With a 50% redefault rate, does HAMP even make sense?

Posted on October 28, 2010 by grim

From HousingWire:

COP: Half of HAMP permanent mortgage mods will redefault

Half of the so far nearly 500,000 permanent modifications completed by servicers participating in the Home Affordable Modification Program will redefault, Sen. Ted Kaufman (D-Del.), chairman of the Congressional Oversight Panel said Wednesday.

Since the HAMP launched in March 2009, servicers have completed 495,898 permanent modifications, and extended 1.6 million trials. So far, the Treasury has committed nearly $30 billion to the servicers for a program that was initially estimated to cost $50 billion.

Servicers are paid $1,000 for every permanent modifications and another $1,000 every year the new loan is current.

“To date fewer than half a million homeowners have received permanent mortgage modifications through Treasury’s program, and as many as half of these borrowers will ultimately redefault and lose their homes,” Kaufman said, a view in line with the Special Inspector for the Troubled Asset Relief Program that said earlier in the week that TARP has let down many homeowners.
…
Of all mortgages that had been converted into a permanent modification, 15.6% fell into 60-plus day delinquency within nine months of the conversion, and 11% fell into 90-plus day delinquency. After six months of the conversion, 9.8% had gone into 60-plus day delinquency, and 5.5% into 90-plus, according to the latest HAMP report.

Posted in Foreclosures, National Real Estate, Risky Lending | 160 Comments

“its either going to look good before getting really bad. Or its just going to keep getting worse.”

Posted on October 27, 2010 by grim

From CNBC:

Watch Out for a Housing Head-Fake Later This Year

The recent moratoriums on foreclosures may produce some unexpected volatility and unreliability in home price numbers.

House prices are now clearing headed downward in much of the country, as this mornings Case Shillers numbers showed. Those numbers are backward looking three month averages, so the decline in prices in three cities shows that we started double dipping over the summer.

One question many will be asking is how long the second-leg downward will last? Are we looking at a temporary drift downward or a full-on meltdown that could last years?

I think theres a significant possibility that the price data could produce some better numbers later this year. But far from being an indication that the market for homes is improving, this will be a statistical illusion caused by the foreclosure fiasco. And if this improvement does happen, it will likely foreshadow an even sharper drop rather than a continued rise.

As a result of the foreclosure freezes, many distressed sales were taken out of the market in October. Those sales are typically at lower prices, which means their absence could create a illusory price increase. The housing market could Freeze Upward. A sure sign that this is happening: home prices rise while the number of sales of existing homes declines.

Of course, the head-fake rise may never happen if buyers have been so frightened by the uncertainty caused by the mess that they have stayed out of the market. Alternatively, if mortgage lending slowed significantly during the freeze, this could also dampen the Freeze Upward effect on prices.

The Freeze Upward effect wont last long. Slowing down foreclosure sales will result in a build up of housing inventory, which will scare housing market investors and when that inventory comes onto the market create excess supply that will push down prices.

Posted in Economics, Housing Bubble, National Real Estate | 147 Comments

Otteau says no recovery in 2011

Posted on October 25, 2010 by grim

From the Record:

Appraiser: Home prices could drop another 6 percent in 2011

New Jersey home prices will drop another 6 percent in 2011, an East Brunswick real estate appraiser predicted Monday.

“This is not a pretty picture, and it’s not what you would prefer to hear, but it’s what’s going on out there,” Jeffrey Otteau, who tracks the housing market statewide, told a seminar for real estate agents in East Hanover.

Home values stabilized during late 2009 and early 2010, as an $8,000 federal tax credit lured first-time buyers into the market. But once the credit expired earlier this year, the number of home sales plummeted in the state and nationwide. As a result, there’s a one-year-plus supply of homes on the market in Bergen and Passaic counties, and even more elsewhere in the state. That means that at the current pace of sales, it would take more than a year to clear all the inventory

“We’re just not able to create jobs yet, so this huge supply of housing is going to stay for a while,” Otteau said. And at those inventory levels, prices typically drop by about one percent a month, he said.

The housing downturn has fallen unevenly on New Jersey, with some towns being affected more than others. Rural markets, such as Sussex County, and vacation-home markets, such as the shore, have seen larger price drops than towns within commuting distance of New York. And towns that have rail lines into New York have held their value better than other towns, Otteau said.

Posted in Economics, Housing Bubble, New Jersey Real Estate | 153 Comments

S&P Case Shiller may begin next leg down

Posted on October 25, 2010 by grim

From HousingWire:

Clear Capital: Home price drop sudden and dramatic

Clear Capital said a 6%, two-month decline in home prices represents a magnitude and speed not seen since March 2009.

“Clear Capital’s latest data through Oct. 22 shows even more pronounced price declines than our most recent (Home Data Index) market report released two weeks ago,” said Alex Villacorta, senior statistician with data analytics firm. “At the national level, home prices are clearly experiencing a dramatic drop from the tax credit-induced highs, effectively wiping out all of the gains obtained during the flurry of activity just preceding the tax credit expiration.”

Prices are now at the same level as in mid-April, two weeks prior to the expiration of the federal homebuyer tax credit. The drop, in advance of typical winter housing market slowdowns, paints an ominous picture that will likely show up in other housing indices in the coming months.

If previous correlations between the Clear Capital and S&P/Case-Shiller indices continue as expected, the next two months will show a similar downward trend in S&P/Case-Shiller numbers.

Posted in Housing Bubble, National Real Estate | 118 Comments

Too late for ARC-bitrage?

Posted on October 23, 2010 by grim

From the NY Times:

ow a Tunnel Would Help New Jersey Home Values

WHAT is the real estate value of a one-seat train ride to Manhattan from a station close to one’s home in New Jersey? Leave it to statisticians to come up with a figure.

“It has to be a lot,” said Perri K. Feldman of Keller Williams Realty, who has built a client base in towns along a section of the New Jersey Transit Midtown Direct line running from Morristown to South Orange. “It’s the first question so many people ask about a house: ‘How close is it to the train? Can I walk to the station?’ ”

Now, the extra value that comes with proximity to a station with direct service to Manhattan — no transfer required — has been quantified: $19,000, on average, for homes within two miles of a station; $29,000 for houses within half a mile.

Home values would increase by those amounts in neighborhoods surrounding 10 New Jersey Transit lines and 2 Metro-North Railroad lines if a third rail tunnel under the Hudson River was ever built, according to a study by the independent Regional Plan Association.

Statisticians worked backwards, analyzing the impact on real estate value when previous rail-improvement projects were done, to project the impact that a new tunnel would have on home values.

The cumulative increase in property value would be $18 billion, according to the study, which was published two months before Gov. Christopher J. Christie of New Jersey decided to suspend work on the tunnel as of Oct. 7. Senator Frank R. Lautenberg, a tunnel supporter, has worked to publicize the findings.
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Data from 45,000 area home sales that took place from 1993 through 2008 were analyzed. According to Juliette Michaelson, who performed that section of the research, the analytic process assumes that the price of a house is determined by the value of characteristics like number of bedrooms, quality of the school district and access to train service. By looking at thousands of sales involving houses with differing combinations of those characteristics, it becomes possible to estimate the amount that each individual characteristic adds to the price of the house, Ms. Michaelson explained in the notes accompanying the study.

Posted in Economics, New Jersey Real Estate | 57 Comments

Fed: Home prices “drifting down in northern New Jersey”

Posted on October 22, 2010 by grim

From the Federal Reserve:

Beige Book – Second District–New York

Construction and Real Estate

Housing markets have been mixed but generally stable since the last report. Real estate contacts in both northern New Jersey and western New York State report that sales activity has remained exceptionally weak as the usual seasonal pickup in September has not occurred. The ongoing weakness was partly attributed to the expiration of the home-buyers tax credit, which is believed to have pulled sales forward from the second half of 2010. Prices are characterized as relatively stable in upstate New York and drifting down in northern New Jersey, where one industry contact notes a sizable inventory of distressed properties on the market. Manhattan’s co-op and condo market was stable in the third quarter: sales activity was steady, after accounting for a normal seasonal dip, and prices were steady to down slightly overall. Manhattan’s apartment rental market improved modestly: effective rents are estimated to be rising moderately, as landlords pull back on concessions. New leasing activity picked up noticeably in the quarter–largely attributed to renters moving in response to the end of concessions on lease renewals.

Office markets across the District softened modestly since the last report. Asking rents continued to drift down in Manhattan and northern New Jersey but were mostly steady in other parts of the region. In Manhattan, office vacancy rates retreated in August and September, after rising in July. In most of the District, though, vacancy rates have edged up since the last report.

Posted in Economics, Housing Bubble, New Jersey Real Estate | 115 Comments

“Why are people surprised that they don’t know what they are doing here either?”

Posted on October 21, 2010 by grim

From the NY Times:

Battle Lines Forming in Clash Over Foreclosures

That clash — expected to be played out in courtrooms across the country and scrutinized by law enforcement officials investigating possible wrongdoing by big lenders — leaped to the forefront of the mortgage crisis this week as big lenders began lifting their freezes on foreclosures and insisted the worst was behind them.

Federal officials meeting in Washington on Wednesday indicated that a government review of the problems would not be complete until the end of the year.

In short, the legal disagreement amounts to whether banks can rely on flawed documentation to repossess homes.

While even critics of the big lenders acknowledge that the vast majority of foreclosures involve homeowners who have not paid their mortgages, they argue that the borrowers are entitled to due legal process.

Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel A. Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”

Others are more sanguine about the dispute.

Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.

“You borrowed money,” he said. “You are obligated to repay it.”

After freezing most foreclosures, Bank of America, the largest consumer bank in the country, said this week that it would soon resume foreclosures in about half of the country because it was confident that the cases had been properly documented. GMAC Mortgage said it was also proceeding with foreclosures, on a case-by-case basis.

While some other banks have also suggested they can wrap up faulty foreclosures in a matter of weeks, some judges, lawyers for homeowners and real estate experts like Mr. Cole expect the courts to be inundated with challenges to the banks’ actions.

“This is ultimately going to have to be resolved by the 50 state supreme courts who have jurisdiction for property law,” Professor Cole predicted.

Posted in Foreclosures, National Real Estate | 199 Comments

Taking it back

Posted on October 20, 2010 by grim

From CNBC:

Foreclosed Homeowners Break Into Former Home

There’s been a lot of funny business in the mortgage industry. It’s getting less funny by the minute.

Danielle and Jim Earl admit they skipped mortgage payments, filed for bankruptcy, and lost their home. But they broke back into the house last week after changing the locks.
…
They admit having money troubles in the past, including bankruptcies. Danielle Earl reportedly co-owns a medical equipment company, and she says times were tight in 2006, so they skipped some mortgage payments. Earl says they eventually caught up, paying more than $100,000, only to receive a notice of default. The home was foreclosed on earlier this year and sold to an investor group, Conejo Capital. The Earls were evicted.

The investors sold the home, but before the new owner could move in, the Earls had the locks changed and moved back in themselves. “Why should we lay down?” she says her husband asked her. “We need to fight back.” She began researching the history of their mortgage and the title to the property. Names began popping up that she says she’d never heard of, documents allegedly appeared forged. “The company that we had been paying all this money to, that we felt our money was stolen from us, was actually not legitimately our mortgage company.” If no one can prove who owns the home, the Earls argue, it’s still theirs.

So far, they haven’t convinced a judge. The Earls have been ordered to move out a week from today, but their attorney, Michael Pines, says they may move back in, saying they can legally do that since the judge didn’t issue a permanent injunction. He’s reportedly helped other Southern California families break back into their old homes, and Pines claims that mortgage securitization calls into question every commercial and residential loan going back decades.

So what now? “If the sheriff shows up and tells us to leave we’re going to leave,” Danielle Earl says, “but that doesn’t mean our fight is over.”

Posted in Foreclosures, National Real Estate, Risky Lending | 168 Comments

Housing outlook “deteriorating”

Posted on October 19, 2010 by grim

From Bloomberg:

Builders Probably Began Work on Fewer U.S. Houses in Sign Recovery Delayed

Builders in the U.S. probably began work on fewer homes in September, a sign the residential real estate market will be slow to recover from the worst recession since the 1930s, economists said before a report today.

Housing starts fell 3 percent to a 580,000 annual rate, according to the median estimate of 71 economists surveyed by Bloomberg News. Building permits, a proxy of future production, were little changed, the survey showed.

Mounting foreclosures, near record-low home sales and a lack of jobs will make it difficult for housing, the industry that precipitated the economic slump, to rebound. Broadening foreclosure moratoria caused by faulty documentation at some of the nation’s biggest banks also raises the risk the mending process will be delayed even more.

“Builders are faced with weak new-home sales, competition from foreclosures and, if anything, uncertainty around the foreclosure environment has increased,” said Michelle Meyer, a senior U.S. economist at BofA Merrill Lynch Global Research in New York. The housing outlook is “deteriorating,” she said.

The Commerce Department’s report is due at 8:30 a.m. in Washington. Survey estimates ranged from 550,000 to 624,000. Starts plunged to a record-low 477,000 pace in April 2009 after reaching a three-decade high of 2.27 million in January 2006.

Posted in National Real Estate, New Development | 147 Comments

Jersey residents win back $80 million in appeals

Posted on October 18, 2010 by grim

From the Daily Record:

NJ tax appeals produce windfalls for residents, shortfalls for municipalities

Property tax assessment appeals are producing windfalls for property owners in New Jersey, returning about $80 million this year to those who won their cases in front of county tax boards and tax courts.

But those appeals are busting municipal budgets.

More than 74,000 property tax appeals were filed in New Jersey this year, the most since 1992, a result of the continued decline in property values since a real estate market peak in early 2007.
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Generally, towns are required to make property owners whole by issuing credits on fourth quarter tax bills.

Municipal officials can set aside money to cover the credits, but they must guess at how much the credits will amount to because results of disputes aren’t known before the budgeting process begins.
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Atlantic City owes more than $9 million to those who successfully contested tax assessments. Monroe in Middlesex County is on the hook for $5 million.

The squeeze for many towns has prompted support in the state Legislature for revamping the state’s property assessment administration.
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A survey of town officials by the New Jersey State League of Municipalities showed that tax boards have granted average property value reductions of close to $5,000 per appeal, said William Dressel, the league’s executive director.
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Dressel said his organization is reviewing the proposal. Meanwhile, Dressel said he plans to “encourage the Legislature to recognize the budgetary impact of the large and growing number of successful property tax appeals. There must be methods and programs designed to smooth the problem during this transitional period, as municipalities all around the state see their tax base shrink.”

Posted in New Jersey Real Estate, Property Taxes | 178 Comments

JPM: Delinquent borrowers are just trying to stall foreclosures

Posted on October 16, 2010 by grim

From HousingWire:

JPM: Robo-signing now borrower strategy to avoid foreclosure

One of the largest investment banks at the center of the robo-signing scandal is claiming that distressed borrowers are using the allegations as a stall tactic to prevent losing their homes. Further, the secondary industry is rejecting claims that the current transfer of mortgage titles into the bond market is faulty.

According to one analyst at JPMorgan Chase, the storm surrounding robo-signing activity may delay the process but will not help troubled homeowners retain their property.

In a strategy call Friday morning, JPM mortgage-backed securities analyst Ed Reardon said that borrowers who are in default on their homes will naturally search for a number of ways to prevent foreclosure. These borrowers will look for any legal technicality to make the lawsuit or procedure “inappropriate,” he said.

“Robo-signing is just the latest legal strategy by borrowers to try to prevent foreclosures,” Reardon said. “Our view is robo-signing can be fixed relatively quickly,” and the foreclosures will go forward eventually.

Posted in Foreclosures, National Real Estate, Risky Lending | 134 Comments

Rotten in Denmark (Maine)

Posted on October 15, 2010 by grim

From the NY Times:

From a Maine House, a National Foreclosure Freeze

The house that set off the national furor over faulty foreclosures is blue-gray and weathered. The porch is piled with furniture and knickknacks awaiting the next yard sale. In the driveway is a busted pickup truck. No one who lives there is going anywhere anytime soon.

Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break.

Her file was pulled, more or less at random, by Thomas A. Cox, a retired lawyer who volunteers at Pine Tree. He happened to know something about foreclosures because when he worked for a bank he did them all the time. Twenty years later, he had switched sides and, he says, was trying to make amends.

Suddenly, there is a frenzy over foreclosures. Every attorney general in the country is participating in an investigation into the flawed paperwork and questionable methods behind many of them. A Senate hearing is scheduled, and federal inquiries have begun. The housing market, which runs on foreclosure sales, is in turmoil. Bank stocks fell on Thursday as analysts tried to gauge the impact on lenders’ bottom lines.

All of this is largely because Mr. Cox realized almost immediately that Mrs. Bradbury’s foreclosure file did not look right. The documents from the lender, GMAC Mortgage, were approved by an employee whose title was “limited signing officer,” an indication to the lawyer that his knowledge of the case was effectively nonexistent.

Posted in Foreclosures, Housing Bubble, National Real Estate | 111 Comments

My my my, how times have changed.

Posted on October 14, 2010 by grim

From the Record “Ask the Realtor” section. For those not familiar, this is a staged advertorial section paid for by one of the local Realtor boards. This “column” is usually filled with puffery and “great time to buy” nonsense.

Proposed legislation may ease short sale process

Q: I do not understand why my lender is not responding to my multiple requests for a short sale. My home is worth less now than when I purchased it in 2007. I do not want to just walk away from it, but if these guys won’t respond, what am I supposed to do?

Tom M.

Waldwick

A: Tom, members of the RealSource Association of Realtors who work within this same environment and attempt to find the best solutions understand your frustration. As you may know, the Realtor association works to protect your private property rights and, in this case, a smooth transition from the hardship you are trying to deal with. That said, there may be good news on the immediate horizon. Homeowners who are underwater — meaning, whose home is worth less than they owe on their mortgage — may find that relief is on the way from a bill strongly supported by the National Association of Realtors that would impose a deadline on lenders to respond to short sale requests. The legislation, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010,” was offered recently in Congress by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill would require lenders to respond to consumer short sale requests within 45 days. Hopefully this legislation, coupled with an improving market, will help you and others work through your financial challenges.

Posted in Economics, Housing Bubble, New Jersey Real Estate | 116 Comments

The “other” housing market

Posted on October 13, 2010 by grim

From the WSJ:

Home Deals in Suburbs Start to Dry Up

When Daniel Allen and his wife, Elizabeth, decided they were finally ready to leave their apartment on West 15th Street and buy a house in the suburbs, the couple found themselves repeatedly outbid.

It wasn’t what Mr. Allen, an architect, and Ms. Allen, who now works part time for a small investment bank, expected when they went house hunting over the past year amid the biggest housing downturn in a generation.
…
But brokers say that so far this year, Manhattan’s bedroom communities have undergone a boomlet in sales and rising prices as city dwellers have been looking for housing bargains in nearby suburbs that were hard hit during the downturn.

The stabilization of the Wall Street economy is helping drive sales—and boosting prices—in these affluent neighborhoods that have easy Manhattan commutes and offer good schools, broker and analysts say. From Milburn and Summit in New Jersey, to Great Neck and Manhasset on Long Island, the close-in suburbs are outperforming the rest of the slumbering regional housing market.

The same is true north of the city. “You can measure the recovery in Westchester by how far you are from Manhattan,” said Chris Meyers, chief operating officer of Houlihan Lawrence, the largest brokerage firm in Westchester County.

Jeffrey G. Otteau, president of the Otteau Valuation Group, a New Jersey appraisal and consulting firm, said that New Jersey towns with short, direct train rides to Manhattan outperformed the rest of the state during the first half of the year.

“We have seen the effects of the Manhattan rebound in the market we describe as Midtown Direct,” he said.

The suburban bump echoes rising prices of sales in Manhattan during the past few quarters. In the ring of towns in Westchester nearest to New York City, median prices are up 14% this year, and are only 3% below the market peak in 2006, according to Houlihan Lawrence.
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Across New Jersey, Mr. Otteau said median home prices had risen less than 2% in the first half of the year. But in the Midtown Direct corridor, with direct commutes of 35 minutes or less, he said prices rose 5.7% and sales rose 24%.

Sales rose even more in the New Jersey condo market across the river from Manhattan, but with a surplus of new condominiums, median prices fell by 8.2%.

Posted in Economics, New Jersey Real Estate | 214 Comments

So much for “innovation” in lending

Posted on October 12, 2010 by grim

From HousingWire:

Freddie Mac economist: Exotic mortgages meant steepest declines in area values

In states where adjustable-rate or exotic mortgages were more prevalent than traditional loans, home values fell 39% on average, compared to a 5% decrease in more conservative states, according to Freddie Mac chief economist Amy Crews Cutts.

In a perspective published Monday, Crews Cutts said more traditional mortgages have saved many homes since foreclosures began mounting in 2007.

“The long-term, fixed-rate mortgage has emerged as an economic shock absorber for millions of households and thousands of neighborhoods during the current downturn,” Crews-Cutts said.

When subprime loans began to deteriorate and investors began pulling capital out of the market, many borrowers with adjustable-rate mortgages could not refinance and avoid the interest-rate resets. Subprime and ARMs accounted for nearly half, 47%, of all foreclosures started in the first half of 2010.

Crews Cutts went on to compare state home price indices vs. FRM totals for all 50 states and found that the states where home prices fell the most, fewer borrowers had prime FRMs, FHA or VA mortgages.

Posted in Housing Bubble, National Real Estate, Risky Lending | 162 Comments