Month: September 2010

JPMorgan halts 50K foreclosures for possible flaws

WEDNESDAY SEP 29, 2010

BY JANNA HERRON AND ALAN ZIBEL, ASSOCIATED PRESS

JPMorgan Chase has temporarily stopped foreclosing on more than 50,000 homes so it can review documents that might contain errors.

JPMorgan’s move Wednesday makes it the second major company to take such action this month, underscoring a growing legal problem. The issue could stall an already overloaded foreclosure process.

Still, analysts don’t expect the delays to reduce the number of foreclosures over the long run.

“It will probably slow things down for a couple months while these documents are reviewed,” said Rick Sharga, a senior vice president at foreclosure listing service RealtyTrac Inc. “It won’t stop things.”

But if the problems turn up at more of the largest mortgage companies, a foreclosure crisis that’s already likely to drag on for several more years could persist even longer.

GMAC Mortgage LLC last week halted certain evictions and sales of foreclosed homes in 23 states to review those cases. The company said it found procedural errors in some foreclosure affidavits.

After GMAC’s announcement, attorneys general in California and Connecticut told the company to stop foreclosures in their states until it proves it’s complying with state law. The Ohio attorney general this week asked judges to review GMAC foreclosure cases. And in Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases.

The issue is also gaining attention on Capitol Hill. Last week, Rep. Barney Frank, D-Mass. and two other lawmakers wrote to Fannie Mae, urging the government-controlled mortgage giant to stop working with so-called “foreclosure mill” law firms under investigation for document fraud.

“Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes?” the lawmakers wrote.

A Fannie Mae spokesman said the company is reviewing the issue.

JPMorgan acknowledged Wednesday that its employees signed some affidavits about loan documents without personally verifying the files. These affidavits verifies the accuracy of the loan information, including who owns the mortgage.

JPMorgan spokesman Kelly said the bank believes the information in the affidavits is accurate, and that the affidavits were prepared by “appropriate personnel.”

The bank asked judges not to enter judgments against homeowners facing foreclosure until it completes its review of the problem. JPMorgan expects the process to take a few weeks.

The way mortgages are packaged and sold to many investors as securities can make it hard to determine who has the right to foreclose on a homeowner.

In some states, lenders can foreclose quickly on delinquent mortgage borrowers. But 20 states use a lengthy court process for foreclosures. They require documents to verify information on the mortgage, including who owns it. Florida, New York, New Jersey and Illinois are the biggest states with this process.

Christopher Immel, a Florida lawyer who represents homeowners, said people who already have lost homes could sue their lender, alleging errors in documents.

In August, a judge in Duval County, Fla., ruled that JPMorgan could not foreclose on two homeowners. The reasoning was that Fannie Mae carried the mortgage on its books and JPMorgan Chase only collected payments on the loan. JPMorgan Chase had identified itself as the owner of the loan.

More lawsuits could come soon.

In May, JPMorgan employee Beth Ann Cottrell said in a deposition that she and her staff of eight signed about 18,000 legal documents a month without reviewing every file. In a similar testimony, GMAC employee Jeffrey Stephan said he signed 10,000 documents a month without personally verifying the mortgage information.

“It’s very realistic to believe that this is a standard practice in how they go about foreclosures in certain states,” said Immel, whose law firm took Cottrell’s and Stephan’s depositions.

Forecast: O.C. home prices up 2.2% in year

by Jon Lansner, Lansner on Real Estate Blog

Orange County home prices will rise 2.2% in the year ended September 2011, according to the latest forecast from housing tracker Veros from Santa Ana.

Eric Fox, Veros’ economic modeling VP, says “affordability is the driver” that will keep local housing prices up. Previously, Veros’ forecast that home price will be up 1.8% in the year ending June 2011.

To Fox, local home affordability – a mix of depressed values and cheap mortgage rates — will largely offset the area’s weak job market. Fox also think rent-seeking investors will play a big role in supporting local home prices, as these cash-rich buyers won’t have the tall hurdles — overall angst or loan qualification challenges — that currently chill some buyers seeking their own shelter.

Nationwide, the strongest major markets by Veros’ forecasting math in the year ending September 2101 will be …

  1. Houston, +3.8%
  2. Dallas-Fort Worth, +2.7%
  3. Amarillo, Texas,, +2.7%
  4. Anchorage, +2.7%
  5. Davenport, Iowa, +2.7%

Fox says in the report: “Texas is looking strong, with four of the top ten markets in the appreciation forecast … California markets are less robust than in previous quarterly updates, but remain steady.”

The weakest in Veros’ forecast for the 12 months anding Sptember 2011?

  1. Port St. Lucie, Fla., -7.2%
  2. Reno, -7.0%
  3. Orlando, -6.3%
  4. Las Vegas, -6.1%
  5. Deltona, Fla.  -6.0%

Fox offer a glimmer of hope for these markets, saying “Reduced depreciation rates are better news for Florida and Nevada.”

Overall, Fox concludes: “There are tangible indications that things are getting better as time moves on.”

http://lansner.ocregister.com/2010/09/29/forecast-o-c-home-prices-up-2-2-in-year/83088/

Home prices up, but growth rate slows

Home prices up, but growth rate slows
 
By Les Christie, CNNMoney.com
September 28, 2010
 

NEW YORK (CNNMoney.com) — Home prices have risen for five straight months, but the rate of growth has slowed, according to an industry report released Tuesday.

Prices inched up 0.6% in July compared with June, according to S&P/Case-Shiller 20-city home price index. On a year-over-year basis, prices rose 3.2% compared with July 2009.

Experts polled by Briefing.com had forecast a year-over-year rise of 3.3%. S&P’s 10-city index has gained 4.1% over that period.

The weak readings reveal the ongoing strife in housing markets. Sales of both new and existing homes are well below the the standards set during the housing boom years. New home sales have been running at or near record lows.

“Anyone looking for home prices to return to the lofty 2005-2006 levels might be disappointed,” said David Blitzer, spokesman for Standard and Poors. “Judging from the recent behavior of the housing market, stable prices seem more likely.”

Half the 20 cities have recorded gains over the past year, led by San Francisco, where prices have risen by 11.2%.

Las Vegas is the only market to have hit a new low during July. Prices there fell 0.8% from a month earlier and were down 4.9% from 12 months ago. The loss from the price peak, set in August 2006, was 57%.

Ally Financial legal issue with foreclosures may affect other mortgage companies

By Ariana Eunjung Cha
Washington Post, Wednesday, September 22, 2010

Some of the nation’s largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork – an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

The legal predicament compelled Ally Financial, the nation’s fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now it appears hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

As head of Ally’s foreclosure document processing team, 41-year-old Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.

In a sworn deposition, he testified that he did neither.

The reason may be the sheer volume of the documents he had to hand-sign: 10,000 a month. Stephan had been at that job for five years.

How the nation’s foreclosure system became reliant on the tedious work of a few corporate bureaucrats is still a matter that mortgage lenders are trying to answer. While the lenders may have had legitimate cause to foreclose, the mishandling of the paperwork has given homeowners ammunition in their fight against foreclosure and has drawn the attention of state law enforcement officials.

Ally spokesman James Olecki called the problem with the documents “an important but technical defect.” He said the papers were “factually accurate” but conceded that “corrective action” may have to be taken in some cases and that others may “require court intervention.”

Olecki said the company services loans “from hundreds of different lenders,” but he declined to provide names.

Spokesmen for Fannie and Freddie confirmed Tuesday after inquiries from The Washington Post that they use Ally, formerly called GMAC, to oversee some mortgages. The companies have launched internal reviews to assess the scope of any potential issues.

Ally, Fannie and Freddie – all troubled mortgage companies that received extraordinary bailouts by the federal government during the financial crisis – declined to say how many loans might be affected. The Treasury Department, which owns a majority stake in Ally and seized Fannie and Freddie in 2008, also declined to comment.

Fannie and Freddie, created by Congress to finance mortgages and encourage homeownership, have in recent years been repossessing houses at record numbers. Fannie alone reported recently that 450,000 of its single-family loans were seriously delinquent or in the foreclosure process as of June 30. That’s nearly 5 percent of the loans it guarantees.

Lawyers defending homeowners have accused some of the nation’s largest lenders of foreclosing on families without verifying all of the information in a case, but it has been hard for them to stop foreclosure proceedings.

Ally’s moratorium comprises only the 23 states – none in the Washington area – that mandate a court judgment before a lender can take possession of a property. But if Stephan signed documents related to foreclosures in states without this requirement (it’s unclear whether he did), it could help a much broader range of borrowers.

Iowa Assistant Attorney General Patrick Madigan, chair of a national foreclosure prevention group composed of state attorneys general and lenders, said the fallout from the Ally review could be enormous because Stephan’s actions could be considered an unfair and deceptive practice.

“If servicers are submitting court documents that aren’t true or that have not been verified, that is of great concern,” Madigan said.

Stephan’s job at Ally was arguably one of the least enviable in the mortgage business: formally signing off on foreclosure papers that his company would submit to the courts to get approval to evict delinquent homeowners and resell their homes.

From his office in suburban Philadelphia, Stephan oversaw a team of 13 employees that brought documents to him for his signature at a rapid clip. Stephan did not respond to messages left at his work and home.

His official title was team leader of the document execution unit of Ally’s foreclosure department, but consumer advocates call him the company’s “super robot signor” or “affidavit slave.”

In sworn depositions taken in December and June for two separate court cases involving families trying to keep their homes, Stephan revealed his shortcuts when reviewing the files. He said he would glance at the borrower’s names, the debt owed and a few other numbers but would not read through all the documents as legally required. He would then sign them. The files were packed up in bulk and sent off for notarization several days later.

Stephan testified he did not know how the “summary judgment” affidavits he signed were used in judicial foreclosure cases.

At the rate Stephan was reviewing files, if he worked an eight-hour day he would have had an average of only 1.5 minutes for each document.

“A ridiculous amount of time for something so critically important,” said Thomas Cox, an attorney in Maine who was one of those who deposed Stephan. He added that Maine and Florida law enforcement officials are investigating the matter.

Stephan was the only employee signing papers for foreclosures that were to be submitted to courts that did not involve bankruptcies. The latter cases, which were more complex, were handled by a separate department.

Olecki said Stephan still works for Ally but added, “We cannot comment further about his position.”

While several large lenders contacted by The Post declined to talk about the document review process for foreclosures, attorneys working on behalf of homeowners said the setup at Ally was not unusual.

Christopher Immel, an attorney in Florida who deposed Stephan for a case in Palm Beach County, said he thinks Stephan was not a rogue employee but one that was performing his job responsibilities as the company told him to do.

“GMAC has a business model to do this, and Stephan was just one small part of it,” Immel said. “He was under the impression it was okay to do this.”

Where Is the Shadow Inventory?

Realtor.org  September 17, 2010

For the last year, the real estate industry has been talking about shadow inventory and the coming flood of distressed properties. Where are they?

Here’s what’s happening, according to a recent paper by Alan Mallach, a senior fellow the Brookings Institution:

· Some delinquencies have been resolved through loan modifications or people working out the problems on their own.
· Banks are getting better at managing short sales.
· Investors are aggressively buying up properties, sometimes in bulk, directly from the banks or at courthouse auctions so they don’t hit the market.

The likeliest outcome, Mallach predicts, is a steady flow of foreclosures over a long timeframe that will prevent another crash in home prices, but will probably lead to low or no appreciation in home prices.

Source: The Wall Street Journal, Nick Timiaros (09/16/2010)

A housing rebound? Yes, it’s possible.

Fortune, September 17, 2010

Nin-Hai Tseng

Despite continued discouraging data from the real estate sector, a few bullish arguments are beginning to emerge. One MIT economist even believes that demand for new homes exceeds residential construction.

At a time of slumping home sales and a glut of unsold inventory, it’s hard to imagine how anyone could form a bullish take on the troubled U.S. housing market. Even though home prices have risen slightly in recent months, experts in charge of Standard & Poor’s Case-Shiller index, a crucial indicator of the health of the housing market, warned as recently as last month that the market remains weak. And some analysts think home prices could fall further by 15% to 20%.

But talk about real estate has shifted somewhat lately. It looks as if the contrarian view of the housing market is beginning to gain traction, if ever so slightly.

Credit Suisse says the worst is behind us and that fear of another hit on the housing market is just overreaction. The bank offers a few factors that could help home prices from here on out, including government support of about 70% of home mortgages that will likely keep prices from revisiting the nerve-wracking plunges seen in 2007 and 2008. Also, The Wall Street Journal’s Brett Arends earlier this week listed 10 reasons to buy a home, countering a recent Time Magazine cover story earlier this month that questioned the pros of homeownership. Arends lists everything from record low mortgage rates to savings on taxes to guarding against inflation.

All are worth noting, but one of the more striking bullish arguments come from an economist at Massachusetts Institute of Technology’s Center for Real Estate. Bill Wheaton, who thinks the housing market is poised to make a strong comeback, calls home construction “a sleeping giant that is about to wake up.”

Wheaton thinks much of the excess home inventory would either be sold, occupied or other otherwise absorbed by 2013. But from 2011 onward, demand should return to pre-recession levels. What’s more, he says, the recovery of home construction could boost overall GDP at levels unseen during recoveries after previous recessions, with the exception of the massive building that happened right after World War II.

Not just a comeback, but a strong one

“Housing construction will not only rise, but it will stay high for a while, which didn’t happen in previous recoveries,” Wheaton says, commenting on a paper he wrote for the center in 2009. “It won’t just be a one or two year blip.”

So is Wheaton really onto something, especially at a time when so many people are jobless and housing units sit empty — an unknown number of which could eventually fall to foreclosure?

The crux of Wheaton’s argument lies in the rate of residential construction today. It’s been historically low – so low that he believes demand is actually exceeding the level of building going on. This helps set the grooves for a relatively large comeback in residential investment.

Here’s how Wheaton backs the imbalance of demand for housing units and residential construction.

He estimates that housing demand in 2009 was at about 1.1 million units – more than twice construction at the time. At this rate, the excess inventory will eventually be absorbed. “It’s going to be a long time before construction picks up with demand,” Wheaton says, adding that this should help housing prices. Foreclosures won’t stop anytime soon, he says, but demand will return to a more normal level, clearing out the inventory and eventually sparking more new construction.

Housing construction could hugely drive America’s economic growth over the next few years, Wheaton says. Residential investment as a share of GDP is relatively small, averaging about 3% to 4%. But given that there’s so little building going on today, it’s plausible housing construction could add an average of 0.7% to GDP growth per year over five years – a level far greater than what has been seen during recoveries of previous downturns.

Some might think Wheaton sounds way too bullish given what most experts are saying about America’s housing rut. He could be wrong. He might only be half-right. But the bull’s side is worth hearing as much as the bear’s.

Foreclosure rates hold steady

CNNMoney

By Les Christie, September 16, 2010  CNNMoney.com

NEW YORK (CNNMoney.com) — The foreclosure crisis has entered a new phase: The number of properties entering the foreclosure process has dropped, and now nearly matches the number of repossessions.

The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes.

But lenders repossessed more than 95,000 homes — a record — and that was up from 76,000 a year ago.

RealtyTrac spokesman, Rick Sharga, said the initial default rate should be higher, given the numbers of borrowers who have missed one or two payments. Normally, when a third payment is missed, lenders take immediate action.

“It appears that lenders are allowing delinquencies to go on longer before they issue notices of default,” he said.

Lenders may delay filing for a couple of reasons. In some cases, a notice of default puts lenders on the clock; regulations force them to foreclose within a certain time frame, sometimes before they want to.

Second, borrowers might vacate their homes when they receive default notices, leaving the houses empty, subject to vandalism, and forcing lenders to take over the expense of maintaining them.

However, once lenders have begun the initial foreclosure process, they are moving quickly to repossession.

That’s in part because as housing markets have improved, as it has in California, lenders are able to resell foreclosed homes more quickly and avoid further losses.

In other markets, according to Sharga, they may take homes back but not necessarily put them on the market again right away. That may represent a deliberate effort to manage the flow of foreclosures to prevent further erosion of home prices.

Not only would a flood of properties and lower prices hurt lenders’ profits, it would leave more mortgage borrowers owing more than their homes are worth. As more homeowners plunge underwater, more would default, causing a new round of home price drops and still more foreclosures.

For the 44th straight month, Nevada led all states in the rate of foreclosure filings. One in every 84 households there received some kind of filing during the month, more than four times the national average.

The other “sand states,” Florida (one in 155 households), Arizona (one in 165) and California (one in 194) followed in a familiar foreclosure pecking order.

All of the top 10 metro area hot spots recorded drops in foreclosure activity during August. In the worst hit city, Las Vegas, filings dropped 25% year-over-year but still came to one for every 73 households.

Modesto and Stockton, both medium-sized cities in California’s Central Valley, closely trailed Las Vegas in filing rate. Rounding out the first five metro areas were Cape Coral and Miami.