Wednesday, February 28, 2007
“Today’s announcement by Freddie Mac that it will only purchase subprime mortgages – and mortgage-related securities backed by these subprime loans – that qualify borrowers at the fully-indexed rate will limit the product options and the access to credit for those individuals most in need, many of whom are first time, underserved or minority homebuyers.
The mortgage products that these new standards target are important financial instruments, crucial to helping borrowers get into homes and repair their credit. Regulation that further limits consumer choice is unwarranted.”
Total existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 3.0 percent to a seasonally adjusted annual rate1 of 6.46 million units in January from an upwardly revised pace of 6.27 million in December. Sales were 4.3 percent below the 6.75 million-unit level in January 2006.
David Lereah, NAR’s chief economist, said observers shouldn’t overreact to the sales gain, or to other short-term effects. “Although we’re expecting existing-home sales to gradually rise this year, and buyers are responding to the price correction, some unusually warm weather helped boost sales in January,” he said. “On the flip side, the winter storms that disrupted so much of the country in February could negatively impact the housing market.
"U.S. home prices fell 0.7% in the fourth quarter, the fastest rate since 1992, and are up just 0.4% in the past year, Standard & Poor's reported Tuesday in the inaugural release of the national Case-Shiller price index."
“After holding steady in the range of 450,000 units on a seasonally adjusted annual basis since July of last year, home sales activity was slightly lower in January,” said C.A.R. President Colleen Badagliacco. “On a regional basis, sales fell an average of 13 percent, while median prices declined in all areas except Los Angeles, the San Francisco Bay Area, and Riverside/San Bernardino.”
"Alan Greenspan and the Wall Street nosedive aside, economists think the probability of a U.S. recession this year is fairly low and the likelihood of one in China is even slimmer. Greenspan, the former chairman of the Federal Reserve, warned this week that the world's largest economy -- the United States -- could slip into recession this year. That would be bad news for the global economy, too."
"Regulators have shut down Mesa-based Eagle First Mortgage and its more than 75 Valley branches, citing illegal lending practices. The Arizona Department of Financial Institutions pulled the license of the mortgage firm and its broker, David Sanchez, last week. Regulators described more than 100 illegal money transactions, loan activities and hiring practices."
"Freddie Mac, the second-largest provider of funds for U.S. home loans, will stop buying subprime mortgages that have a `high likelihood' of borrowers not meeting their monthly payments."
"The U.S. may be saddled with more sluggish growth than the Federal Reserve expects as the economy struggles to shake off a lingering hangover from the housing bubble."
"The worst case: Distress already evident in the riskiest part of the mortgage-lending industry turns into a full-scale credit crunch that cripples the housing market and the economy."
"Year-old Prosper functions as an online way station where borrowers and lenders can arrange three-year loans of up to $25,000, at rates three to five percentage points lower than what credit cards charge (see table). Its a-rated borrowers pay an average 8.8% yearly, versus 11.8% for a fixed-rate credit card and 13.8% for a variable-rate card. They could get even better rates, along with tax deductions, if they tapped home equity, but many Prosper borrowers don't own a home."
"The East Bay's employment market remains the Bay Area's star performer, but the relentless erosion of the housing market could tarnish the region's economic luster and darken the job outlook, a new report warns. In an assessment that starkly declares 'The East Bay forecast: The real estate juggernaut falters,' a researcher with UCLA's Anderson Forecast said the region faces plenty of economic hazards in 2007. Economist Ryan Ratcliff of the Anderson Forecast suggested real estate will impede the East Bay economy this year. "
" As a Fortune 150 company with over $14 billion in revenue, Pulte Homes Inc. isn't the type of developer that should have to default on a $7.3 million loan, even in a souring housing market. Still, Pulte did just that on Stonebridge Commons, an active adult community it's building in Hanson -- not for lack of funds, but simply because the company decided the 58 acres it bought in 2004 was no longer worth what it had paid. "
"Sub-prime mortgage lenders are dropping like flies. According to The Wall Street Journal, at least 20 sub-prime lenders have closed or filed for bankruptcy. Solvent lenders are also feeling the pain. Novastar Financial, HSBC Holdings, H&R Block and Accredited Home Lending have reported huge losses on sub-prime loans. The only mystery is why this comes as a surprise."
"A segment on CNN's Open House reports that over 2 million people are at risk of losing their homes in the next few years due to predatory mortgage lending practices."
"The current real estate market condition provides an excellent backdrop for mortgage fraud. As long as the market stays in the doldrums, mortgage fraud will continue to thrive, say experts. It can creep into any neighborhood and hurt not only buyers, sellers and lenders, but even neighbors. "
"Since early 2000, economists have been sounding the housing bubble alarm with increasing urgency. And while many markets around the country have seen prices drop in the last year, the dire, across-the-board correction that many predicted has yet to materialize."
Two state lawmakers plan to introduce bills on Monday that would require mortgage lenders in Colorado to be licensed, as well as other requirements designed to "put some teeth" into measures to help stem the foreclosure tide sweeping the state.
"Subprime mortgage companies' shares dropped on Friday, extending more than two weeks of declines and triggering slumps in many finance companies' shares, sending investors to the perceived safety of U.S. Treasuries."
"Instead of penalizing mortgage fraud perpetrators under general fraud laws, a pending bill would establish specific punishments for mortgage fraud, including imprisonment for up to 20 years and fines of up to $10,000 for knowingly making false statements."
"ResMae Mortgage Corp. may be on the cutting edge of a trend in the U.S. subprime-loan industry. It's bankrupt and selling assets for pennies on the dollar. ResMae, which made home loans to people with bad credit, will be auctioned off next week. The opening bid, by Credit Suisse Group, is $19.1 million, less than half the size of an offer received by ResMae before it went bankrupt Feb. 13. "
"It's in recession," says economist Mark Schniepp. "There is not a lot of sales going on and buyers are on the sidelines waiting for further corrections. And sellers do not want to drop their prices. So, there's a stalemate occurring."
The subprime market is overloaded with bad loans that have effectively smashed holes into the hull of this financial ship. It has been surprisingly easy for people buying a new house to borrow hundreds of thousands of dollars by simply telling the bank how much money they make -- without any proof. It's called a "stated income" loan, but many people inside the housing industry call it something else: a “liar loan” or a “NINA” (no asset, no income verification). Forty percent of the subprime market (about $400 - $500 billion of loans), is made up of these loans. At best estimates, half of all subprime mortgages had no income verification. This is no small problem!
" California vacation-home purchases dropped sharply in 2006, falling even faster than the overall housing market, a real estate information service said Thursday. A total of 13,798 second homes were purchased statewide last year, down 37.1 percent from the 21,925 bought in 2005. The peak was in 2004, when 24,916 vacation homes were sold, according to DataQuick Information Systems."
"Europe's biggest bank HSBC Holdings has ousted the head of its North American operations, Bobby Mehta, in the wake of this month's shock profit warning from its troubled U.S. mortgage business."
"The perceived risk of owning low- rated subprime mortgage bonds rose to a record for a fifth day after Moody's Investors Service said it may cut the loan servicing ratings of five lenders. An index of credit-default swaps linked to 20 securities rated BBB-, the lowest investment grade, and sold in the second half of 2006 today fell 5.6 percent to 74.2, according to Markit Group Ltd. It's down 24 percent since being introduced Jan. 18, meaning an investor would pay more than $1.12 million a year to protect $10 million of bonds against default, up from $389,000. "
"Prices are falling slowly. But no sign of a dangerous pop. What's the outlook for the rest of 2007? The worst may be behind the battered housing market, but that doesn't mean it will bounce back soon. Reports released last week showed that housing starts, home sales and median home prices continued to fall. But so far there is no sign of a housing bubble popping, with prices collapsing in major markets, as some feared. There remain pockets of price appreciation across the U.S., even in the Northeast."
"Late payments for residential mortgages shot up by 15.6 percent in the fourth quarter, U.S. regulators said on Thursday in a report showing record earnings by commercial banks and thrifts in 2006. The Federal Deposit Insurance Corporation, which insures deposits at more than 8,600 banks and savings institutions, said the increase in late mortgage payments followed a 5.2 percent increase in the third quarter."
"Real-estate analysts, economists and housing industry leaders agree the market is down, as evidenced by slowing transaction volume and declining average sales prices in all segments of the housing market: single-family homes, apartment properties and condo conversions. The softening trends in San Diego County have been brought about by buyer hesitation and sellers reflecting general concern in the marketplace about future interest rates, job and wage growth, population migration and widely projected downturn in the national housing market."
"Valued from $5000 to over $250,000, the Homes Will Be Auctioned March 5-10 by Hudson & Marshall, America's Largest Auction Firm of Foreclosed Properties"
"Second-home purchases in California dropped sharply last year, the result of lower appreciation for primary residences as well as continued interest in out of state properties, a real estate information service reported."
Sunday, February 25, 2007
"Fed officials voted to leave the benchmark rate at 5.25 percent for a fifth straight policy meeting. Traders see almost no chance of either an increase or reduction in borrowing costs by the end of July, and Bernanke reiterated in his testimony that the central bank will lift rates if needed."
"Even if the housing market improves in the second half of 2007, as the National Association of Realtors predicts, sales of furniture and construction supplies will stagnate, said Amal Bendimerad, a research analyst at the Harvard center. Housing and related industries account for about 23 percent of the economy, according to the center."
"When a short sale, deed-in-lieu agreement or foreclosure occurs and a residential lender loses money on a loan, the lender will most likely file the loss with the Internal Revenue Service, and the former homeowner may end up owing thousands of dollars in taxable income. It comes in the form of a 1099-C, or Cancellation of Debt. According to the IRS, the cancellation or forgiveness of a debt is the same as if the lender handed the homeowner cash and shook hands."
"Home Depot Inc. on Tuesday said its fourth-quarter profit plunged 28%, hurt by a slump in the housing market and a charge taken to cover executive severance costs, and warned that it doesn't expect a "dramatic turnaround" this year."
"Here's an alarming fact about Sacramento's housing market: About one of every five existing homes on the market is a 'short sale.' That means the home is worth less than the value of the mortgage, and the lender is willing to accept less than full repayment of the loan to avoid foreclosure, says Tracey Saizan, president of the Sacramento Association of Realtors."
* Foreclosure sales in 2007 have more than tripled from the same period a year ago, from 11 to 41. Compare that to the number of single-family homes sold last year, an average of 159 per month.
* The Santa Cruz Record, a legal publication that tracks forecloures, has expanded to 20 pages, mostly due to foreclosure-related activity.
* Real estate agents and mortgage brokers are getting advice on how to handle foreclosure transactions, which are strictly regulated. One session took place last week; another will take place Wednesday, sponsored by the Santa Cruz chapter of the Women's Council of Realtors.
* The number of defaults in the county — cases where people fall behind on their mortgage payments — has jumped from 59 to 83, adding to the likelihood that more homes will be sold in foreclosure.
"The number of homes in or nearing foreclosure is growing, and some investors are taking advantage of the bargains created. But even with a steady stream of distressed properties coming on the market, jumping into foreclosure investing is dangerous, especially if you are not familiar with the process or new to real-estate investing."
"DEVELOPERS, who care more about breaking even than about break points, will do almost anything to avoid slashing prices."
"Prices of resale homes in that Central Valley ZIP Code of 93280 jumped 53.7% from the year before, DataQuick Information Services reported. The bad news is that the number of sales dropped 34.8% year over year in that ZIP Code."
"The coming layoffs of about 100 Stockton-based workers at Washington Mutual should surprise nobody. A good number of those people work in WaMu's sub-prime lending arm, Long Beach Mortgage, one of the nation's biggest sub-prime mortgage lenders."
" In the past month, Downing sold two homes for sellers who took his advice. But he says that most hopeful sellers still come in with prices about 10 percent higher than the market will bear."
"Homeowners beware: You could be victimized by a certain scam where someone tries to lure you into applying for a loan secured by your home. The Federal Reserve put out that warning Friday in response to questions and complaints from people about direct-mail solicitation scams that describe a "Community Reinvestment Act Program" that entitles certain homeowners to cash grants or equity payments. No such federal program exists, the Fed said."
Thursday, February 22, 2007
"Mr. Hussain's rise and fall illustrates one of the hazards of a frothy property market: inexperienced developers get in over their heads and drag unsophisticated investors down with them."
"Total housing starts declined 14.3 percent in January as builders worked down their inventories of unsold homes, according to figures released by the Commerce Department today. The pace of construction for the month slowed to seasonally adjusted annual rate of 1.408 million units. This was 37.8 percent below the January 2006 pace."
"As more Americans fall behind on mortgage payments, Merrill Lynch & Co., J.P. Morgan Chase & Co., HSBC Holdings PLC and others are trying to force mortgage originators to buy back the same high-risk, high-return loans that the big banks eagerly bought in 2005 and 2006."
"Home sales in the Bay Area fell for the 24th month in a row in January as prices slipped to their lowest level in a year and a half, a real estate information service reported. A total of 6,168 new and resale houses and condos sold in the nine- county Bay Area last month. That was down 26.3 percent from a revised 8,372 in December, and down 4.1 percent from a revised 6,434 for January last year, according to DataQuick Information Systems. "
"When news of deteriorating credit quality hurting subprime lenders made headlines late last week, investors punished the good, the bad, and the ugly indiscriminately. Standard & Poor's Equity Research believes there's an opportunity to pick up good names that were sold off unfairly last week. But investors should be forewarned: There are still potential pitfalls for many financial firms, as S&P thinks their holdings of new-fangled mortgage products with adjustable rates and flexible payment options could face some hurdles in the coming months (see BusinessWeek.com, 2/14/07, 'A Sinking Sensation for Subprime Loans')."
"Home sales in the Bay Area continued a two-year-long slide last month, when fewer homes were sold than during any January since 1996, a real estate information firm reported Thursday. The median price of all new and resale houses and condominiums sold in the nine-county region was $601,000, a 1.5 percent drop from the same period last year, according to DataQuick Information Systems. The number of homes sold dropped 4.1 percent to 6,168, the smallest year-over-year decline since March 2005, indicating that the weak local housing market may be moving toward a recovery."
"Existing-home sales in most states were down from year-ago levels in the fourth quarter, marking the likely bottom for the current housing cycle, while prices in many areas corrected as a result of sellers’ willingness to negotiate, according to the latest quarterly surveys by the National Association of Realtors®. Total existing-home sales including single-family and condo, were at a seasonally adjusted annual rate (1) of 6.24 million units in the fourth quarter, down 10.1 percent from a 6.94 million-unit level in the fourth quarter of 2005. Even with the general decline, six states showed increases in the sales pace from a year ago and one was unchanged. Complete data for three states were not available. "
"The percentage of loans in the pools that are severely delinquent range from 2.77 percent for Terwin's 2006-8 issue to 13.46 percent for New Century's 2006-S1 deal, S&P said."
"While some economists said they believed the worst may be over for housing, others predicted more price declines to come until near-record levels of unsold homes are reduced."
"The National Association of Realtors said the states with the biggest declines in sales from October through December compared with the same period in 2005 were: Nevada, down 36.1 percent; Florida, down 30.8 percent; Arizona, down 26.9 percent; and California, down 21.3 percent."
"Former Federal Reserve chairman Alan Greenspan said the U.S. housing slowdown may be coming to an end, citing sales of new homes."
"Greenspan's comments represent a view similar to those of his successor, Ben S. Bernanke. Bernanke told the Senate Banking Committee today that the Fed expects economic growth to strengthen 'somewhat as the drag from housing diminishes.' Fed policy makers predicted gross domestic product will increase by 2.5 percent to 3 percent this year."
"About $70 million in pre-construction loans were taken in their names by Construction Compliance Inc., the St. Petersburg company that was building the homes in Florida."
"When the builder stopped paying contractors, the investors got hit by liens. When the builder collapsed, the institution financing the loans, Bradenton's Coast Bank, turned to investors for repayment, despite promises from CCI and Seashore that the home builder would carry all interest payments until the nearly 500 homes were completed."
"San Diego County housing prices slipped last month to their lowest levels since mid-2004, but sales were higher than the usual pace for a January, DataQuick Information Systems reported Wednesday."
"As in earlier years, however, the price decline was entirely attributable to new houses and condo conversions. The median prices of resale houses and condos remained unchanged from December, at $540,000 and $380,000 respectively, while the new-housing category went from $460,000 to $395,000."
"According to the original lawsuit, the plaintiffs borrowed as much as $3 million each in mortgage loans and credit card advances. They spent the majority of that on single-family homes in and around Murrieta; the original lawsuit alleges that the defendants promised to invest the remaining 10 to 25 percent of it in low-risk, high-return investments. The defendants allegedly lied to the clients about the meaning and significance of the loan documents and other forms they were signing, and allegedly acted as securities brokers without the necessary licenses. Many of the houses are now going into foreclosure, and the lawsuit alleges that the defendants have pocketed the money."
"Loan, mortgage, real estate and construction workers are getting less work or even being let go"
"Loan officers, mortgage agents, real estate employees, development executives and construction workers are among the array of people who have lost jobs in the East Bay or are wondering when the ax might fall. And directly or indirectly, those job losses are tied to a drastic slump in the sales, construction and financing of new homes."
"I've been doing a lot of yapping about the importance of must-sell inventory (as a catalyst for home price declines) and of mortgage defaults (as an indicator of must-sell inventory). I now offer the inevitable graph, with data kindly provided by local foreclosure guru Ward Hannigan."
"The blue line indicates the monthly number of "notices of default," which are sent when borrowers have neglected their mortgage payments. The red line indicates the number of "trustee's deeds," which are filed if lenders end up foreclosing on the defaulting borrowers' homes. The foreclosure line lags the default line, for obvious reasons, but both data series give a decent read on the amount of must-sell inventory out there."
"The changes include a broader definition of a home sale and a new way to calculate the median price. Figures back to 1988 were revamped. All told, DataQuick's remodeling didn't change its O.C. median price calculation much, with the revised prices 0.8% lower since '88 than the old numbers. More liberal acceptance of unorthodox sales bumped up sales volumes by an average of 9.1%."
"A revised total of 32,425 new and resale houses and condos were sold statewide last month. That's down 25.3 percent from a revised 43,431 for December, and down 16.7 percent from a revised 38,937 for January 2006. The year-over-year decline was the most moderate since a decline of 16.2 percent last March. The year-over-year sales decline peaked last September at 34.5 percent."
"We have made a couple of changes in the way we generate our sales counts and median sale prices. These changes, which reflect the use of new tools that allow us to provide the best data possible, will take effect starting with our published January 2007 sales statistics."
"Don't count on home equity to come through with a significant portion of retirement funding, cautions a new report by Fidelity Investments. According to the study, home values underperformed stocks and bonds over every five- and 10-year period from 1963 to 2005. Home values have been slightly above the returns on treasury bills during the same time, according to the report, 'The Equity You Live In: The Home as a Retirement Savings and Income Option.'"
Wednesday, February 14, 2007
"What's the risk in the mortgage game these days? Darn good question. The real estate info experts at First American in Santa Ana just added to their service portfolio CoreLogic, a Sacramento shop known for its mortgage risk measures. We checked in with Mark Fleming, CoreLogic's chief economist, to hear his view on how dicey the loan business has become."
"Southern California home buyers and sellers continued to eye each other without doing much last month, resulting in the slowest January in nine years, a real estate information service reported. A total of 18,128 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 25.1 percent from a revised 24,209 for December, and down 17.2 percent from a revised 21,895 for January last year, according to DataQuick Information Systems. "
"Even though Seiders said that he expects starts to begin a 'gradual recovery' following further erosion during this year’s first quarter, total housing production for 2007 is projected to slip a further 14.2 percent to 1.560 million, and single-family starts for the year are expected to decline 15 percent to 1.256 million."
Homebuilder Robert Toll, CEO of Toll Bros., said recently: "We continue to believe that buyer confidence is the key to a turnaround in the new home market. It appears that the media's sentiment toward the housing market is becoming more balanced and their messages are making customers aware that, in the current climate of attractive interest rates, motivated sellers and a generally healthy economy, now is a good time to buy a home." We asked visitors to the Lansner on Real Estate blog ( blogs.ocregister.com/lansner) about how they would describe the media's recent coverage of the housing market. Here are the results from 590 votes cast in what's an unscientific sample of public sentiment:
34.2 percent: Far too upbeat
21.2 percent: Bit too upbeat
22.0 percent: Balanced
8.6 percent: Bit too downcast
13.9 percent: Far too downcast
"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending February 9. The Market Composite Index, a measure of mortgage loan application volume, was 639.8, an increase of 1.5 percent on a seasonally adjusted basis from 630.1 one week earlier. On an unadjusted basis, the Index increased 4.5 percent compared with the previous week and was up 10.9 percent compared with the same week one year earlier."
"ResMae Mortgage, a Brea-based lender with 1,037 workers, has filed for bankruptcy protection and agreed to sell its assets to Credit Suisse Group for $19 million. ResMae, which made nearly $8 billion in loans last year and is one of the top 25 subprime lenders in the nation, hopes the sale will allow it to preserve more than 800 jobs, or 77 percent of its work force."
"In December, Merrill Lynch, the largest buyer of ResMae's loans, demanded it buy back $308 million in loans, according to the bankruptcy filing. ResMae disputes the amount, saying the buyback period has expired for many of them. The issue is unresolved."
"Fremont General Corp., the third largest provider of subprime U.S. mortgages through brokers and lenders, eliminated 'combo' programs amid a decline in investor demand for the loans. Combo programs allow borrowers to use a second loan in lieu of a down payment when buying a home. Santa Monica California- based Fremont General stopped offering the programs because it can no longer sell the loans at enough of a profit, said Trude Tsujimoto, general counsel for Fremont Investment & Loan, which does the company's subprime lending. "
"More than 25,000 homes were in various stages of foreclosure last month, compared to 8,753 in January 2006. The statistics include notices of default, auctions, and homes repossessed by the lender."
"Though many builders have worked to improve the quality of their houses over the past decade, says Alan Mooney, president of Criterium Engineers, a national engineering firm, the building frenzy also opened the door for unskilled labor, unscrupulous contractors and untested products."
" While real estate sales throughout San Diego County have been in the doldrums for more than a year, the legendary hotel is enjoying brisk business with its new beachfront condo-hotel suites."
"A racketeering conspiracy said to have defrauded more than 700 investors in multiple states, including California, was described last week in a federal lawsuit filed by two Rialto residents who claim to have suffered losses of more than $600,000."
"The number of San Diego County properties in some stage of foreclosure increased by more than 50 percent in January from December, according to RealtyTrac, an Irvine-based research and publishing company."
"Hennigan and the company he works for, Home Center Realty, don't have the luxury of waiting to see how the story will play out. They need to make a living now, and they're betting that things are going to get worse. Maybe much worse."
"Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) and New Century Financial Corp. (NEW.N: Quote, Profile, Research) led shares of U.S. mortgage lenders down for a third trading day as a new report suggested that even U.S. homeowners with good credit may be defaulting more often."
"ResMae Mortgage Corp., a U.S. home lender to people with bad credit, filed for bankruptcy protection and said Switzerland's Credit Suisse Group agreed to buy most of its assets for $19.1 million."
"KB Home (NYSE:KBH - News), a leading U.S. home builder, on Tuesday posted a smaller-than-expected quarterly net loss after a $343.3 million noncash for declining land values, sending its shares up 1.6 percent."
"The company reported a net loss of $49.6 million, or 64 cents per share, for the fiscal fourth quarter that ended November 30, compared with net income of $304.4 million, or $3.44 per share, a year earlier."
The past year, 2006, marked the lowest volume of annual sales since 1999 with less than 47,000 new and existing houses and condominiums sold in the four county Sacramento area according to DataQuick. As reported in a Sacramento Bee story, “'06 housing stats tell a scary tale,” the inventory of available homes has dropped from August 2006 highs but still ended up with just about 11,000 homes on the market in the four county area."
"Just as the struggling real estate market seems to be stabilizing, a fresh problem is brewing far from real estate offices or home construction sites: a jump in defaults by higher-risk borrowers."
"News of rising default rates by buyers with less than stellar credit could put a crimp in financing for home purchases - and prices. That's because the rapid growth of new types of mortgages was one of the key factors behind the boom that sent home buying, and prices, to record highs for five straight years through 2005."
"She says she and her husband paid about $150,000 more than the recent homes in her Carlsbad neighborhood had sold for, a detail she says their Realtor neglected to mention. And because their Realtor, Michael Little, was associated with a Re/Max office in La Costa, she focuses her complaints on Re/Max International, the giant company, for using a brand name umbrella without, in her opinion, keeping its agents accountable."
"Real Estate Equity Exchange Inc. will give a consumer cash representing up to 15% of their home’s value in exchange for a cut of up to 52.5% of the capital appreciation when the property is sold. The San Francisco-based startup, which is known as “Rex,” gets 3.5% of the gains for every 1% it pays the consumer for the option."
Monday, February 12, 2007
"The consolidation wave sweeping through the mortgage sector showed no signs of abating, according to coverage from http://www.MortgageDaily.com -- the dominant source of online news for the mortgage industry."
"HSBC Holdings and New Century Financial may end up giving stock and bond investors a renewed appreciation for risk. Shares of both companies tumbled last week after they said losses on so-called subprime mortgages had exceeded their forecasts. Credit-default swaps, or contracts to protect against defaults, on bonds backed by subprime loans became more costly."
"Merrill Lynch & Co. Chief Executive Officer Stanley O'Neal was willing to lose $230 million to catch Bear Stearns Cos. and the shakeout is just beginning. That's because Merrill is determined to capture a dominant share of trading in bonds backed by home loans, the fastest- growing debt market since 1995 and this year's most troubled. O'Neal's enthusiasm for mortgages to potentially delinquent borrowers coincides with the highest default rate in more than six years, a record contraction in demand for so-called subprime loans and descending bond prices."
"From mid-2005 to mid-2006, according to a statistical sampling of a representative group of 7,548 purchasers, nearly half of all first-time buyers financed the entire transaction, obtaining mortgages in the full amount of the home price. Also, 30% put down 10% or less. The research was conducted by the National Assn. of Realtors, using information on home transactions supplied by Experian, a major credit and realty data firm. The median down payment of first-time purchasers, according to the study, was just 2%. In other words, the median-sized mortgage for first-timers represented 98% of the home purchase price."
"THE 'FOR SALE' SIGN on the house next door has been up three months. Home sales have clearly declined and home price appreciation has slowed. Should Bay Area homeowners be worried?"
"Several dozen families are being asked to leave the houses they rent, a mass eviction that makes them the latest group of people touched by an alleged real estate scam centered in Murrieta. The houses belong to about 20 plaintiffs who have signed on to a class action lawsuit that accuses three Murrieta men and their companies of running a vast pyramid scheme. According to the suit, the defendants suckered investors into buying overpriced houses with 100 percent financing. They allegedly promised the investors that excess cash from the loans would be plowed into low-risk, high-yield investments that would help to cover the monthly mortgage payments."
"A month ago, she felt frustrated, knowing her household income was above the median for the county but still not enough to buy a house. She saw a 'dinky' home near the Polo Grounds reduced from $575,000 to $535,000 and thought it would be ridiculous to pay $3,000 a month for a mortgage on such a small house."
"You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn't be so strong now."
"Stock of Irvine's New Century Financial lost more than one-third of its value Thursday, as investors digested news that it will restate past earnings, make fewer loans this year and report a fourth-quarter loss. New Century's stock price fell 36 percent, crashing through its previous 52-week low of $29.07, to close at $19.24. "
"With HSBC and New Century Financial suffering losses from subprime borrowers, which other mortgage lenders face an unpleasant reckoning?"
"More bad news came from Irvine (Calif.)-based lender New Century Financial (NEW). New Century, the second-largest subprime mortgage originator in the U.S., announced it would restate results for the first three quarters of 2006 to correct accounting errors related to loan repurchase losses, sending the stock down 30% on Feb. 8. The company expects to see a loss for the fourth quarter of 2006 due to early payment defaults."
"During the boom of the last decade, newly licensed agents poured into the business. In 2006, the National Association of Realtors boasted membership of more than 1.25 million, up 63 percent from 2000. Last summer, a story in Homethinking Blog reported that in Miami one out of 17 people is a real estate agent. (When you subtract children and the sizable retired population, that's an astonishing number of agents.) According to a 2003 UC Berkeley study, when home prices go up in a city, more people become agents, but average income from commissions declines. Now that sales volume has also declined, agents are looking for ways to distinguish themselves from their Lexus-driving peers."
"Mortgage rates have enjoyed a modest rally, the 10-year T-note's decline from 4.88 percent to 4.77 percent leading mortgages from 6.375 percent to 6.25 percent. Do not expect more improvement, not with an economy as strong as this, and zero chance of a rate cut from the Fed. On the other hand, don't expect the blow-up in rates that would normally follow dashed bond-market hopes for a recession, long yields soaring above the Fed's 5.25 percent cost of money."
"The ripple from a slow housing market consumes a different victim almost daily. In the Belavida subdivision in Elk Grove, brand new homes sit for months. Desperate to avoid still more losses, home builder Standard Pacific sent upgraded model homes to auction last Saturday with a bargain price tage."
"In an assessment that starkly declares 'The East Bay forecast: The real estate juggernaut falters,' a researcher with UCLA's Anderson Forecast said the region faces plenty of economic hazards in 2007. Economist Ryan Ratcliff of the Anderson Forecast suggested real estate will impede the East Bay economy this year."
"The condo craze is over, developers declared here today. That may be hard to tell given the number of condominium buildings still under construction in areas like downtown West Palm Beach, but builders and developers attending the massive International Builders Show here said don't expect that trend to continue."
"The gas at the CITGO on Route 70 across from the former Garden State Park wasn't free, but it was dirt cheap -- 10 gallons for $1. As hordes of drivers jockeyed for position at the pumps, they also got glossy, full-color advertisements from Beazer Homes, a national home builder that owns 10 residential developments in South Jersey."
"The developers of a 473-town house community in south Fort Myers are suing 25 people for nearly $700,000 in deposits for not closing on the properties and they want the court to force the investors to buy them."
"With rates on many homeowners' adjustable-rate mortgages rising, some who would like to refinance into a new loan are finding they can't."
"Shares of U.S. mortgage lenders plunged after New Century Financial Corp. and HSBC Holdings Plc said losses from bad home loans are piling up faster than they expected."
"Extra equity is an added benefit to the American dream. You can manage this equity in one of several ways. You can sit on it and hope that the real estate market in your area doesn't tank. You can tap your equity and use it -- generally not a good strategy since you have to pay it back. Or you can cash it out and move to an area where the housing dollar buys more for the buck."
"A weak forecast from Toll Brothers Inc., the nation's largest builder of luxury homes, pressured housing stocks and rekindled concerns about whether the slumping housing market would hurt the economy. And HSBC Holdings PLC, the European bank, announced an increase in its provisions for soured mortgage loans, which hurt shares of U.S. banks."
Thursday, February 08, 2007
"This is the first installment of 'The Smart Surfer,' a feature that reviews real-estate Web sites and tools available online for home buyers/sellers and real-estate investors."
"HSBC Holdings Plc Chief Executive Officer Michael Geoghegan is shaking up management and tightening lending policies after losses from home loans in the U.S. climbed."
"Toll Brothers Inc. reported Thursday an 'uptick' in sluggish housing demand in several markets as the luxury home builder's cancellation rate came down but said it may post quarterly writedowns as high as $160 million or more, which would handily top its previous estimate for all of 2007."
“MBA is concerned that approaches such as rigid, new underwriting standards and the imposition of suitability requirements will rollback hard fought homeownership and fair lending gains and will stifle innovation and take good financing options out of the hands homeowners, limiting consumer choice. The effect will be to reduce available and affordable credit, undermining our mutual goal of putting Americans in homes and keeping them there. The mortgage market has performed well for consumers and for the larger economy and any policy that is not based on sound facts has the potential to undermine these benefits.”
"New data released by the Census Bureau shows that the vacancy rate of homes for sale, at 2.7%, or 2.1 million vacant homes, is at its highest level since the bureau began tracking it 40 years ago, according to a Wall Street Journal Online article. These properties, many of which are likely held by investors, could bring housing values down further as prices are slashed to attract buyers, WSJ Online says. Meanwhile, CNNMoney.com reports that figures released by Case Shiller Weiss indicate that nearly every major housing market in the U.S. has seen price declines in November. Showing the largest year-over-year price declines that month were Boston, with a 5% dip, and Detroit, with a 4.5% drop, CNNMoney says. The biggest year-over-year price increases were in Seattle (13%), Portland (11.6%) and Miami (7.4%), according to the article, which includes a chart summarizing market trends for 20 U.S. cities."
"They went to court, saying they were deceived. A federal judge sided with them and is allowing a class-action suit involving up to 7,000 borrowers against Chevy Chase. The bank has appealed and on Friday was granted a motion for an expedited appeal. The bank says the terms were clearly stated in the contract and that the family should take any grievance to the mortgage broker who sent the original sales flier and acted as an intermediary between them and the bank."
"U.S. Senate Committee on Banking, Housing and Urban Affairs Martin Eakes, CEO, Center for Responsible Lending & Self-Help Credit Union
February 7, 2007"
"The subprime mortgage market today is a quiet but devastating disaster. The ultimate effects are very much like Hurricane Katrina, as millions of citizens lose their homes and the fabric of entire communities is threatened."
"Consumers are beginning to respond to more favorable housing market conditions, but new home construction will be dampened until inventories decline further, according to the latest forecast by the National Association of Realtors®."
"David Lereah, NAR’s chief economist, is looking for a steady rise in existing-home sales. 'After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008,' he said. 'New-home sales should continue to slide, but we look for that sector to turn around later in the year. When you put it all together, home sales may appear weak in comparison with the record surge in 2005, but they will be sustained at historically high levels that are in line with long-term demand.'"
"The National Association of Realtors® today told a Senate panel that NAR supports stronger anti-predatory lending legislation and more consumer education on nontraditional mortgage products."
"Only the speculators and flippers and the last ones that purchased in 2005-2006 are in any trouble at all. The rest of us just need to continue to enjoy our homes, unless we were using it as an automatic teller machine."
"California's housing slump is in part a result of conflicting expectations of buyers holding out for better deals and sellers still seeking a premium for their homes, a state Realtors group concluded."
"Mortgage applications dropped last week, reflecting weaker demand for home purchase loans even as interest rates fell, an industry trade group said Wednesday."
"The worst housing slump in 16 years made a lot of smart money vanish. D.R. Horton Inc., Pulte Homes Inc., Lennar Corp., Centex Corp. and Toll Brothers Inc., the five biggest U.S. homebuilders, said plummeting land prices cost them a combined $1.47 billion in the fourth quarter."
"Mortgage Lenders Network USA Inc. on Monday filed for Chapter 11 bankruptcy protection, becoming one of the largest casualties among lenders to people with poor credit histories as the U.S. housing market slows."
"Excess houses for sale have prompted builders to aggressively cut prices and to make other concessions that, in addition to low interest rates, have beckoned a larger number of prospective buyers to new housing tracts in recent weeks, Johnson said. It is too early to tell whether that will translate to more sales, he said."
"D.R. Horton Inc., the largest U.S. home builder, on Monday said net sales orders in January continued to fall compared with a year ago, but its cancellation rate for the month was about the same as that seen in the most recent quarter."
"Mortgage Lenders Network USA Inc., which caters to borrowers with weak credit, filed for bankruptcy-court protection Monday, the latest in a string of subprime home-loan providers to be hit by slowing home sales and rising delinquencies."
Tuesday, February 06, 2007
"The Mortgage Bankers Association (MBA) expressed concern today over the Administration’s proposed budget for housing. MBA’s primary concern is that the budget not only imposes new taxes on homeowners and renters by increasing fees for key housing guarantee and insurance programs, it falls short on the need for structural, in addition to programmatic, FHA reform."
"Delinquency rates are evolving as any seasoned observer of the mortgage market would expect them to do. Barring any unexpected downturn in the economy, the recent increase in mortgage delinquency rates will likely peak by the end of 2007, but at levels well below those of past peaks. This lower peak will come despite the change in the composition of outstanding loans, namely a larger proportion of subprime loans in recent years."