 11.2% from the previous quarter, for a total of 47,669. In Southern California, the number of deeds filed jumped 4.5% from the same quarter a year earlier, and 9.6% from the previous quarter, to 24,367.

Experts and real estate professionals said the increase in foreclosure activity also has to do with the steadying housing market. Now that prices have bottomed, banks apparently feel comfortable putting more inventory on the market.

"It's a little bit busier, and everything is selling pretty fast because interest rates are so low," said Leo Nordine, a Los Angeles real estate agent who specializes in selling foreclosed homes on behalf of major lenders. "The high end is still really slow, and the banks are really pushing short sales hard."

URL to Original Article:
http://www.latimes.com/business/realestate/la-fi-foreclosures-20100722,0,5721319.story

Wednesday, July 21, 2010

Fannie, Freddie 'Black Holes' of Financial Reform: Strategist

By: CNBC.com

Fannie Mae and Freddie Mac are the real 'black holes' in the financial regulation bill before Congress and they both need to be addressed, Robert Pozen, Chairman of MFS Investment Management, told CNBC Monday.

"They were too political volatile to handle and are not in the bill," said Pozen who is a former vice chairman of Fidelity Investments. "But we need to get to them. Fannie reported an $8 billion loss in the first quarter but the costs to them for the loans in the footnote of the report, were over $100 billion. The $8 billion may turn out to be just a drop in the bucket."

Pozen went on to say that it's difficult to deal with Fannie and Freddie because the housing market is too weak at this time. "It will probably take a year or two (for a housing recovery) before they can be dealt with," Pozen added.

Pozen also criticized a segment that is currently in the financial regulation bill that he says could have a negative effect on the markets.

"There's a sleeper in that there that's worrisome," Pozen said. "It's the Securities Exchange Commission's rule having authority over conflict of interests. What does that mean? I don't like to see them with broad authority and without any perimeters. Are the going to tell hedge fund manager what they can make? I hope not. The markets won't like that."

URL to Original Article:
http://www.cnbc.com/id/38210531

Homeowners vs. Home-Loan Buyers

By RUTH SIMON

Eddie Patrick thought he had a deal with Kondaur Capital Corp. to restructure the mortgage on his Baltimore house after he fell behind on his payments. The 54-year-old taxi driver dropped a lawsuit against the company after he says it promised to "work with me" on a loan modification, according to a court filing.

Kondaur foreclosed anyway—and then offered to sell the house back to Mr. Patrick for $140,000. "I don't know why they are so inhumane," he says about the Orange, Calif., company, one of the nation's largest buyers of troubled mortgages.

The appetite is huge among companies like Kondaur, hedge funds and investors to buy shaky mortgages, credit-card debts, auto loans and even payday loans from lenders eager to cut their losses. So far this year, nearly $10 billion in troubled mortgages has changed hands, according to Private National Mortgage Acceptance Co., or PennyMac, a mortgage-loan buyer started in 2008.

Such loans often sell for just pennies on the dollar, with the buyers hoping to make a profit by restructuring the loan, selling it to someone else or, in the case of mortgages, foreclosing if all else fails.

But some borrowers complain that consumer-debt buyers have strong-armed them with threats, tried to collect the wrong amount or sought money from the wrong person. The Federal Trade Commission is examining nine large buyers of credit-card and other unsecured debts to determine their role in questionable debt-collection practices.

Kondaur and some of its competitors have deep roots in the subprime industry and, as was the case with subprime lenders, the company's operations fall under a hodgepodge of regulators, making it hard to enforce one set of standards.

As a result, some state officials say they aren't sure whether home-loan buyers should be regulated as mortgage companies or debt collectors, making it harder to effectively monitor the growing industry's behavior. "I have concerns that some of these activities fall through the cracks of the regulatory structure," says Mark Pearce, North Carolina's chief deputy banking commissioner.

Industry executives say they are working hard to meet all government requirements. "We take this compliance very seriously and realize that behind each of our loans is a borrower who is counting on us to act in the highest ethical manner," says David Spector, PennyMac's chief investment officer.

URL to Original Article:
http://online.wsj.com/article/SB10001424052748704258604575360860682756080.html?

Welcome Aboard New Agents

I just wanted to take a minute to Welcome aboard new sales agents here at London Properties.
The following agents will be working out of our Fresno main office; Andrew Simon, Frye Burr, Brent Lake and Darlene Cole. Rebecca Hatcher has joined our team in our Chowchilla office and Jeff Nightengale has joined our team in our Merced office. Welcome to the London Family and go get'em!!!!

Monday, July 19, 2010

BofA Nonperforming Loans, Foreclosures Up 15% from a Year Ago

by JON PRIOR

Bank of America (BAC: 13.61 -2.65%) reported $35.7bn in nonperforming loans, leases and foreclosed properties in Q210, which is 15% above levels measured in the same quarter of last year.

These loans and properties increased more than $5bn in total aggregate balance since Q209.

The total did drop by more than $200m worth of these loans and properties from the $35.9bn reported in Q110.

They represented 3.74% of all outstanding loans, leases and foreclosed properties at the end of Q210.

BofA reported $3.1bn in Q210 earnings despite losses in its mortgage division. BofA is continuing efforts to keep these troubled mortgages out of foreclosure. Since 2008, BofA and the acquired Countrywide completed nearly 650,000 loan modifications. During Q210 alone, BofA completed 80,000 modifications, including 38,000 trial modifications that were converted into permanent workouts under the Home Affordable Modification Program (HAMP).

If a modification does fail, BofA is putting an emphasis on selling the home through a short sale ahead of foreclosure. At REO Expo 2010, Matt Vernon, the short sale and REO executive at BofA said that the bank added 1,000 employees to the short sale staff and will “do everything possible to liquidate property prior to foreclosure.”

URL to Original Article:
http://www.housingwire.com/2010/07/16/bofa-nonperforming-loans-foreclosures-up-15-from-a-year-ago

'Vacuum of Demand' to Keep Pulling Down Housing Numbers Next Week

by DIANA GOLOBAY

On the heels of a 30% plunge in pending home sales in May — the first month that house hunters didn't have the first-time homebuyer tax credit to entice them to sign contracts — analysts are anticipating a week of plummeting housing starts and existing home sales.

In a note coming out Monday, Toronto-based macroeconomic research firm Capital Economics will project weak June housing starts, with little demand for housing and existing home sales.

The firm is expecting new home sale numbers to "plummet."

Legislation passed in July extended the homebuyer tax closing deadline through September, meaning some deals could fall into July or August.

The PMI Mortgage Insurance Co., the primary operating subsidiary of The PMI Group (PMI: 3.20 +3.56%), said in its July housing and mortgage market analysis this week (download here) that housing activity may not rebound for months.

"The expiration of the second tax credit has hit housing activity hard, after having drawn sales forward into March and April," the firm said. "Moreover, all of the near-term leading indicators of housing activity suggest no pickup in coming months (and perhaps even additional declines).

Directionally, however, this should not have been a surprise to anyone — although the magnitude of the falloff is larger than we expected."

PMI lowered its projection of home sales in 2010 in response to the larger-than-expected decline in May — and prospectively in June and perhaps even July. Now expect existing home sales to grow by 2.9% to 5.31m units and new sales by 9.4% to 409,000 units for the whole of 2010. Sales should increase at a faster pace in 2011, with existing sales growing 8.6% to 5.76m units and new sales expanding 48.7% to 608,000 units.

PMI said home prices should remain static for the balance of 2010, as a falloff in sales erases recent gains, before climbing modestly by 2% in 2011.

Fitch Ratings also noted recent new and existing home sales data suggest the first-time homebuyer tax credit pulled sales forward into March and April.

"This has left a vacuum of demand (especially from entry-level buyers) in its absence. A rather sluggish economy also continues to restrain interest in housing," said Fitch managing director and lead US homebuilding analyst Bob Curran, in a statement.

Home affordability and low mortgage rates could drive sales in the fall, Curran said, although job creation and improving consumer confidence will also play a key role in restoring housing demand.

URL to Original Article:
http://www.housingwire.com/2010/07/16/vacuum-of-demand-to-keep-pulling-down-housing-numbers-next-week

Citigroup North American REO Up 81% from Last Year

by JON PRIOR

The amount of REO properties held by Citigroup reached $1.4bn in Q210, an 81% increase from the same time last year.

In the second quarter of 2009, Citigroup held $789m in REO in North America. The latest total is a 10% increase from the $1.2bn in North American REO totaled in Q110. The bank did not break down the total among the continent’s countries.

Citigroup defines its REO as the carrying value of all property acquired by the bank through foreclosure or other legal proceedings. Worldwide, Citigroup holds $1.6bn in REO, up 73% from a year ago.

Citigroup reported earnings of $2.7bn in Q210 after posting $4.4bn in the previous quarter.

Through its servicing arm, CitiMortgage, the bank continues work to reduce the amount of foreclosures on its balance sheet. According to the latest Home Affordable Modification Program (HAMP) report from the Treasury Department, Citi has converted 25% of its trial modifications into permanent status through May, totaling more than 34,000 modifications.

URL to Original Article:
http://www.housingwire.com/2010/07/16/citigroup-north-american-reo-up-81-from-last-year

Friday, July 16, 2010

Mass Foreclosures This Year Expected to Eclipse '09 Levels

By Associated Press:

LOS ANGELES -- More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.

"That would be unprecedented," said Rick Sharga, a senior vice president at RealtyTrac.

By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.

The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.

The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.

In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.

Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn't read too much into that.

"The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market," he said.

On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.

Assuming the U.S. economy doesn't worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.

And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn't improve fast enough to lift home sales.

The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

"The downward pressure from foreclosures will persist and prices will be very weak well into 2012," said Celia Chen, senior director of Moody's Economy.com.

She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.

Lenders are offering to help some homeowners modify their loans. But many borrowers can't qualify or they are falling back into default. The Obama administration's $75 billion foreclosure prevention effort has made only a small dent in the problem.

More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.

Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.

Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.

URL to Original Article:
http://www.foxnews.com/us/2010/07/15/homes-lost-foreclosure-track-eclipse-levels-banks-work-backlog/

FHA May Require 10% Down from Low Credit-Score Borrowers

by DIANA GOLOBAY

The Federal Housing Administration (FHA) is considering three policy changes to boost its capital reserves. Under the changes, new borrowers seeking FHA-insured loans will need a minimum FICO score of 580 to qualify for FHA's 3.5% downpayment program. New borrowers with credit scores between 500 and 580 will be required to provide a 10% downpayment, and borrowers with credit scores below 500 will no longer qualify.

The US Department of Housing and Urban Development (HUD) published a notice today seeking public comment on the measures, which are designed to reduce financial risk and preserve affordable mortgage finance. HUD will accept public comment for the next 30 days on the proposed changes.

"These are the latest in a series of changes to allow the FHA to manage its risk better while continuing to support the nation's housing recovery," said FHA commissioner David Stevens in a press release. "By protecting FHA's capital reserves, we can continue providing affordable, responsible mortgage products and will remain the nation's largest source of home purchase financing for underserved communities."

Specifically, the FHA is proposing to update the combination of credit and downpayment requirements for new borrowers, reduce seller concessions from 6% to 3% and tighten underwriting standards for manually-underwritten loans.

The changes also seek to reduce the share of the home sales price that sellers are allowed to contribute at the closing table to offset the buyers' costs. The current share of 6% "exposes the FHA to excess risk by potentially driving up the cost of the home beyond its appraised value," the FHA said in a statement today. The proposed change would reduce seller concessions to 3%, which the FHA said would bring it into conformity with industry standards.

The proposed FHA policy updates also require lenders, during the underwriting process, to consider compensating factors that are "the best predictive indicators of loan performance" — credit history, loan-to-value ratio, debt-to-income ratio and cash reserves.

URL to Original Article:
http://www.housingwire.com/2010/07/15/fha-may-require-10-down-from-low-credit-score-borrowers

Monday, July 12, 2010

Equity upside down? We may help sell your home for less than your loan and still put cash in your pocket.

http://www.shortsaleserv.com/page/index/4117

End of 2010 Census means end of job for many

By Michael Powell

PROVIDENCE, R.I. — It was a finely honed machine, this United States Census team, and it had a good run. But in the coming days and weeks, many of its members will experience the pain of unemployment — once again.

Christine Egan, a 31-year-old massage therapist, says her census job offered shelter from the economic storm last year. “The economy was terrible; there was nothing,” she says. “I’ve already gone through ‘horrific,’ so I’m immunized.” She smiles, optimism almost extending to her eyes. “It must be better now, right?”

When the Census Bureau hired upward of 700,000 Americans over the last two years — most in the last six months — it landed more experienced workers with more sophisticated skills than any time in recent memory. This was the unintended upside of the nastiest recession of the last 70 years.

Now, its decennial work largely done, the Census Bureau is shedding hundreds of thousands of workers — about 225,000 in just the last few weeks, enough to account for a jot or two in the unemployment rate, say federal economists. Most of those remaining will be gone by August; a few will last into September.

In past decades, the bureau faced a challenge just keeping workers around to close up shop, as most dashed for new jobs that might pay better. Not this time around. Jobs remain scarce. In Rhode Island, the unemployment rate stands at 12.3 percent, higher than a year ago. The national rate, too, has not budged.

As most census workers have nowhere to go, rushed farewells are rare. Self-reflection, and a touch of anxiety, mark the mood.

“Typically, at this point in the process, we’re losing a lot of people because they’re taking jobs,” said Kathleen Ludgate, the regional director in Boston. “I wish we had that problem now.”

Ms. Ludgate receives notes from departing workers, some by e-mail, others in ink. They thank her for the chance to learn something about themselves and their country. They write to say their confidence had picked up, that they can again meet the gaze of friends and neighbors.

These are the missives of hard-working people who found themselves in a tighter spot than they ever expected, and who came to view census work as a lifeline.

Many are middle-aged. The census offices in Providence and Bridgeport, Conn., offer a sea of gray-haired men and women in neat office garb. They work with an intensity that suggests they would rather concentrate on the task at hand than the fast-approaching end.

Sherri Wood worked for the schools in Bridgeport before taking a chance a few years back and leaving to try something new. The recession broke like a thunder cloud, and she took a job nearly two years ago in community affairs for the census.

The money was not great. She began mowing her own lawn and making her lunches, but it wasn’t all bad.

“I learned so much, I really loved it,” said Ms. Wood, 45, who will leave in the next few weeks. “Things will work. I pray for that.”

Bureaucratic quirks make life in this recession a nerve-racking ride. Many departing census workers will be eligible for unemployment, although by no means all of them.

Some census employees, particularly those who knocked on doors — known as enumerators — worked in fits and starts. They were dispatched intensively, then laid off, then rehired.

Unemployment rules are a crazy quilt, with no two states quite the same.

“If a worker was in the last tier of long-term unemployment, they might not be able to go back to unemployment,” said Andrew Stettner, deputy director of the National Employment Law Project. “They may have been better off not taking this job.”

Perhaps so. But in the Providence office, workers speak of a certain joy that comes with applying their minds.

What is left of the Providence team works out of a ground-floor office that overlooks a cemetery, and on a recent morning, workers checked tallies and researched vacant buildings. Bob Hamilton, the director, introduced his staff.

Ms. Egan, the massage therapist, with a degree in history from the University of Rhode Island, was his assistant field manager. Vada Seccareccia, an architect with an undergraduate degree from Bryn Mawr College, is his payroll manager. And the soft-spoken young mother who oversees the clerks? Yasmin Mercedes has years of retail experience and, if she can’t find work, plans to go to college this fall.

“You look for people who had certain skills in a previous life,” Mr. Hamilton says. “It’s not hard to find them, not with this god-awful economy.”

Angular, with close-cropped gray hair and a voice laden with hard New England vowels, Mr. Hamilton, too, is a temporary worker with a backstory. He was vice president for a retailer until he took some time off in 2007, his mortgage paid and bank account strong. Then the economy tanked, as did his retirement fund. He tried to return only to find that when it came to finding a job, the rug had been pulled out from under him.

“I was reluctant to do this at first,” he says. “I finally said to myself: This isn’t going any better. I better take the next step.”

That pattern repeats across the country. In south Connecticut, a laid-off executive for a large insurer helps coordinate the door-to-door counters. In Orange County, Calif., unemployed real estate lawyers work as counters, and the office is managed by a down-on-her-luck corporate trainer.

In the census office in Worcester, Mass., the guy who took the tech services job acknowledged quietly that he had a degree in nuclear engineering from M.I.T.

Wages vary by regional cost of living and responsibilities. A census worker might get $17 an hour in Providence, $23 in Boston or $12.25 in Jackson, Miss.

Mr. Hamilton has only to look at his Red Sox calendar to see the days ticking down. He would like to find a job back in retail management. He has a sneaking suspicion that his age — he’s 59 — works against him. “That’s my goal,” he says. “Whether I get there or not is something else.”

Every member of his team sounds reshaped, by the experience and by the recessionary storm howling outside.

Ms. Egan smiles and says she knows she can survive. When she was jobless and counted quarters to pay for groceries, she took a job as a boat deckhand and a bartender. She does not want to go back to giving massages full time, though; she found she is a natural at motivating people.

So she has polished her résumé. “We all understand, if you have another opportunity, take it,” she says, more cheerfully than you might expect. “We’re on a sinking ship.”

Mr. Hamilton walks a visitor to the door. He turns and looks at his domain, and says, more to himself: “You could start a hell of a business with these folks.”

URL to Original Article:
http://www.nytimes.com/2010/07/12/business/12census.html?

Friday, July 9, 2010

Biggest Defaulters on Mortgages Are the Rich

By David Streitfeld:

LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.

The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

Five properties here in Los Altos were scheduled for foreclosure auctions in a recent issue of The Los Altos Town Crier, the weekly newspaper where local legal notices are posted. Four have unpaid mortgage debt of more than $1 million, with the highest amount $2.8 million.

Not so long ago, said Chris Redden, the paper’s advertising services director, “it was a surprise if we had one foreclosure a month.”

The sheriff in Cook County, Ill., is increasingly in demand to evict foreclosed owners in the upscale suburbs to the north and west of Chicago — like Wilmette, La Grange and Glencoe. The occupants are always gone by the time a deputy gets there, a spokesman said, but just barely.

In Las Vegas, Ken Lowman, a longtime agent for luxury properties, said four of the 11 sales he brokered in June were distressed properties.

“I’ve never seen the wealthy hit like this before,” Mr. Lowman said. “They made their plans based on the best of all possible scenarios — that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”

The defaulting owners, he said, often remain as long as they can. “They’re in denial,” he said.

Here in Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the country, several houses scheduled for auction were still occupied this week. The people who answered the door were reluctant to explain their circumstances in any detail.

At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives.

At another house, the family said they were renters. A third family, whose mortgage is $1.6 million, said they would be moving this weekend.

At a vacant house with a pool, where the lender was seeking $1.27 million, a raft and a water gun lay abandoned on the entryway floor.

Lenders are fearful that many of the 11 million or so homeowners who owe more than their house is worth will walk away from them, especially if the real estate market begins to weaken again. The so-called strategic defaults have become a matter of intense debate in recent months.

Fannie Mae and Freddie Mac, the two quasi-governmental mortgage finance companies that own most of the mortgages in America with a value of less than $500,000, are alternately pleading with distressed homeowners not to be bad citizens and brandishing a stick at them.

In a recent column on Freddie Mac’s Web site, the company’s executive vice president, Don Bisenius, acknowledged that walking away “might well be a good decision for certain borrowers” but argues that those who do it are trashing their communities.

The CoreLogic data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind, especially when it comes to investment and second homes. Nor do they appear to be particularly worried about being sued by their lender or frozen out of future loans by Fannie Mae, possible consequences of default.

The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23 percent. For cheaper investment homes, it is about 10 percent.

With second homes, the delinquency rate for both types of owners was rising in concert until the stock market crashed in September 2008. That sent the percentage of troubled million-dollar loans spiraling up much faster than the smaller loans.

“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”

Willingly, but not necessarily publicly. The rapper Chamillionaire is a plain-talking exception. He recently walked away from a $2 million house he bought in Houston in 2006.

“I just decided to let it go, give it back to the bank,” he told the celebrity gossip TV show “TMZ.”

“I just didn’t feel like it was a good investment.”

The rich and successful often come naturally to this sort of attitude, said Brent T. White, a law professor at the University of Arizona who has studied strategic defaults.

“They may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,” Mr. White said.

The CoreLogic data measures serious delinquencies, which means the borrower has missed at least three payments in a row. At that point, lenders traditionally file a notice of default and the house enters the official foreclosure process.

In the current environment, however, notices of default are down for all types of loans as lenders work with owners in various modification programs. Even so, owners in some of the more expensive neighborhoods in and around San Francisco are beginning to head for the exit, according to data compiled by MDA DataQuick.

In Los Altos, Los Altos Hills and the most expensive neighborhood in adjoining Mountain View, defaults in the first five months of this year edged up to 16, from 15 in the same period in 2009 and four in 2008.

The East Bay suburb of Orinda had eight notices of default for million-dollar properties, up from five in the same period last year. On Nob Hill in San Francisco, there were four, up from one.

The Marina neighborhood had four, up from two.

The vast majority of owners in these upscale communities are still paying the mortgage, of course. But they appear to be cutting back in other ways. The once-thriving Los Altos downtown is pocked with more than a dozen empty storefronts in a six-block stretch.

But this is still Silicon Valley, where failure can always be considered a prelude to success.

In the middle of a workday, one troubled homeowner here leaned over his laptop at the kitchen table, trying to maneuver his way out from under his debt and figure out the next big thing.

His five-bedroom house, drained of hundreds of thousands of dollars of equity over the last 13 years, is scheduled for auction July 20. Nine months ago, after his latest business (he has had several) failed in what he called “the global meltdown,” the man, a technology entrepreneur, said he quit making his $9,000 monthly payments.

“I’m going to be downsizing,” he said.

The man spoke on the condition of anonymity because, he said, he did not want his current problems to interfere with his coming reinvention. “I’m a businessman,” he explained. “I have to be upbeat.”

URL to Original Article:
http://www.nytimes.com/2010/07/09/business/economy/09rich.html?_r=2&src=mv

Weekly Mortgage Rates Mixed, but Low Levels Sweeten Refinance Prospects

by AUSTIN KILGORE

Average rates for 30-year fixed-rate mortgages (FRMs) dipped slightly, setting new weekly records, while other types of mortgages varied, still hovering around historic lows.

Freddie Mac's weekly survey put the average rate for a 30-year FRM at 4.57% with a 0.7 origination point for the week ending July 8. That's down slightly from last week's average of 4.58% and below the year-ago average of 5.2%. It's the third consecutive week that the 30-year FRM set a new record low in the 39 years that Freddie Mac has tracked the product.

The Bankrate survey of large banks and thrifts also set a new record, with the average rate for a 30-year FRM at 4.74% with a 0.39 origination point. That's down from last week's then record-setting average of 4.75% and a year ago, when the survey averaged 5.59%.

“With mortgage rates falling to historic lows, refinance activity has been strong over the past three months,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The Bureau of Economic Analysis reported that the effective mortgage rate of all loans outstanding was just below 6% in the first quarter of 2010, the lowest since the series began in 1977. Since the start of the second quarter, two out of three mortgage applications on average were for refinancing, according the Mortgage Bankers Association."

As HousingWire previously reported, Barclays Capital research found that Ginnie Mae constant prepayment rates rose from April to May as buyouts occurred across vintages and coupons.

Freddie said the 15-year FRM averaged 4.07% with an average 0.7 point, up from last week's average of 4.04%, but below the year-ago average of 4.69%. The Bankrate average for 15-year FRMs also increased slightly, at 4.22% with a 0.39 origination point, up from 4.2% last week.

Average rates on adjustable-rate mortgages (ARMs) declined this week. Freddie said the five-year Treasury-indexed hybrid ARM averaged 3.75% with an average 0.7 point, down from last week's average of 3.79% and the year-ago average of 4.82%. It's a new record low in the survey for five-year ARMs. Bankrate said average rate for a five-year ARM was 4.06% with a 0.39 origination point, down from last week's average of 4.07%.

Freddie said the average rate for a one-year ARM was 3.75% with a 0.7 origination point, down from last week's average 3.8% and a year ago when it averaged 4.82%.

URL to Original Article:
http://www.housingwire.com/2010/07/08/weekly-mortgage-rates-mixed-but-low-levels-sweeten-refinance-prospects

Thursday, July 8, 2010

Obama Signs Homebuyer Tax Credit Extension

"Read more about the extended homebuyer tax credit below and for further information about additional California tax credits, go to londonproperties.com"

by JACOB GAFFNEY

President Barack Obama this morning signed HR 5623, the "Homebuyers Assistance and Improvement Act of 2010," a three-month extension on the closing deadline for first-time home buyers to receive the tax credit.

Potential homeowners with offers currently under contract now have until September 30 to close the deal, instead of the original June 30 deadline.

The tax credit remains at a maximum $8,000.

The Senate approved the bill late Wednesday evening, a day after it passed the House of Representatives.

A copy of the HR 5623 can be downloaded here.

The bill is worded to retroactively include properties that closed in the last two days.

According to the Internal Revenue Service, besides providing a tax benefit to first-time homebuyers and purchasers who haven’t owned homes in recent years, the law also allows a long-time resident of the same main home to claim the credit if they purchase a new principal residence.

To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home.

URL to Original Article:
http://www.housingwire.com/2010/07/02/obama-signs-homebuyer-tax-credit-extension

John Burns Sees Housing Market Hit Bottom with Little Downside to Investing

"As stated here, the downside of investing in housing right now is about as low as you will ever see....."

by DIANA GOLOBAY

The housing market has improved in the last two years to the extent that John Burns Real Estate Consulting sees the market as possibly approaching the beginning of its next up cycle.

Three factors needed for such a transition include demand, supply and investment, as the firm noted in a March 2008 report.

More than two years later, job growth is coming back slowly and renters are beginning to recognize favorable buying conditions. New home construction is at an all-time low and is likely to remain low until REO inventory clears.

As for the investment situation, mortgage rates and home prices fell dramatically since March 2008, creating the best buyer affordability conditions in about 30 years, the firm said.

"We are at Stage 1 (The Bottom) and heading into Stage 2 (The Beginning)," CEO John Burns said in a statement today. "While we think Stage 2 will last longer than usual, we want to point out that the downside of investing in housing right now is about as low as you will ever see."

Solid job growth, a wealth of available home equity for down payments, low mortgage rates, high consumer confidence, low levels of new home competition and availability of affordable homes all would make for a "good" housing market, the firm said in early 2008.

But as of July 2010, the "only boxes that can be checked…are low mortgage rates and affordable homes," the firm said today, adding that job growth is key to pushing recovery in the housing market forward.

URL to Original Article:
http://www.housingwire.com/2010/07/07/john-burns-sees-housing-market-hit-bottom-with-little-downside-to-investing