Lenders prefer foreclosure to loan modification in certain cases
The government program for preventing foreclosures is not in the best interest of lenders in all cases. If a borrower is likely to default even after participating in mortgage modification program, the lender is better-off opting for foreclosure. Michael Fratantoni, vice president at the Mortgage Bankers Association, said: "There is going to be this narrow slice of borrowers for which modifications is the right answer." Fratantoni said it is tough to estimate the size of that slice and "the industry and policymakers have been grappling with that." According to a study conducted by the Federal Reserve Bank of Boston, about a third of the borrowers who miss 2 payments can get back on track without help from their lender.
"These are the people who will get a second job, borrow from their family to keep up," said Paul Willen, a senior economist at the Federal Reserve Bank of Boston. "From a cold-blooded profit-maximizing standpoint, these are the people the banks will help the least." Michael Barr, assistant Treasury secretary for financial institutions, while commenting on the mortgage modification program, said: "We will continue to refine the program as new data becomes available. We are committed to studying the effectiveness and efficiency of the program, and we welcome outside analysis."
Government mulls more housing sops for troubled homeowners
With foreclosures rising, the Obama administration officials are set to meet this week to discuss new initiatives to help homeowners. Rising unemployment is impacting the effectiveness of the administration's current foreclosure prevention program. "Unemployment is making the job of doing loan modifications more difficult," William Apgar, a Housing Department senior adviser, told a congressional committee last week. "We are exploring other options related to how to provide assistance to unemployed folks." According to RealtyTrac, over 1.5 million homes received at least one foreclosure filing in the first half of 2009.
Unemployment accounts for a large number of foreclosures. The loan modification program introduced by the administration has not been effective so far for a variety of reasons including operational problems. "Loan modifications will not reduce by any sizable amount the number of homes going into foreclosure," said Morris Davis, an assistant professor at the Wisconsin School of Business. Experts feel that a new foreclosure prevention program may not find favor with lawmakers given the low success rate of existing program. "Any measures taken to help people avoid foreclosure will only prolong the pain by using taxpayer money to prop up unsustainable mortgages," said Kurt Bardella, press secretary for California Rep. Darrell Issa. "The best thing we can do for the unemployed is adopt policies that will create jobs," Bardella said.
Excuses Be Gone
Tuesday, July 28, 2009
California Real Estate Market Analysis
California real estate market is divided in to three catagories. Under $500k, the market is smoking hot....some areas less than 2 months of inventory. Between $500k-$1,000k, the market is so so and above a Million it is a snails pace. The reason????? It's The Financing Virgina. Their ain't no Santa Claus when it comes to financing. The current dichotomy exists within the conforming loan amount being increased from $417k to $729,750 in many counties including San Diego. The interest rates are higher too which makes qualifying more difficult for these loans. The qualifing is even more strict for jumbo loans, loans above the $729k. Since Fannie and Freddi only buy conforming loans; therfore, less money is available for jumbo loans. It isn't clear why conforming loans pay higher rates and have tougher guidelines to qualify than the loans for less than $417k. Historically, all conforming loans had the same interest rates and qualifying guidelines. Unless Fannie and Freddie start treating all conforming loans equally, and the governement intervenes on the ol' jumbo's, as it has on conforming loans, we will continue to experience this nasty tale of 3 markets and soon the upper-end market will likely see prices depreciate even more before this market strenghtens. Anyone want to buy a home on the cheap in Mission Hills??? Let's wait and see.
Monday, July 27, 2009
Sunday, July 26, 2009
Thursday, July 23, 2009
Existing home sales rise for the third straight month
According to the National Association of Realtors (NAR), existing home sales in June rose by 3.6% to an annual rate of 4.89 million, the highest since last October. Lawrence Yun, NAR chief economist, said: "The increase in existing-home sales occurred in all major regions of the country." Analysts say that this signals moderation in housing slump.
"Market-clearing price levels are resulting from the foreclosure wave," said John Ryding, chief economist at RDQ Economics. "This will be a protracted bottom, rather than anything that will show a quick recovery." The national median existing-home price for all housing types was $181,800 in June, which is 15.4% below June 2008, according to the NAR. Analysts expect to see depressed home prices for many more months to come. Tax incentives and drop in interest rates have contributed to the rise in home resales. But concerns about unemployment are keeping many prospective homeowners in the sidelines.
Banks incur significant losses in commercial real estate loans
While banks, irrespective of their size are incurring losses in commercial estate loans, large banks typically have well-diversified revenue streams, protecting them from a downturn in a single sector. "For the smaller banks, the primary revenue generator is going to be the lending side of the business. That's still a real mess out there. Particularly relating to commercial real estate, it's getting worse, not better," said David Twibell, president of wealth management at Colorado Capital Bank.
Morgan Stanley lost $700 million in commercial real estate last quarter while Wells Fargo reported a 69% increase in delinquent loans. Regional banks such as Key Corp and HMN Financial have reported a significant rise in commercial real estate loan losses. "Banks are writing off commercial real estate loans now at a bigger rate than in the last 20 years," said Kathy Boyle, president of Chapin Hill Advisors. Analysts are not bullish about banks. "There are still significant problems in the commercial real estate market," Twibell said. "We're probably in the third or fourth inning of that, whereas in the residential side we're in the seventh or eighth inning. There are so many problems, it's tough for me to get excited about banks."
Initial jobless claims rise after 2 straight weeks of decline
According to the Labor Department, initial jobless claims rose by 30,000 to 554,000 in the week ended July 18. Claims had fallen by 93,000 over the previous two weeks on account of companies such as General Motors shutting down their plants and not laying off as many workers as expected. "The level of initial claims is still consistent with deep job losses but smaller than we saw in the first months of this year," said Zach Pandl, an economist at Nomura Securities.
Continuing claims decreased by 88,000 to 6.23 million in the week ended July 11, the week for which latest data is available. This is the lowest since April. Forty one states reported an increase in new claims while 12 reported a drop. Federal Reserve Chairman Ben Bernanke says unemployment is the "most pressing issue" for policymakers today. "Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending," Bernanke said in a recent testimony before Congress. "The possibility that the recent stabilization in household spending will prove transient is an important downside risk to the outlook."
Bailing out Fannie and Freddie is proving to be expensive
Since Congress authorized the Treasury Department in provide capital to Fannie Mae and Freddie Mac last July, Fannie Mae has received $34.2 billion of direct government support while Freddie Mac has received $51.7 billion. While the amounts are lot lower than bailout funds offered to firms such as AIG and Citigroup, analysts say that Fannie Mae and Freddie Mac may require significant sums of money in future on account of their rising losses. "We're assuming they each will cross the $100 billion mark fairly soon. They could be hitting the $200 billion barrier by the end of next year," said Bose George, mortgage analyst at Keefe, Bruyette & Woods. From a financial perspective, investments in Fannie and Freddie may not yield much to the government.
Few expect that Fannie or Freddie will be able to pay the committed 10 to 12 % dividend on the government funds they have received, let alone return the principal. James Lockhart, director of the Federal Housing Finance Agency, says investment in Freddie and Fannie cannot be looked at just in terms of financial returns. "They really have been the backbone of the housing market throughout this period," said Lockhart. "The money spent, we can at least say has gone to a good cause -- keeping the housing market much more stable than it would have been [without the bailout]."
Debt collectors wait for loan quality to deteriorate further
Debt collectors buy troubled loans at fire-sale prices and collect whatever is possible from borrowers in order to make profit. "Once they decide to buy the portfolios and get a sizable amount, the portfolios could be lucrative for the companies over a number of years," says Sameer Gokhale, an analyst at Keefe, Bruyette & Woods. Given the current economic conditions, one would expect debt collectors to be busy. Not quite. It looks as though debt collectors are waiting for a further deterioration of the economy when they can buy loans cheaper. "Our strategy has been to reduce purchasing.
We are waiting for those advantageous prices," said Rion Needs, chief executive of Asset Acceptance Capital, a debt collection firm. This is a good strategy. Buying loans for pennies on the dollar would significantly limit the downside for debt collection firms while providing a significant upside even if they manage to collect on a small number of loans. Analysts caution that debt collectors will not be able to improve their results in the near-term on account of borrowers' poor repaying capability. "It will be unusual to see an acceleration in performance (near term) because the consumer is still so strapped," Mark Hughes of SunTrust Robinson Humphrey.
"Market-clearing price levels are resulting from the foreclosure wave," said John Ryding, chief economist at RDQ Economics. "This will be a protracted bottom, rather than anything that will show a quick recovery." The national median existing-home price for all housing types was $181,800 in June, which is 15.4% below June 2008, according to the NAR. Analysts expect to see depressed home prices for many more months to come. Tax incentives and drop in interest rates have contributed to the rise in home resales. But concerns about unemployment are keeping many prospective homeowners in the sidelines.
Banks incur significant losses in commercial real estate loans
While banks, irrespective of their size are incurring losses in commercial estate loans, large banks typically have well-diversified revenue streams, protecting them from a downturn in a single sector. "For the smaller banks, the primary revenue generator is going to be the lending side of the business. That's still a real mess out there. Particularly relating to commercial real estate, it's getting worse, not better," said David Twibell, president of wealth management at Colorado Capital Bank.
Morgan Stanley lost $700 million in commercial real estate last quarter while Wells Fargo reported a 69% increase in delinquent loans. Regional banks such as Key Corp and HMN Financial have reported a significant rise in commercial real estate loan losses. "Banks are writing off commercial real estate loans now at a bigger rate than in the last 20 years," said Kathy Boyle, president of Chapin Hill Advisors. Analysts are not bullish about banks. "There are still significant problems in the commercial real estate market," Twibell said. "We're probably in the third or fourth inning of that, whereas in the residential side we're in the seventh or eighth inning. There are so many problems, it's tough for me to get excited about banks."
Initial jobless claims rise after 2 straight weeks of decline
According to the Labor Department, initial jobless claims rose by 30,000 to 554,000 in the week ended July 18. Claims had fallen by 93,000 over the previous two weeks on account of companies such as General Motors shutting down their plants and not laying off as many workers as expected. "The level of initial claims is still consistent with deep job losses but smaller than we saw in the first months of this year," said Zach Pandl, an economist at Nomura Securities.
Continuing claims decreased by 88,000 to 6.23 million in the week ended July 11, the week for which latest data is available. This is the lowest since April. Forty one states reported an increase in new claims while 12 reported a drop. Federal Reserve Chairman Ben Bernanke says unemployment is the "most pressing issue" for policymakers today. "Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending," Bernanke said in a recent testimony before Congress. "The possibility that the recent stabilization in household spending will prove transient is an important downside risk to the outlook."
Bailing out Fannie and Freddie is proving to be expensive
Since Congress authorized the Treasury Department in provide capital to Fannie Mae and Freddie Mac last July, Fannie Mae has received $34.2 billion of direct government support while Freddie Mac has received $51.7 billion. While the amounts are lot lower than bailout funds offered to firms such as AIG and Citigroup, analysts say that Fannie Mae and Freddie Mac may require significant sums of money in future on account of their rising losses. "We're assuming they each will cross the $100 billion mark fairly soon. They could be hitting the $200 billion barrier by the end of next year," said Bose George, mortgage analyst at Keefe, Bruyette & Woods. From a financial perspective, investments in Fannie and Freddie may not yield much to the government.
Few expect that Fannie or Freddie will be able to pay the committed 10 to 12 % dividend on the government funds they have received, let alone return the principal. James Lockhart, director of the Federal Housing Finance Agency, says investment in Freddie and Fannie cannot be looked at just in terms of financial returns. "They really have been the backbone of the housing market throughout this period," said Lockhart. "The money spent, we can at least say has gone to a good cause -- keeping the housing market much more stable than it would have been [without the bailout]."
Debt collectors wait for loan quality to deteriorate further
Debt collectors buy troubled loans at fire-sale prices and collect whatever is possible from borrowers in order to make profit. "Once they decide to buy the portfolios and get a sizable amount, the portfolios could be lucrative for the companies over a number of years," says Sameer Gokhale, an analyst at Keefe, Bruyette & Woods. Given the current economic conditions, one would expect debt collectors to be busy. Not quite. It looks as though debt collectors are waiting for a further deterioration of the economy when they can buy loans cheaper. "Our strategy has been to reduce purchasing.
We are waiting for those advantageous prices," said Rion Needs, chief executive of Asset Acceptance Capital, a debt collection firm. This is a good strategy. Buying loans for pennies on the dollar would significantly limit the downside for debt collection firms while providing a significant upside even if they manage to collect on a small number of loans. Analysts caution that debt collectors will not be able to improve their results in the near-term on account of borrowers' poor repaying capability. "It will be unusual to see an acceleration in performance (near term) because the consumer is still so strapped," Mark Hughes of SunTrust Robinson Humphrey.
Tuesday, July 21, 2009
Bidding wars seen in markets for foreclosed homes
"Prices of foreclosed homes have taken such a beating that investors are jumping in and bidding up prices. Investors who win bids are often cash buyers who do not need to go through the appraisal process to get a loan. Traditional buyers who are looking for a home to reside are at a disadvantage. Jerry Lou Davis, a real-estate agent in California, says the activity in the foreclosed housing market is similar to the housing bubble of yesteryears. Jay Butler, director of the Realty Studies program at Arizona State University, concurs with this view. "This market is about as abnormal as the hypermarket that we came out of a few years ago," said Butler. Experts say that the bidding wars will impede stabilization of the housing market.
In Phoenix, the median home price, which was $265,000 3 years ago, was $125,000 last month, from a low of $115,000 in April. Real estate agents across the country have been observing price wars in the last couple of months, according to Walter Molony, a spokesman for the National Association of Realtors. In states such as Nevada, Arizona, California, and Florida, where home prices are moving to levels well below their peak values, it is not uncommon for sellers to get multiple offers. Jonathan Abbinante, a real estate agent in Las Vegas, says some of his clients are making 3 offers a day on homes they have not seen. "I sell homes right over the Internet," said Abbinante. "That's what I did in 2004."
Is there still hope in the fight against foreclosure?
The Obama administration has been criticized for its $ 75 billion modification program not doing enough to the stem the rise in foreclosures. Some experts believe that the steep learning curve is inevitable given the magnitude of the problem. "Part of it has been understanding how big the problem is," says economist Dean Baker, co-director of the Center for Economic And Policy Analysis "They're also getting more experience about what's going to work and what isn't." Some say that there are far too many operational glitches for the program to succeed immediately.
"There seems to be a ramp up and that's good, but there are still execution issues," says Andrew Jakabovics a housing expert at the Center for American Progress. "We're starting to see an impact from the modification program. I don't think we're at a comfort point yet." The Obama administration seems to take criticisms and suggestions for improvement seriously. The administration has implemented an audit mechanism for applications that have been rejected. Government officials recently wrote to industry players asking them to do more for the success of the loan modification program. "I don't think the administration's plan has proven to be a magic bullet yet," says Edward Pinto, a former chief credit officer at Fannie Mae. "We have to work through this; it is a long process."
TARP official says rescue cost may eventually be $23.7 trillion
Neil Barofsky, special inspector general for the Treasury's Troubled Asset Relief Program, says the $700 billion bank-investment program introduced by the Treasury represents a fraction of the total federal funds required to revive the financial system."
Compliments of Chris McLaughlin of www.shortsaleriches.com
In Phoenix, the median home price, which was $265,000 3 years ago, was $125,000 last month, from a low of $115,000 in April. Real estate agents across the country have been observing price wars in the last couple of months, according to Walter Molony, a spokesman for the National Association of Realtors. In states such as Nevada, Arizona, California, and Florida, where home prices are moving to levels well below their peak values, it is not uncommon for sellers to get multiple offers. Jonathan Abbinante, a real estate agent in Las Vegas, says some of his clients are making 3 offers a day on homes they have not seen. "I sell homes right over the Internet," said Abbinante. "That's what I did in 2004."
Is there still hope in the fight against foreclosure?
The Obama administration has been criticized for its $ 75 billion modification program not doing enough to the stem the rise in foreclosures. Some experts believe that the steep learning curve is inevitable given the magnitude of the problem. "Part of it has been understanding how big the problem is," says economist Dean Baker, co-director of the Center for Economic And Policy Analysis "They're also getting more experience about what's going to work and what isn't." Some say that there are far too many operational glitches for the program to succeed immediately.
"There seems to be a ramp up and that's good, but there are still execution issues," says Andrew Jakabovics a housing expert at the Center for American Progress. "We're starting to see an impact from the modification program. I don't think we're at a comfort point yet." The Obama administration seems to take criticisms and suggestions for improvement seriously. The administration has implemented an audit mechanism for applications that have been rejected. Government officials recently wrote to industry players asking them to do more for the success of the loan modification program. "I don't think the administration's plan has proven to be a magic bullet yet," says Edward Pinto, a former chief credit officer at Fannie Mae. "We have to work through this; it is a long process."
TARP official says rescue cost may eventually be $23.7 trillion
Neil Barofsky, special inspector general for the Treasury's Troubled Asset Relief Program, says the $700 billion bank-investment program introduced by the Treasury represents a fraction of the total federal funds required to revive the financial system."
Compliments of Chris McLaughlin of www.shortsaleriches.com
Monday, July 20, 2009
Friday, July 17, 2009
http://ping.fm/VDwKJ Don't miss our upcoming Webinar on Loan Modification or Know Your Options if you Need to Short Sale. http://ping.fm/PN2gQ
http://ping.fm/VDwKJ Don't miss our upcoming Webinar on Loan Modification or Know Your Options if you Need to Short Sale. http://ping.fm/PN2gQ
Thursday, July 16, 2009
Subscribe to:
Posts (Atom)
Google Ads
Get Your Listings Promoted The Way They Should Be
Change Your Thoughts, Change Your Mind, Change Your Business
