Month: October 2011

Pending home sales up 6% from last year


Thursday, October 27th, 2011, 10:05 am

Pending home sales based on contract signings in September increased 6% from the year before, according to theNational Association of Realtors.

The index is based on signed sales of existing single-family homes, condos and co-ops. The transactions have yet to close, making it a forward-looking projection from the trade group.

Pending home sales were down 4.6% from the month before, but that is a typical seasonal drop. NAR Chief Economist Lawrence Yun blamed a combination of weaker consumer confidence and tighter requirements from banks.

The index showed the highest increase from last year in the Midwest, with pending sales there 12.3% higher than they were last year. The area, however, showed the sharpest monthly decrease at 6.2%.

Pending sales in the Northeast were 4% above the year before, the smallest increase.

Mortgage refinancing to get easier under revised U.S. program

The plan could help 1 million to 2 million people get significantly lower monthly payments in hopes of stabilizing the real estate market.

By Jim Puzzanghera, Don Lee and Alejandro LazoLos Angeles Times Staff Writers
The Obama administration is launching yet another high-profile campaign to shore up the housing market — and with it, the economy — by making it easier for some struggling homeowners to refinance underwater mortgage loans at today’s ultra-low interest rates.

The federal government’s new rules will encourage borrowers to secure new loans no matter how much value their homes have lost during the nation’s housing crisis, with the hitch that they can’t have missed any mortgage payments for the last six months.

The plan could help 1 million to 2 million people get significantly lower monthly payments in hopes of stabilizing the real estate market. On top of that, it would boost the economy by putting about $2,500 more in a typical homeowner’s pocket each year, administration officials said.

But given the huge problems that continue to plague the real estate market, the plan is less a solution to the foreclosure crisis than a firebreak to try to prevent things from getting worse, analysts said. In particular, the program won’t help the 3.5 million borrowers who are seriously delinquent on their loans or are already in default.

“It’s a step forward, but what we need is a leap forward,” saidJohn Taylor, president of the National Community Reinvestment Coalition, an association of organizations that promote access to affordable housing.

The Obama administration has struggled to find a fix for the housing crisis. A program to lure banks to permanently modify mortgages has fallen so far short of its goals thatRepublicans have pushed to kill it. And the refinancing program, designed to help millions of homeowners, has been revised several times in hopes of making it more effective.

Separately, Federal Reserve officials have hinted in recent days that they could launch another program to buy up mortgage-backed bonds in an effort to pull home loan rates lower.

“They keep trying to find something that’s going to work and so far they haven’t found the silver bullet. Arguably there’s no silver bullet,” Bert Ely, an independent banking analyst, said of the Obama administration’s attempts to help the housing market.

“More moderate approaches haven’t worked, so now they’re trying something that frankly is more radical,” he said.

The plan could help borrowers such as James Perry, 36, an editor for a television show who owns two properties that are underwater, meaning he owes more on the mortgages than the homes are worth.

Perry bought a condominium in Santa Monica in 2005, near the height of the market, and rented it out after he couldn’t sell it. Its value has dropped about 6%, he said. He owns a larger home in Tarzana for his growing family, and its value has plunged nearly 20%.

Refinancing both properties could save him about $400 a month, Perry said. “I am not a rich guy, so $400 a month will help,” he said. “I have two kids. I would like to put that toward some college savings, and it would just make for a little more breathing room. We are not in any sort of trouble, but an extra $400 a month will obviously make us happier.”

Perry said he tried refinancing the Santa Monica home about a year ago, paying about $500 for the appraisal, but the home’s value didn’t allow him to qualify for a low rate. Given that experience, he didn’t bother trying to refinance the Tarzana home.

The plan announced Monday amounts to a sweeping overhaul of the 2½-year-old Home Affordable Refinance Program, easing rules and reducing fees to allow many more homeowners potentially to take advantage of historically low mortgage rates. Through August, the program had helped 894,000 homeowners refinance.

The revisions include lifting a ceiling that barred participation by borrowers who owed more than 125% of the value of their homes, and using a controversial modeling method to replace costly appraisals that are among the fees that have kept some homeowners from refinancing.

“These are important steps that will help more homeowners refinance at lower rates, save consumers money and help get folks spending again,” President Obama said in touting the changes during an appearance in Las Vegas on Monday.

Nevada, California and Florida are among the states hit hardest by the subprime housing bubble crash.

About 14.6 million mortgages nationwide were underwater at the end of the first quarter, about 29% of the nearly 51 million residential mortgages nationwide, according to Moody’s Analytics andEquifax. The rate was higher in California, where about 2.1 million mortgages are underwater, a third of the state’s 6.3 million mortgages.

Perry’s refinancing problems were typical, mortgage experts said. Even though HARP allows underwater homes to qualify, banks usually won’t refinance a loan in which the borrower owed more than 105% of the value.

Southland Home Sales Up – Barely – from Year Ago, Median Price Dips Again

October 13, 2011


La Jolla, CA—Southern California home sales dropped last month from August, as they normally do, and eked out a tiny gain from a year earlier as bargain hunting below $300,000 remained relatively strong. Home prices continued their sideways-to-downward slide, with the region’s median sale price falling below the year-ago level for the seventh consecutive month, a real estate information service reported.

A total of 18,149 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in September. That was down 7.7 percent from 19,654 in August and up 0.3 percent from 18,091 in September 2010, according to San Diego-based DataQuick.

It’s normal for home sales to drop between August and September, partly because many home buyers try to close their deals before school starts in late summer. On average, sales have fallen 8.3 percent between August and September since 1988, when DataQuick’s statistics begin.

September sales have varied from a low of 12,455 in 2007 to a high of 37,771 in 2003. Last month’s sales were 25.3 percent below the September average of 24,310 transactions since 1988.

“Last month’s Southland sales weren’t great but, like some other economic indicators of late, they came in a bit higher than some might have expected. Holding steady with a year ago isn’t so bad when you consider the hits the housing market has taken in recent months, including a big psychological blow from a tanking stock market in early August. Part of what’s keeping demand afloat is improved affordability thanks to ultra-low mortgage rates and lower home prices. We’ll have to wait and see what impact the lower conforming loan limits, which took effect recently, will have in some of the higher-priced markets,” said John Walsh, DataQuick president.

The median price paid for all new and resale Southland houses and condos purchased last month was $280,000. That was up 0.4 percent from $279,000 in August but down 5.2 percent from $295,500 in September 2010.

The regional median has declined year-over-year for the past seven months – since March. The last time any one of the six Southland counties posted an annual gain in its median sale price was in January, when San Bernardino logged a 1.0 percent year-over-year increase.

Last month’s median was 13.4 percent higher than the median’s low point in the current real estate cycle – $247,000 in April 2009 – but was 44.6 percent lower than the peak $505,000 median in mid 2007. The peak-to-trough drop was due to a decline in home values and a shift in sales toward lower-cost homes, especially inland foreclosures.

Today’s median price is also undermined by the Southland’s extraordinarily weak new-home market. Sales of newly built homes, which typically sell for more than resale homes, totaled 1,056 last month, down 24.9 percent from a year ago and the lowest for the month of September in DataQuick’s records back to 1988.

The focus for many buyers continues to be on the region’s most affordable resale homes, often located in areas hit hardest by distressed property sales and price declines. Compared with a year earlier, September home sales fell in the middle and upper price ranges but rose 5.6 percent in the below-$300,000 market. Sales of homes priced $300,000 to $800,000 fell 9.3 percent year-over-year, while sales over $800,000 fell 10.4 percent from September 2010.

Many of the sub-$300,000 deals were distressed properties, which accounted for more than half of the Southland resale market last month. Nearly one out of three homes resold last month was a foreclosure, while close to one in five was a “short sale.”

Foreclosure resales – properties foreclosed on in the prior 12 months – made up 32.3 percent of the Southland resale market in September, down from 32.4 percent in August and 33.6 percent a year earlier. Last month’s figure was the lowest since January 2008, when foreclosure resales were 28.6 percent. They peaked at 56.7 percent in February 2009.

Short sales, where the sale price fell short of what was owed on the property, made up an estimated 18.5 percent of Southland resales last month. That was up from 17.5 percent in August and 16.1 percent a year ago. Two years ago the estimate was 15.3 percent.

Tight credit conditions didn’t let up last month, meaning demand continues to be constrained in mid- to high-end markets that had long relied on adjustable-rate and “jumbo” home loans.

Last month adjustable-rate mortgages (ARMs) accounted for 7.4 percent of all Southland home purchase loans, down from 8.7 percent in August but up from 5.5 percent a year ago. The average monthly ARM rate over the past decade is about 37 percent.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.8 percent of last month’s purchase lending, up from 17.2 percent in August but down from 18.1 percent a year earlier. In the current cycle, jumbos fell in early 2009 to less than 10 percent of the Southland purchase market. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for 40 percent of the purchase loan market.

In lower-cost Southland markets, much of the activity continues to be fueled by government-insured FHA loans, a popular low-down-payment choice among first-time homebuyers. FHA loans accounted for 32.5 percent of purchase mortgages in September, up slightly from 31.8 percent in August but down from 34.8 percent a year earlier.

Meanwhile, many buyers continue to skip a home loan and use cash.

Southland buyers paying cash accounted for 28.5 percent of total September home sales, paying a median $210,000. Last month’s cash buyer level was down slightly from 29.1 percent in August but up from 26.2 percent a year earlier. Cash purchases hit a high of 32.3 percent of sales this February, while the 10-year monthly average is about 14 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.

Last month 52.9 percent of those paying cash were absentee buyers, meaning they were investors or second-home buyers.

All absentee buyers – those using cash or a mortgage – purchased 24.3 percent of the Southland homes sold in September, paying a median $202,000. Absentee buyers made up 24.8 percent of sales in August and 21.4 percent in September 2010. The absentee share of the market peaked this February at 26.4 percent. Over the last 10 years, absentee buyers purchased a monthly average of 16.7 percent of all homes sold.

Nearly 59 percent of absentee buyers paid cash in September.

Last month 19.8 percent of all sales were for $500,000 or more, down from 20.1 percent in August and down from 21.6 percent a year earlier. The low point for $500,000-plus sales in this cycle was in January 2009, when only 13.8 percent of sales were above that price threshold. Over the past 10 years, a monthly average of 27.5 percent of homes sold for $500,000-plus.

An alternative method of tracking sales by price segment suggests mid- to high-end activity now accounts for a fairly normal share of total sales compared with recent history. Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 37.1 percent of total sales last month, compared with a 10-year monthly average of 36.8 percent. Last month’s figure was down slightly from 37.2 percent in August but up from 36.0 percent a year ago. These higher-cost zips codes’ contribution to overall sales hit a low of 26.8 percent in January 2009.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,084 last month, down from $1,101 in August and down from $1,177 in September 2010. Adjusted for inflation, current payments are 53.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.9 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last few years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Sales Volume Median Price
All homes Sep-10 Sep-11 %Chng Sep-10 Sep-11 %Chng
Los Angeles 6,070 6,185 1.90% $340,000 $310,000 -8.80%
Orange 2,524 2,510 -0.60% $445,000 $425,000 -4.50%
Riverside 3,292 3,303 0.30% $200,000 $191,000 -4.50%
San Bernardino 2,454 2,295 -6.50% $160,000 $150,000 -6.30%
San Diego 3,069 3,084 0.50% $330,500 $315,000 -4.70%
Ventura 682 772 13.20% $370,000 $349,000 -5.70%
SoCal 18,091 18,149 0.30% $295,500 $280,000 -5.20% 

Axelrod calls for fairer mortgage finance, support of Cordray for CFPB, by JACOB GAFFNEY
Tuesday, October 11th, 2011

David Axelrod, former senior adviser to President Obama, said repairing housing and a creating fairer mortgage finance system would help ease the anger and frustration the country has with Wall Street as the economy remains stagnant.

“America and the American people need a strong financial system — a need you provide,” he said, making his comments Tuesday at the Mortgage Bankers Association annual conference in Chicago.

The mortgage finance system must be completely transparent, he said. Further, the frenzied packaging of toxic subprime mortgages into securities, as he put it, contributed greatly to the economic downturn and should have been prevented.

And while he doubts such mortgages will return, he called for fair lending standards.

“Loans need to be given on terms borrowers can understand and afford,” he said, adding some borrowers share the blame for agreeing to these problematic mortgages.

One way to help this along, he said, is with the immediate appointment of Richard Cordray as head of the Consumer Financial Protection Bureau.

“There is little energy in real estate reform,” said Jeb Bush, former governor of Florida. “Businesses have got too timid in pushing themselves. People are marching on CEOs in New York. Stand up for yourself,” he advised the crowd, in a reference to Occupy Wall Street, a three-week protest in Manhattan in which protesters promised Tuesday to march outside the homes of wealthy CEOs in New York.

Bush said the mortgage business needs to be more aggressive with promoting solutions to the housing crisis. He also criticized the sheer bulk of the Dodd-Frank financial reform to loud applause.

Axelrod said calls to reduce regulation in order to drum up business should be clearly thought out.

“Simply filing reforms under the guise of protecting the economy is not going to fly,” he said. “The American people demand solutions that, at the core, demand the security they have lost.”

He also said government-sponsored enterprises remain part of the housing finance problem.

“We have to end Fannie and Freddie as we know them,” Axelrod said. “There is no reason Fannie and Freddie should own 300,000 homes.”

Axelrod added that a bulk REO sales might work, if lenders let investors buy the home for rentals. “We need to take advantage of these low interest rates,” he said.

Review of Foreclosure Mistakes Is Set By Nick Timiraos and Ruth Simon | October 4, 2011

Millions of current and former homeowners will have a chance to get their foreclosure cases examined to determine whether they should be compensated for banks’ mistakes, under a wide-ranging review being planned by federal regulators.

 The review process, which could be unveiled in the next few weeks, will be open to borrowers who were in some stage of foreclosure in 2009 or 2010. Estimates prepared by the Office of the Comptroller of the Currency, which will oversee the review, indicate that 4.5 million borrowers could be eligible for review.

John Walsh, acting head of the OCC, unveiled some aspects of the plan in a speech last month to banking executives, when he said the agency was exploring “the best means of ensuring that injured homeowners had the opportunity to seek relief,” when they were harmed by lender improprieties.

The process will include a broad public-outreach campaign, including direct mail to eligible borrowers and a single website and toll-free number. The reviews will be conducted by independent third-party companies that were hired earlier this year by 14 banks that signed consent orders in April with the OCC and the Federal Reserve. The regulators had to sign off on the selection of these companies.

“It’s a substantial undertaking at great expense to the banks,” said Tim Rood, a partner at Collingwood Group, a housing-finance consulting firm.

Borrowers who are determined to have suffered “financial injury” could be eligible for compensation that would be determined on a case-by-case basis by the third-party firms. Borrowers will have to request reviews before a cutoff date, likely to fall near the end of the first quarter of 2012. It hasn’t been determined whether borrowers that accept restitution would have to agree to surrender related legal claims.

Regulators declined to provide estimates of the amount of money that injured borrowers might receive or how much the program might cost lenders.

However, few if any borrowers are expected to have foreclosures overturned.

The review process is one of several continuing efforts to address disclosures that surfaced a year ago over banks’ use of “robo-signers,” bank employees who signed off on huge numbers of legal foreclosure filings daily and falsely claimed in the documents to have personally reviewed each case. The disclosures prompted some judges to question the veracity of other bank foreclosure practices.

The process is separate from the months-long talks between federal agencies, state attorneys general and banks to reach a multibillion-dollar settlement over foreclosure abuses. That effort took a big step backwards Friday, when California Attorney General Kamala D. Harris called the deal “inadequate” and pulled out of the settlement talks.

The loss of California could cripple any settlement because the state has among the nation’s highest volumes of foreclosures. Banks are less likely to agree to the $25 billion price tag pushed by federal and state officials without the participation of California. Banks, federal officials and state attorneys general are set to resume meetings in Washington on Tuesday.

Representatives for both sides said they still hope to reach an agreement despite Friday’s setback. The banks “remain committed to the dialogue and continue to believe that a global settlement would be an effective means of supporting the recovery of the housing market and helping to strengthen the economy,” said one person familiar with the banks’ thinking.

“We are still full-steam ahead,” said a spokesman for Iowa Attorney General Tom Miller, who is spearheading the 50-state negotiations. “With or without some states, we are still moving forward.”

Borrowers who suffered ‘financial injury’ could be eligible for compensation. Here, a foreclosure sign hangs in front of a house in Canton, Mich., in March.

In the OCC review process, financial injury could cover a wide range of misrepresentations or errors committed by mortgage companies, according to people familiar with the process.

Banks could be liable if they miscalculated mortgage payments or applied impermissible fees or penalties. A handful of borrowers have alleged that mortgage-servicing companies, for example, improperly placed expensive insurance coverage onto their mortgage, pushing them into default and preventing them from becoming current with their payments.

Borrowers may be able to receive compensation if the review finds that the bank moved a borrower to foreclosure while the bank was receiving partial payments as part of a trial or permanent loan modification. Compensation might also be due if borrowers provide evidence that they provided the necessary documentation required to qualify for a modification but were denied the modification.

A separate report to be released on Tuesday raises new questions over Fannie Mae‘s oversight of the attorneys that conduct foreclosures on its behalf. The report, from the inspector general for the Federal Housing Finance Agency, faulted Fannie for inadequate oversight of those firms

Since 2008, Fannie has required its mortgage servicers to use designated law firms that are part of its “retained attorney network.” The network arrangement allows Fannie to negotiate discounted rates with approved firms, which in turn can lock in business from the nation’s largest mortgage investor.

The report said that in June 2010, the FHFA conducted a two-day field visit to Florida, where it found that “documentation problems were evident and law firms…were not devoting the time necessary to their cases due to Fannie Mae’s flat fee structure and volume-based processing model.”

FHFA staff subsequently informed senior Fannie officials that its attorneys were “increasingly unprepared when they enter the courtroom,” leading to a larger backlog of foreclosures.

Fannie Mae declined to comment on the report.

Rate on 30-year mortgage falls to record 4.01 pct.

DEREK KRAVITZ, AP Real Estate Writer, Sep. 29, 2011

In this photo taken Sept. 27, 2011, a real estate sign is posted outside a newly listed home for sale, in Cincinnati. Fixed mortgage rates have fallen to historic new lows for a fourth straight week and are likely to fall further. Freddie Mac says the average on a 30-year fixed mortgage fell to 4.01 percent this week. That’s the lowest rate since 1951. (AP Photo/Al Behrman)

WASHINGTON (AP) — Fixed mortgage rates have fallen to historic new lows for a fourth straight week and are likely to fall further.

The average on a 30-year fixed mortgage fell to 4.01 percent this week, Freddie Mac said Thursday. That’s the lowest rate since the mortgage buyer began keeping records in 1971. The last time long-term rates were lower was in 1951, when most long-term home loans lasted just 20 or 25 years.

The average on a 15-year fixed mortgage, a popular refinancing option, ticked down to 3.28 percent. Economists say that’s the lowest rate ever for the loan.

Mortgage rates tend to track the yield on the 10-year Treasury note. Rates could fall further after the Federal Reserve announced last week that it would take further action to try to lower long-term rates.

But low rates have so far done little to boost home sales or refinancing. Many would-be buyers or homeowners don’t have enough cash or home equity to get a new loan.

High unemployment, scant wage gains and debt loads represent a heavy burden for many people. Others can’t qualify. Banks are insisting on higher credit scores and 20 percent down payments for first-time buyers.

This year is shaping up to be among the worst for sales of previously occupied homes in 14 years. Few are buying, even though the average rate on the 30-year fixed mortgage has fallen to around 4 percent.

Most people must also pay extra fees to get the low mortgage rates. Those fees are known as points; one point equals 1 percent of the loan amount.

The average fee for the 30-year held steady at 0.7; for the 15-year, it rose to 0.7. The average fee for both the five-year and one-year adjustable-rate loans was unchanged at 0.6 point.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage was unchanged at 3.02 percent. The average for the one-year adjustable-rate mortgage ticked up to 2.83 percent.

Associated Press