New Jersey Real Estate Report

From the WSJ:

Wall Street Firms Are Subpoenaed
New York Examines Treatment
Of Debt Tied to Risky Mortgages
By KARA SCANNELL
December 5, 2007; Page C2

New York state prosecutors have sent subpoenas to several Wall Street firms seeking information related to the packaging and selling of debt tied to high-risk mortgages, people familiar with the matter say, the latest legal woe to hit the stressed industry.

The subpoenas, sent by the office of New York state’s attorney general, Andrew Cuomo, are broadly written and request information from firms including Merrill Lynch & Co., Bear Stearns Cos. and Deutsche Bank AG, people familiar with the matter say.

The review, part of a broader investigation into the mortgage industry, is examining how adequately the investment banks reviewed the quality of mortgages before packaging them into products that were then sold to investors, these people say. The subpoenas also requested information about how the debt was pooled into securities, including the banks’ relationship with credit-rating firms.

A spokesman for Mr. Cuomo couldn’t be reached. A Merrill spokesman declined to comment on the subpoena, saying: “We always cooperate with regulators when asked to do so.” Bear Stearns and Deutsche Bank declined to comment.

The state-prosecutor inquiry is the latest twist in the fallout stemming from residential subprime mortgages. A rise in defaults and foreclosures, particularly among low-end borrowers, has whipsawed global stock and bond markets, led to the dismissal of two Wall Street chief executives, and resulted in losses by banks, hedge funds and securities firms. The Securities and Exchange Commission has opened about two-dozen investigations stemming from the collapse of residential subprime mortgages, a person with knowledge of the situation said. In addition, the role of credit-rating firms is being examined by federal and state regulators.

From CNN/Money:

October foreclosure filings surge

Foreclosure filings nearly doubled in October and more people could lose their homes in 2008, according to a report released Thursday.

In October, 224,451 foreclosure filings were reported nationwide, up 94 percent from October 2006 and up 2 percent from September, according to RealtyTrac.

In the month, 53,609 U.S. homeowners were forced out of homes repossessed by banks, up from 20,768 a year ago, the firm said. Through October, a total of 309,557 homes have been repossessed by banks leading to forced evictions.

“Some people are in over their heads, owing more than what they can sell their house for,” said RealtyTrac spokesman Daren Blomquist.

For the full year, RealtyTrac expects 2 million homes to have entered the foreclosure process – including bank repossessions, default notices and auction sale notices.

Foreclosures could hit homeowners even harder in the beginning of 2008, Blomquist said. Homeowners experiencing trouble in the fall may not see a foreclosure notice until the January or later, he said.

On top of that, adjustable-rate mortgages are scheduled to reset in greater numbers through 2008, sending homeowners’ monthly mortgage payments higher, possibly to unmanageable levels.

“The other side of the vise pressing on these people is that it’s harder to refinance because lenders’ standards are tighter,” Blomquist added.

From Reuters:

Home foreclosures soar 94 percent: RealtyTrac

Home foreclosure filings in October edged up 2 percent from September but at 224,451 were a whopping 94 percent higher than a year earlier, real estate data firm RealtyTrac said on Thursday.

The figure, a sum of default notices, auction sale notices and bank repossessions, was down from a 32-month peak in August however, RealtyTrac, an online market of foreclosure of properties, said in its monthly foreclosure market report.

RealtyTrac said the national foreclosure rate was one filing for every 555 U.S. households in October.

“Overall foreclosure activity continues to register at a high level compared to last year but it appears to have leveled off over the past two months after hitting a high for the year in August,” James Saccacio, chief executive officer of RealtyTrac, said in a statement.

In September, home foreclosure filings fell 8 percent.

Default rates in the subprime segment of the U.S. mortgage market, which caters to borrowers with poor credit histories, have jumped this year as the housing industry slowed and prices fell in many regions, particularly areas that benefited the most during the housing market’s boom from 2000 to 2005.

“Default notices were down nearly 9 percent in October, indicating that some of the efforts on the part of homeowners, lenders and advocacy groups to find alternatives to foreclosure may be starting to have an impact. On the other hand, bank repossessions were up nearly 35 percent, evidence that more homeowners who enter foreclosure are losing their homes,” Saccacio said.

From the New York Times:

Bracing for Home Loan Losses, Wells Fargo to Take Big Charge

Wells Fargo & Company, the nation’s second-largest mortgage lender, after Countrywide Financial, said yesterday that it would take a $1.4 billion fourth-quarter charge for losses it anticipated in connection with home loans.

The bank said that it would continue to provide home equity financing directly to customers, but that it would not originate or acquire home equity loans through indirect channels. Wells Fargo will also not originate home equity loans through third parties when the combined loan-to-value ratio of the first and second mortgages is over 90 percent or where the second mortgage is not behind a Wells Fargo loan.

The bank is putting $11.9 billion into a special liquidating portfolio. The bank’s filing with the Securities and Exchange Commission said that the figure is 3 percent of its total loans outstanding, but that it represents the riskiest element of the $83.4 billion in its National Home Equity Group portfolio. The loans are generally clustered in areas of the country that are having the greatest decline in retail prices.

R. Scott Siefers, an analyst who follows Wells Fargo for Sandler O’Neill, said: “It is unfortunate certainly because Wells Fargo has had an aura of invincibility. Over the last few years, it has not gotten involved in a lot of the issues that have caused so much pain for the group. It is one of the largest mortgage lenders in the country so this is going to be painful for everybody.