Month: February 2012

FHFA launches pilot REO property sales

By Justin T. Hilley

February 27, 2012

The Federal Housing Finance Agency announced Monday the first pilot transaction under the Real Estate-Owned Initiative, whereby the government will take bids on government-sponsored enterprise REO.

The agency will take bids on nearly 2,500 properties in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and Florida.

Prequalified investors can submit applications to demonstrate their financial capacity, experience and specific plans for purchasing pools of Fannie Mae-foreclosed properties. Investors must rent out the purchased properties for a specified number of years.

U.S. pending home sales near a 2-year high in Jan

updated 2/27/2012
WASHINGTON — Signed contracts for U.S. home resales rose to a nearly two-year high in January, an industry group said on Monday, further evidence of a budding recovery in the housing market.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in January, increased 2 percent to 97.0 – the highest reading since April 2010.

December’s reading was revised down to 95.1 from a previously reported 96.6.

Economists polled by Reuters had expected signed contracts, which lead existing home sales by a month or two, to rebound 1.0 percent after a previously reported 3.5 percent fall. Contracts signed were up 8.0 percent in the 12 months to January.

A nascent recovery is under way in the housing market, with the supply of both new and previously owned homes on the market being whittled down in recent months.

But with the foreclosure tide yet to recede and continuing to depress prices, recovery will be a long, drawn-out affair. (Reporting by Lucia Mutikani; Editing by James Dalgleish)

Home prices at lowest point in more than 10 years

By Chris Isidore @CNNMoney February 22, 2012

chart-home-sales.top.gif

NEW YORK (CNNMoney) — Home prices fell to their lowest point in more than a decade in January, which helped to lift the pace of home sales, according to a report from an industry trade group.

The National Association of Realtors reported that the median home price in January fell 2% from December to $154,700. That’s the lowest price reading since November 2001, before the run-up in home prices that became known as the housing bubble.

The median price is the point at which half of homes are sold for a higher price, and half are sold at a lower price. (Multi-million dollar foreclosures)

Serving as a drag on existing home prices is a large inventory of homes in foreclosure. Distressed home sales, which includes homes in foreclosure and so-called short sales in which the home is sold for less than what is owed on the mortgage, made up 35% of sales in January.

“Prices will continue to fall through the first half of 2012 due to the high share of distressed sales,” said Stuart Hoffman, chief economist with PNC Financial. “The recent agreement between the big mortgage servicers, state attorneys general and the Obama administration will also result in more homes going to foreclosure over the next few months, adding to downward pressure on prices.”

But the pace of sales rose to the highest level since May of 2010, helped by the low prices and rock-bottom mortgage rates. The seasonally-adjusted annual sales pace of 4.57 million homes was up slightly from the revised 4.38 million in December. The last time homes sold at that pace, buyers were rushing to qualify for an $8,000 homebuyer’s tax credit that was about to expire. The latest reading was roughly in line with the expectations of economists surveyed by Briefing.com.

“The uptrend in home sales is in line with all of the underlying fundamentals — pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” said Lawrence Yun, chief economist for the Realtors.

The housing market has been showing signs of recovery in recent months. The combination of low mortgage rates and a decline in home prices means homes are more affordable than they’ve been in decades. PNC’s Hoffman agreed that the report is a further sign of recovery in the market, although he cautioned “it will remain a long process.”

New home starts by builders have been rising, along with their confidence and customer traffic, according to an industry survey.

The supply of existing homes on the market tightened slightly in the Realtors’ latest report, slipping 0.4% to 2.3 million homes, roughly a 6 month supply. That is down 20% from the supply of homes a year ago.

Home sales inch up in California as prices fall

California’s median home price in January sinks 1.3% from a year earlier. Bay Area home sales jump sharply. Short sales and foreclosures make up more than half the market.

  • For sale signs are posted at the entrance to a housing complex in Larkspur, Calif., last year.
For sale signs are posted at the entrance to a housing complex in Larkspur,… (Justin Sullivan, Getty Images)
February 17, 2012|By Alejandro Lazo, Los Angeles Times

Home sales were up slightly in January across California, and the statewide median price fell, as investors flooded Southern California and the share of distressed home sales jumped in the Bay Area.

The housing market is one of the few sectors of the economy that is still suffering. A report by San Diego research firm DataQuick indicated that housing continued to limp along last month in the Golden State.

The state’s median home price fell to $236,000, down 1.3% from January 2011. The median — the point at which half the homes in the state are sold for more and half for less — has fallen for 16 consecutive months on a year-over-year basis.

Foreclosures, tight mortgage credit and high unemployment in the state remain significant impediments to a housing recovery, though experts warn that the first month of the year rarely is an indicator of where the market is going because of the small pool of buyers involved.

“The higher-end sales have slowed in recent months as many struggle to qualify for loans and others just sit tight,” DataQuick President John Walsh said.

Statewide sales of previously owned and newly built homes were up 1.5% in January, marking the sixth consecutive month that year-over-year sales in California have improved. January sales fell 25.5% from December, though a decline from December to January is normal.

Short sales and foreclosures made up more than half of the market last month.

In Southern California, the median home price fell to $260,000, down 3.7% from a year earlier, and sales were mostly flat, increasing 0.4%.

In the Bay Area, the median price fell to $326,000, down 3.6% from a year earlier, while sales rose to their highest level for a January in five years, jumping 10.3% from January 2011.

Separately, a report on foreclosure errors released by the San Francisco County office of the assessor-recorder indicated more than 80% of a sample of foreclosures between January 2000 and October 2011 showed some kind of mistake.

State Atty. Gen. Kamala D. Harris said she was reviewing the “deeply troubling” report and would introduce legislation that would get tougher on faulty foreclosure practices.

Banks pay delinquent borrowers $35,000 to sell their homes

By Les Christie @CNNMoney February 10, 2012

NEW YORK (CNNMoney) — In an effort to cut their losses, banks are paying some struggling homeowners as much as $35,000 to sell their homes before they end up in foreclosure.

The deals are aimed at incentivizing homeowners who owe more on their home than it is worth and who are seriously delinquent on their payments to sell their homes in a short sale.

In short sales, homes are sold for less than what is owed and the bank forgives the excess debt. Banks have been reluctant to approve such deals in the past — since they take a loss on the home — but in certain cases, it’s become a much better proposition than letting the homeowner fall into foreclosure.

This new approach by the banks has startled plenty of homeowners, according to Elizabeth Weintraub, a Sacramento-area real estate agent who specializes in short sales.

“Initially, the homeowners are skeptical,” she said. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.'”

When Chase Mortgage (JPMFortune 500) told Angelique Pierce, that she would receive a check for $25,000 if she sold her house, she couldn’t believe it.

“I got the offer in the mail,” said the Rancho Cordova, Calif. resident. “I called my bank to ask if it was real.”

After Pierce became disabled a few years ago and had to stop working work, she fell behind on payments on both her first and second mortgages, valued at $250,000 and $50,000, respectively.

Now, she’s trying to sell her three-bedroom ranch for just $95,000 — almost half of the $179,000 she paid for the place in late 2002.

From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.

“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” said John Hayton, a short sale specialist in Orlando, Fla, who has had a number of clients receive offers from the banks.

Short sales also command higher prices than foreclosed homes. In December, foreclosed properties sold for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors.

All that has been true for years, but it is only lately that these outsized incentives, which Bloomberg recently reported on, have surfaced.

Sellers are more cooperative when they’re going to receive a five-figure check for their troubles.

Nick Chaconas, an agent with discount broker Redfin, wondered why one seller was so anxious to sell their home. “Since I represent the buyer, I didn’t even know about the incentive until the closing,” he said.

It turned out that the seller’s bank was writing her a check for $30,000.

Whether sellers can expect incentives from their banks depends on multiple factors, including where they live.

Wells Fargo (WFCFortune 500) limits its offers to certain states, such as Florida, where the foreclosure process can be lengthy, according to spokeswoman Veronica Clemons. The bank has paid $10,000 to $20,000 to borrowers who short sell or transfer their title to Wells via a deed-in-lieu.

Bank of America (BACFortune 500) had a pilot program in Florida that paid incentives of $5,000 to $20,000 for sales that were initiated between Sept. 26, 2011 and Nov. 30, 2011 and close by the end of this August. The amount of the incentive is based on 5% of the unpaid balance, with a $5,000 minimum and $20,000 maximum.

Jumana Bauwens, Bank of America’s spokeswoman, called it a “test-and-run program” that may be expanded to other states.

The offers are not always a panacea for homeowners struggling to pay the bills, however.

Pierce, for example, has not been able to make hers pay off. She had a buyer but her second mortgage holder refused to go along with the deal unless it got a share of the $25,000 she was being offered by the bank. She said that the bank balked at the deal and the sale was cancelled.

She’s looking for another buyer, but it’s up in the air if Chase will honor its original offer if the second mortgage holder won’t cooperate.

Mortgage deal means more foreclosures

By Chris Isidore @CNNMoney February 10, 2012

NEW YORK (CNNMoney) — Even as the $26 billion mortgage settlement helps hundreds of thousands of troubled homeowners, it will bring a wave of new foreclosures.

Many lenders held off on reposessing homes during the complex negotiations between 49 state attorneys general, and federal officials.

That’s left a backlog of troubled loans, many of which won’t be helped by measures in the deal that will let homeowners refinance or reduce the amount of their mortgage.

“The bottom line is that 2012 will see a lot of foreclosures that should have taken place in 2011 and didn’t,” said Rick Sharga, executive vice president for Carrington Holdings, a real estate finance firm.

Daren Blomquist, vice president of RealtyTrac, online marketer of foreclosed properties, agrees that much of last year’s 34% drop in foreclosure filings was likely due to the uncertainty involved in the negotiations. He estimates that new filings will climb from 1.9 million in 2011 to between 2.2 million and 2.5 million this year.

“We think what we saw in 2011 was artificially low foreclosure numbers,” he said. He added that banks took longer to file foreclosure notices last year, and longer to finish the foreclosure process.

HUD press secretary Derrick Plummer said Thursday’s mortgage settlement is designed to make foreclosure the last resort for banks negotiating with homeowners who are seriously delinquent on loans.

Sharga and Blomquist agree said that the mortgage deal will help many homeowners stay in their homes who would have otherwise been forced out. Up to one million mortgage holders could see the amount of money they owe reduced.

But the solutions offered by the settlement can only work for homeowners who can afford to make new, lower mortgage payments. Banks will have little choice to foreclose on those who have stopped paying due to prolonged unemployment or other severe economic distress.

“The settlement really wasn’t designed to prevent foreclosure on loans that aren’t salvageable,” said Sharga.

Banks have been letting delinquent loans sit in limbo, but now that a settlement has been reached, banks will likely start contacting delinquent homeowners to see which loans can be salvaged. Sharga says that the banks will likely turn up a raft of new foreclosures.

The five lenders who are parties to the deal — Bank of America (BAC,Fortune 500), Citigroup (CFortune 500), JPMorgan Chase (JPM,Fortune 500), Wells Fargo (WFCFortune 500) and Ally Financial — together account for about 60% of the mortgage market, Sharga said. And there are many other lenders who were also taking a wait-and-see approach while the big banks held talks, who might soon join the settlement as well.

Sharga and Blomquist said that while the increase in foreclosures will cause plenty of pain in the short term, it’s an important part of the recovery process for the housing market, especially the hardest-hit markets.

“The uncertainty has been very bad for the market over the last year,” said Blomquist.

There are currently more than 3 million homeowners either seriously delinquent on mortgages or in foreclosure, and that looming inventory has been one of the biggest drags on home sales prices.

“The market needs to clear out a lot of the distressed inventory before prices start to come back,” Sharga said. To top of page

Capital Economics: REO to rental program possibly ‘best housing fix so far’

By Jessica Huseman housingwire.com

February 6, 2012 • 11:28am

In a statement released Monday, Capital Economics called the REO to rental program possibly the “best housing fix so far,” calling it “possibly more significant” than President Obama’s refinancing proposals announced late last month.

Capital Economics lists three reasons why they are hopeful about the success of the program, which would allow approved investors to purchase geographically concentrated REOs from government housing agencies under the requirement that the properties be rented out for a specified period of time.

First, Capital Economics believes the initiative has a better chance of “seeing the light of day” because it does not require Congressional approval or any additional federal funds.

“Indeed, just last Thursday the FHFA announced a pre-qualification round for investors, who would soon be able to bid on REOs released in a pilot phase,” said a statement from property analyst Paul Diggle.

Capital’s second reason is the large potential scale of the REO scheme, even considering that the 300,000 REO homes held byFreddie MacFannie Mae, the FHA and FDIC are only a fraction of the “shadow inventory” of homes that sit vacant or are soon-to-be foreclosed on.

“The impact of the rental scheme could be much greater if you consider that many of the homes in the shadow inventory will eventually become REOs,” they said.

Third, Capitol Economics expects the demand for REOs sold under the program to be strong “given that up to 850,000 additional households a year could be looking for rented accommodation over the next few years,” and the low house prices and high rental yields should make the program attractive to investors.

Capital Economics’ view that the program “could strike at the heart of excess supply in the owner-occupier market and undersupply in the rental market” is in stark contrast with the view of Barclays Capital($14.64 -0.46%), which believes the program will be too difficult to implement but may be beneficial to home prices.

“Rentals yields (adjusted for vacancies/future vacancies) are much lower than where bonds yields in the non-agency space were when the PPIP was announced,” analysts at the investment bank said. “As a result, the equity yields on such a program would look less attractive.”

The program was announced in August 2011. After issuing a Request for Information (RFI) seeking feedback on options for selling single-family REO properties held by the FHA, Fannie Mae and Freddie Mac, the agency received more than 4,000 responses from industry stakeholders. On Feb. 1, the FHFA issued a notice to investors interested in the program to register with Fannie Mae to pre-qualify.