11.3 million homeowners underwater on mortgage

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) -- More than 11.3 million homeowners -- nearly one-fourth of all Americans with a mortgage -- owe more on their loan than their home is now worth, according to a report released Tuesday by FirstAmerican CoreLogic.

More than 10% of people with mortgages owe 25% more than their home is worth.

The number of underwater mortgages increased by about 620,000 from the third quarter, the firm said. Another 2.3 million mortgages had less than 5% equity in their home, which could be wiped out if home prices fall further.

U.S. banks in transition

Jayan Dhru, Standard & Poor's global head of Financial Services Ratings, says U.S. banks are still in recovery mode as they manage the credit cycle while reducing leverage and risk. Reforming the banking sector will have unintended consequences on the broader economy.

In the fourth quarter, national home prices fell 1.1% compared with the third quarter, Standard & Poor's reported in a separate report on Tuesday. See full story on Case-Shiller home price index.

Once the mortgage is underwater, owners cannot easily sell their home or refinance their loan.

Underwater mortgages are concentrated in few states: California, Florida, Nevada, Arizona, Michigan and Georgia. In Nevada, 70% of mortgages were underwater. In California, more than a third of mortgages were underwater.

"The rise in negative equity is closely tied to increases in pre-foreclosure activity," CoreLogic said. Once a homeowner owes 25% more than the house is worth, foreclosure rates rise sharply.

Negative equity exceeded 25% in six states and topped 20% in six others.

Rex Nutting is Washington bureau chief of MarketWatch.

Bank of America to Increase Foreclosure Rate by 600% in 2010

The more I know, the less I understand
All the things I thought I knew, I’m learning again
I’ve been tryin’ to get down
to the heart of the matter
But my will gets weak
and my thoughts seem to scatter
But I think it’s about…forgiveness
Forgiveness
Even if, even if you don’t PAY me anymore

Don Henley — The Heart of the Matter

Lenders are trying to figure out how their massive Ponzi Scheme collapsed. They are relearning lending again because everything they thought they knew was wrong. When you get down to the heart of the matter, borrowers are carrying too much debt which is killing them financially and emotionally. It is about forgiveness. Even if it means debtors don’t pay anymore.

Forgiveness never comes easy, and in lending it never comes cheap. These debts will be forgiven, and the toxic loans that spawned them will be cleansed from the system — mostly through foreclosure. Home debtors are hoping for principal forgiveness without consequence. That isn’t going to happen. Lenders only forgive as a last resort, and there are consequences for the borrower. When it’s done, lenders turn to the US taxpayer to make them whole again.

A 600% increase in foreclosures

I attended a local Building Industry Association conference on Friday 26 March 2010. The west coast manager of real estate owned, Senior Vice President Ken Gaitan, stated that Bank of America, which currently forecloses on 7,500 homes a month nationally, will increase that number to 45,000 homes per month by December of 2010.

After his surprising statement, two questioners from the audience asked questions to verify the numbers.

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Home Prices Post Smallest Annual Decline in 3 Yrs

Published: March 30, 2010
By THE ASSOCIATED PRESS

NEW YORK (AP) -- Home prices showed the smallest annual decline in almost three years in January, indicating there are surprising areas of strength in the housing market.

The Standard & Poor's/Case-Shiller 20-city home price index fell just 0.7 percent from last year on a seasonally adjusted basis. The index reading of 146.32 was almost in line with analysts expectations, according to a survey by Thomson Reuters.

''There was some positive momentum in home prices in January,'' wrote Ian Pollick, a portfolio strategist with TD Securities.

Better still, prices rose 0.3 percent from December to January, the eighth consecutive monthly gain. Among the 20 cities in the index, 12 rose.

The index, released Tuesday, is up nearly 4 percent from its bottom in May 2009, but still almost 30 percent below its May 2006 peak.

Still, there are signs that last year's housing rebound won't last. Home sales sank during the winter, and government incentives that have propped up the market are ending.

Another reason for the positive news is simply that the Case-Shiller index measures a three-month average of home prices. So January's report includes November's strong home sales.

Many analysts expect that the Case Shiller number will eventually turn downward.

''It is only a matter of time before the index records a double-dip in prices,'' wrote Paul Dales, U.S. economist with Capital Economics, who forecasts a 5 percent drop. The market will be tested in the second half of the year, he wrote, when a tax credit that has boosted sales is gone.

Want a Short Sale? Best to Wait By June Fletcher Wall Street Journal 03-19-2010

Want a Short Sale? Best to Wait
By June Fletcher
The Wall Street Journal
March 19, 2010

A new government program aimed to speed up these notoriously sluggish transactions goes into effect on April 5, increasing your chances of negotiating a distressed-property bargain.

Q: I am looking to buy my first home, and it seems like short-sales are priced much lower than regular sales. Are these prices negotiable, or are they the bottom line that lenders will accept?

—Allentown, Pa.
A: Many lenders negotiate prices for short-sales, in which the seller is offering the home for less than is owed on the mortgage. But traditionally the only way you could find out was to submit a below-list offer and wait—often for many months—for a response. If the bank made a counter-offer, you knew you were in the ballpark; if they didn't respond at all, you were too low. By then, you may have lost all interest in buying the property.

he good news is, on April 5, this frustrating system will change at least for some buyers and sellers. That's when the federal government will begin to provide financial incentives to lenders to do more short sales. The rules also help standardize the process, so your chances of negotiating a distressed-property bargain will increase.

Under the old practices, when a financially-distressed seller brought a potential buyer who was offering less than the amount owed on the loan, the bank would order an appraisal or broker's price opinion (BPO) and then decide whether the offer was acceptable. Under the new federal rules, banks will order a BPO before the property is listed for sale, and will share information on the minimum net proceeds they're willing to accept with the sellers. If they then bring in a buyer whose offer is equal to or greater than this pre-approved amount, the lender must accept it within 10 days.

Not all sellers are eligible for this program, called Home Affordable Foreclosure Alternatives (HAFA) (for the requirements see Help for America's Homeowner's Supplemental Directive 09-09). But since the process is likely to go so much smoother for those who buy and sell under HAFA, I suggest you wait a bit until the program goes into effect and concentrate on finding these "pre-approved" deals.

Of course, when you do find a property you like, you may not be the only person bidding on it. To improve your chances of winning, make sure your offer is "clean," with as few contingencies as possible (though I would never forego a home inspection). Include tax and credit records, and a mortgage pre-approval letter. If you can afford to pay cash, that will put you in an even stronger bargaining position.

Still, in your eagerness to win the property, don't forget that distressed properties often come with added financial burdens. Although under HAFA, the seller is supposed to provide clear title, to protect yourself your, your contract must make it clear that you will not be responsible for any of the seller's unpaid property taxes, liens or second trusts. Also, cash-strapped homeowners often stop paying taxes and homeowners' association fees during the time between when the house is listed and the deal is closed. To make sure that you're not on the hook for these expenses, Leonard P. Baron, professor of finance at San Diego State University, recommends that you ask that the bank escrow at least six months worth of taxes and HOA fees, to cover any potential shortfall.

Housing Market Could See Beginnings Of A Rebound

There's a lot of bad news about foreclosures and home sales these days, but for people in a good financial position it could be a good time to buy.

Steve and Patricia Kuczek from Bloomfield, New Jersey, are trying to decide if they should make a move.

"What we're looking at, with the tax credit, if this is the time, we should either remodel or go out and look for and buy something new," said Steve Kuczek.

For home buyers in good financial shape, this could be the best season in years.

The federal tax credit – up to $8000 for first-timers, and up to $6500 for current homeowners – will hit a deadline on April 30th.

"With the added incentive of the homebuyer tax credit, there could be some surging activity right as the tax credit deadline approaches," said Lawrence Yun, the chief economist at the National Association of Realtors.

Mortgage rates, which the government has helped keep steady at a low 5 percent, are expected to rise to possibly as high as 6 percent by years end – another reason to buy sooner rather than later.

"The market right now, if you're looking to buy, looks great," said Jay Brinkmann, the chief economist at the Mortgage Bankers Association. "Prices are probably at or near the bottom of what we're going to see, interest rates are only going to be going up at this point, it's a time to move if you've got that option."

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Gov't tries new fix for mortgage crisis

1 in 4 homeowners underwater in their mortgage!!!

The government's bold new plan to stem the foreclosure crisis aims to succeed where previous efforts have fallen flat. Yet just as before, the odds are long, and many struggling borrowers won't qualify.

In theory, the effort unveiled Friday would help millions of troubled homeowners who owe more on their mortgages than their homes are worth, or who are jobless and need a break on their payments.

But it depends on cooperation from investors and bankers, many of whom have been locked in disputes over whether to reduce the debt owed by homeowners.

And just like the bank bailouts, this rescue plan poses risks. If it doesn't slow the wave of foreclosures or if home prices nosedive, the tentative recovery in the housing market could fizzle.

The Obama administration says the plan will help stabilize the real estate market by keeping many borrowers out of foreclosure. If it succeeds, the plan would limit damage to the overall economy.

The new effort is designed to help two groups:

- Borrowers who owe more on their loans than their houses are worth. More than 15 million homeowners fall into this category, according to Moody's Analytics. About 10 million of them owe at least 20 percent more than their house's current value.

Their mortgage companies can cut the total amount they owe, or they can refinance into loans backed by the Federal Housing Administration. FHA will get $14 billion in incentive money from the federal bailout fund.

- Unemployed borrowers. People receiving unemployment benefits would have their mortgage payments cut to no more than 31 percent of their monthly income for three to six months.

That's intended to give homeowners more time to find a job. Once they do, they may qualify for a loan modification that would permanently reduce their payments under the administration's existing $75 billion loan modification program.

The plan aims to help 3 to 4 million borrowers avoid foreclosure - the same target the administration tried to reach with its original plan last year. Even with the changes, the effort will likely prevent no more than 1.5 million foreclosures, estimates Mark Zandi, chief economist at Moody's Analytics.

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Greenspan says U.S. house prices still fragile

MEXICO CITY, March 24 (Reuters) - Former Federal Reserve Chairman Alan Greenspan said on Wednesday U.S. house prices appeared to have bottomed out but were still fragile and that the country would not be out of crisis until prices stabilized.

The collapse in the residential property market contributed to a deep recession and triggered a world financial crisis. While the economy is recovering, worries linger about continued weakness in the housing and labor markets.

"We will not be out of this crisis until home prices truly stabilize in the United States. They appear to have stabilized but they are very fragile," Greenspan, who headed the Fed from 1987 to 2006 said in a television interview.

"Eventually housing will come back, it can't get any lower," said Greenspan in a conversation with Mexico's former Central Bank Governor Guillermo Ortiz.

Ortiz, who left his position after President Felipe Calderon declined to nominate him for another term last December, debuted a new television program on Wednesday where he will sit down with international economic heavyweights like the President of the European Central Bank Jean-Claude Trichet and Brazil's central banker Henrique Meirelles.

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January New Home Sales Data Show Bottom Keeps Moving Lower

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for January showing significant declines on a month-to-moth and year-over-year basis resulting in a new home sales level that is far lower than the supposed "bottom" seen last year.

In fact, the latest data indicates that at 308K annualized units, new home sales is now at the lowest level seen since records have been kept (47 years) and 8.88% lower than the previous lowest low seen in September of 1981.

New single family home sales dropped 2.2% since January and 13% since February 2009 while median prices have increased 5.15% since February 2009.

Additionally, the monthly supply increased to 9.2 months while the median months for sale jumped to 14.4 months.

So much for the “end of the housing decline".

Although many in the traditional media and elsewhere have been treating the government sponsored bounce seen since March 2009 as if it were a solid indication that the bottom was in, those who have followed this data-set for years know that one needs to rely on a mix of multiple metrics along with healthy dashes of skepticism and hunch in order to glean out the true trend.

Needless to say, these must be awfully disappointing numbers for many.

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Existing home sales fall for third straight month raising worries about housing recovery

Sales of existing homes fell for a third straight month in February, pushing sales down to the lowest level since last July. There is concern the fragile housing rebound is faltering, making it harder for the overall economy to recover.

The National Association of Realtors said Tuesday that sales of previously occupied homes dropped 0.6 percent in February to a seasonally adjusted annual rate of 5.02 million.

The weakness in sales depressed prices with the median home price dropping almost 2 percent from a year ago to $165,100.

Sales activity varied across the country. In the Midwest, sales jumped almost 3 percent, and were up more than 2 percent in the Northeast. In the South, sales fell about 1 percent, and were down almost 5 percent in the West.

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Housing Experts Say Real Estate is Recovering

Some of the nation’s top economists believe the housing market has turned and better days are on the way for the housing industry.

Increases in jobs, credit, and affordable homes will overcome impediments such as rising interest rates, and the expiration of the Federal stimulus program to push the housing market toward recovery, says Dean Maki, chief U.S. economist for Barclays Capital.

“I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” says Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College.

“The underlying trend is turning positive,” says Bruce Kasman, chief economist at JPMorgan Chase & Co.

Source: Bloomberg, Kathleen M. Howley and Rich Miller (03/15/2010)

Foreclosure Inventory Is Increasing

The inventory of foreclosed homes that banks are sitting on is rising, threatening to push home prices down further in some parts of the country.

Analysts at Barclays Capital estimated that banks and mortgage investors held about 645,800 foreclosed homes in January, up 4.6 percent from December. That is down significantly from the peak of 845,000 in November 2008.

States with the largest number of foreclosures are Florida, Arizona, Nevada, California, and Michigan.

Source: The Wall Street Journal, James R. Hagerty (03/19/2010)

U.S. Rethinks Roles of Fannie, Freddie

America's $11 trillion home-mortgage market is heading for a makeover.

Mortgage lending in the U.S. relies heavily on institutions set up in the 1930s by politicians and government officials seeking remedies for the Great Depression. Now, bankers say, the current economic crisis will force Congress and the Obama administration to decide how to repair or rebuild those institutions, including Fannie Mae, the Federal Home Loan Banks and the Federal Housing Administration.

The main focus is on the government-backed buyers of home loans: Fannie Mae, created in 1938, and its younger cousin, Freddie Mac, formed in 1970. Heavy losses stemming from mortgage defaults prompted regulators to seize control of the two companies Sept. 6. Though hobbled by those losses, Fannie and Freddie still buy or guarantee more than half of all home loans in the U.S.

The Treasury Department has agreed to provide them capital as needed, and the Federal Reserve said last week that it would spend as much as $600 billion buying debt and mortgage-backed securities issued by Fannie and Freddie over several quarters.

The consensus among both Republicans and Democrats is that the current structure of Fannie and Freddie doesn't work. Though they are owned mainly by private shareholders, they have a public mission to support the housing market. That has led to conflicts between shareholders' desire for maximum profits and congressional demands for more support to the housing industry.

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Housing construction drops 5.9 pct in February

Housing construction fell in February as winter blizzards held down activity in the Northeast and South. The decline highlighted the challenges facing builders as they struggle to emerge from the worst housing slump in decades.

The Commerce Department said Tuesday that construction of new homes and apartments fell 5.9 percent in February to a seasonally adjusted annual rate of 575,000 units, slightly higher than the 570,000 that economists were expecting. January activity was revised up to a pace of 622,000 units, the strongest showing in 14 months.

Economists characterized the February dip as weather-related although they said any housing rebound this year is likely to be modest at best, given a variety of headwinds from record home foreclosures to high unemployment.

"It's tough when you have massive rain and snow storms over a large part of the nation to get much construction activity," said Joel Naroff, chief economist at Naroff Economic Advisors. "I am expecting housing to be a modest addition to economic growth for the rest of the year."

The February weakness reflected a modest 0.6 percent drop in single-family construction, which declined to 499,000 units. The more volatile multifamily sector plunged 30.3 percent to an annual rate of 76,000 units after having surged 18.5 percent in January.

Activity dropped by 9.6 percent in the Northeast and 15.5 percent in the South, two regions hit by snowstorms in February. Building rose by 10.6 percent in the Midwest and 7.9 percent in the West.

Building permits, considered a good barometer of future activity, fell 1.6 percent to an annual rate of 612,000 units, after having fallen a larger 4.7 percent in January.

Paul Dales, an economist at Capital Economics, said the February weakness stemmed from severe winter weather which prevented builders from breaking ground on new projects. But he said the housing outlook remains bleak because of a huge glut of unsold homes, reflecting the weakness in sales and the continued crisis with home foreclosures.

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Dallas-Fort Worth home sales fell 5 percent in February.

North Texas home sales dropped 5 percent in February, the third month in a row that sales by area real estate agents were down from a year ago.

The local home market had rallied in the fall as first-time buyers scrambled to take advantage of a federal tax credit.

The federal incentive program was extended through April and broadened but hasn't caused a similar uptick in year-over-year home sales.

Real estate agents sold 4,099 preowned single-family homes through the Multiple Listing Service last month, according to statistics from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems Inc.

Housing analysts say they still hope the federal tax credit, which Congress extended in November, will cause a bump in sales in the months ahead.

"If we don't see significant pickup starting in March, then the credit likely isn't going to have much impact on the housing market at all, and overall recovery will be slower and dependent on general economic improvement," said Dr. James Gaines, an economist at the Real Estate Center at Texas A&M. "If this situation exists and the sales numbers continue to slide from last year, we're in for a very difficult year."

For the first two months of 2010, home sales in North Texas are down 5 percent compared with the same period of 2009.

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Rate of New Foreclosures Shows Decline

How bad news can turn in a good one.

Rate of New Foreclosures Shows Decline
The national foreclosure rate is moderating with the number of foreclosures in February rising 6 percent compared to February 2009, the lowest year-over-year increase in four years.

Foreclosure filings, including default notices, scheduled auctions, and bank repossessions, were reported on 308,524 U.S. properties during February, a 2 percent decrease compared to January, RealtyTrac also reports.

“The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said RealtyTrac CEO James J. Saccacio.

Saccacio said it was too early to call this the beginning of the end of the foreclosure crisis because of the number of homes in limbo due to government programs and other delays.

The 10 states with the higher foreclosure rates are Nevada, Arizona, Florida, California, Michigan, Utah, Idaho, Illinois, Georgia and Maryland.

Six states account for more than 60 percent of the national total: California, Florida, Michigan, Illinois, Arizona and Texas.

Source: RealtyTrac (03/11/2010)

Recent Uptick in Mortgage Applications

The number of mortgage applications for home purchases increased 5.7 percent last week compared to the previous week on a seasonally adjusted basis and was up 7.2 percent on an unadjusted basis, according to the Mortgage Bankers Association weekly survey.

Overall, mortgage applications rose only 0.5 percent last week. But applications to refinance declined 1.5 percent. Purchase applications were down 10.7 percent compared to the same week a year ago. And the refinance share of mortgage activity was as low as it has been since October 2009.

Mortgage rates increased:

· 30-year fixed-rate mortgages increased to 5.01 percent from 4.95 percent.
· 15-year fixed-rate mortgages increased to 4.32 percent from 4.27 percent.
· 1-year ARMs increased to 6.80 percent from 6.77 percent.

Source: Mortgage Bankers Association (03/10/2010)

HOAs Seek Association Fees from Banks

Condominium and home owners associations desperate for money are experimenting with a tactic called “reverse foreclosure” to force banks to pay association fees.

The process works like this: When a borrower stops paying the mortgage, banks often delay taking the property into foreclosure. When banks delay, neither the former home owner nor the bank is paying association fees.

To remedy this, the association files its own foreclosure notice, taking over the title. The association can’t sell the property because of the bank’s lien on it. So the association goes to court, renounces the property and asks the judge to give the title back to the bank.

When the judge does so, the bank has to pay the fees. Experts say this technique is becoming very popular in parts of the country where there are a lot of foreclosed condos.

Source: Miami Herald, Rachael Lee Coleman (03/07/2010)

Existing-Home Sales Down, Prices Steady

Existing-home sales fell in January but are above year-ago levels, according to the National Association of REALTORS®.

Existing-home sales — including single-family, townhomes, condominiums, and co-ops — dropped 7.2 percent to a seasonally adjusted annual rate of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5 percent above the 4.53 million-unit level in January 2009.

Lawrence Yun, NAR chief economist, said there is still some delay between shopping and closing that affected current sales. “Most of the completed deals in January were based on contracts in November and December. People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales,” he said. “Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”

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