All good things...

I received my Weekly Mortgage Market Update today from Victor Samaan, our Bank of America rep and as anticipated the threat of higher interest rates on home loans could be just around the corner. It's been my contention that one of the best reasons to buy now, even with the specter of further devaluation in coming months is interest rates. How much would a point add to your payment?


"ALL GOOD THINGS MUST COME TO AN END..."

Or so the popular saying goes. And last week, the Fed reiterated once again that their Mortgage Backed Security (MBS) purchase program...the program that has helped keep home loan rates low for much of the last year...will end on March 31, 2010 as previously stated. Here's the lowdown on what this means, and all the latest news impacting home loan rates and the markets.

Last Wednesday during their regularly scheduled meeting of the Federal Open Market Committee, the Federal Reserve kept the Fed Funds Rate unchanged. But history has shown that when the Fed has left rates too low for an extended period of time, there is a price to be paid, via higher inflation. Yet if the accommodation is removed too early, it can derail an already fragile recovery. The Fed continues to walk this tightrope, trying to get it "just right."

Along with this decision, the Fed emphasized and reminded that their MBS purchase program will still end on their already revised deadline date of March 31, 2010. Why is this significant? Let's look at the numbers from last week to get an idea. The Fed purchased $16B in MBS in the latest week bringing the year-to-date total to $1.087T. This means there is $163B left to purchase before March 31, which in turn means the Fed will purchase about $11.5B on average each week through the end of the buying program. This is less than half of what the Fed was buying regularly throughout 2009 and a 1/3 less than what the Fed has been buying in recent weeks.

So why does this point to higher rates around the corner? When there is lots of supply and diminishing demand, the price of that item will subsequently go down - it's Economics 101. So, when Bond prices start to decrease from the diminishing demand of the Fed's purchases, home loan rates will naturally be likely to increase.

Source: Victor Samaan at Bank of America

Home construction rebounds!?

OK, I'll bite. Because in the end I want to believe that the formula exists to work through all this. You'll note, however that all this new construction "jumped" by only 1.9% here in the West verses 16.4% in the Northeast. So in our micro southern California market housing starts are nearly nonexistent.

And although I partly agree with the comment (love the comments) by Brian Javeline about getting some focus on revitalizing the 128 million existing homes in need, there will always be new construction and Yousuf points out at the end of the piece that Wall Street banks need to help the taxpayers who funded their bailouts with improved lending practices.


Home construction rebounds from 6-month low

By Hibah Yousuf, staff reporter
December 17, 2009: 10:41 AM ET

NEW YORK (CNNMoney.com) -- Home building rebounded from a six-month low in November, with improvement in new home construction in all sections of the nation, according to a government report issued Wednesday.

Construction of new homes rose to an annual rate of 574,000 during the month, 8.9% above the revised October rate of 527,000. The rate was still 12.4% below the 655,000 rate during November 2008.

A consensus estimate of economists surveyed by Briefing.com expected 574,000 housing starts during the month.

New construction jumped the most in the Northeast, with a 16.4% rise from the previous month. Housing starts rose 12.3% in the South, 3% in the Midwest and 1.9% in the West.

The number of building permits issued during November rose to a seasonally adjusted annual rate of 584,000. That was 6% above the revised October rate of 551,000, and 7.3% below the November 2008 estimate of 630,000.

One reason for the October downturn was concern that an $8,000 homebuyer's tax credit -- part of the Obama administration's economic stimulus -- was going to expire on Dec. 1.

At the start of November, the credit was extended through the end of June and expanded to apply to more buyers. But David Crowe, chief economist at National Association of Homebuilders, said the bill hasn't had a chance to impact the housing market.

"This is a recovery from the prior month," said. "But we're still seeing a tapering off toward the end of the year. During the middle of this year, we saw a nice buildup through the late summer as a result of the homebuyer's tax credit."

Housing starts peaked this year in July with an annual rate of 593,000.

"We're in a bit of a lull, but the new (extended) credit will have an impact as we move into 2010 and consumers plan for that credit availability, and builders begin to answer expected demand in the spring," he said.

Crowe added that the tight credit market has also made it difficult for builders to borrow money to start building projects.

"Builders are ready to begin restocking their inventories to prepare for the selling season, but they can't get production credit from the banks," Crowe said. "Banks are effectively making carte blanche decisions without recognizing projects that are in decent markets with viable futures."

Crowe said he hopes President Obama's recent pressure on Wall Street banks to help taxpayers who funded their bailouts will improve lending practices.

Source: CNNMoney.com

Citigroup to suspend foreclosures/evictions for holiday season

I’m not sure exactly how I want to position this… and as much as I want to be professional and not have an opinion, walk the fence (so-to-speak) I can’t help myself on this one.

OK so Citibank is saying “why don’t you folks take an additional 30 days because we’re not going to do anything with your home for the next 30 days anyway and really there are way too many functions on our schedule to sign all the docs until mid January.” The truth is that tens of THOUSANDS of REOs are sitting vacant and will be indefinitely. Much of this inventory is not even being marketed!

Citibank says it’s working on an alternative to foreclosure, so why not work on an alternative to evicting these owners, mid winter 30 days from now? In reality this is a drop in the bucket… The numbers of foreclosures reported in the third quarter were more than 900,000 and that is approximately 23% higher than a year ago. See map at Where Foreclosures Cluster.

Considering the magnitude of this crisis, for an organization the size of Citibank to do a press release about this weak concession is nothing but a publicity stunt to garner “good will” during the holidays. I’m embarrassed for them and ashamed that MSNBC posted it (seriously)… Can I get a WHOOP-DEE DOO!?


Citigroup to suspend foreclosures for 30 days
Bank is working on ‘long-term fundamental alternatives’ to foreclosure

WASHINGTON - Citigroup Inc. will suspend foreclosures and evictions for 30 days in a temporary break for about 4,000 borrowers during the holiday season.

The New York-based bank said Thursday the suspension will run from Friday through Jan. 17. It applies only to borrowers whose loans are owned by Citi. Borrowers who make payments to Citi but whose loans are owned by other investors are out of luck.

"We want our borrowers to have a much less stressful time, to spend their time with their families during the holidays as opposed to worrying about their homes," Sanjiv Das, head of the company's mortgage division, said in an interview.

The suspension means Citi will halt foreclosure sales and stop evicting homeowners from properties it has already seized. The company projects it will help 2,000 homeowners with scheduled foreclosure sales and another 2,000 that were due to receive foreclosure notices.

Das also said the company is working on "some long-term fundamental alternatives" to foreclosure, but declined to be specific. "We know that moratoriums are not permanent solutions," he said.

Most major lenders suspended foreclosures last winter while the Obama administration developed its $75 billion loan modification program. Foreclosures picked up again after those suspensions lifted. In recent months, they have fallen as banks evaluate whether borrowers qualify for the government program.

Citi has enrolled about 100,000 borrowers in the Obama program, but had made only about 270 of those modifications permanent as of the end of last month, according to a Treasury Department report. But Das said the low number resulted from a "reporting error" and said it will rise dramatically by year-end.

"I have put a lot of pressure on my team to make sure that there is almost nothing left in the pipeline," he said.

Short-Sale standards could help troubled homeowners

Bravo! Standardizing the short sale process is a fantastic move…

What’s missing from this proposal is requiring that agents be qualified to work in the Short Sale arena. These transactions are much more problematic and time consuming then a standard sale and require an entirely new skill set.

There are agents, with short sale listing who probably shouldn’t have a real estate license and yet they are representing owners in dire straits, where time is of the essence and they (the agent) are all that stands between a successful short sale and foreclosure.

When one or the other is the only option, there’s a big difference. The credit score hit alone is at least a couple hundred points higher, foreclosure verses short sale and a foreclosure stays on your record for a minimum of 7 years verses just a couple with a short sale. There are other issues as well.

If you’ve followed the content I’ve posted recently, you’ll probably agree that we need to assure that more of this “pre-foreclosure” property is successfully marketed. Perhaps the holders of these second liens will need to decide between $3,000 guarantee and the prospect of pursuing more money, over time by legal means. We all know who end up with the lion share in that scenario.

In the end, if we can cut the number of foreclosures then it’s a win. The banks do not need more property and the short sale process needs to be less of a hassle with a higher rate of success. As someone focusing more and more on short sales, parameters and timeline are welcomed.


Obama's standardized short-sale plan could help troubled homeowners

The Los Angeles Times
By Kenneth R. Harney
December 13, 2009

Reporting from Washington - If you're in trouble on your mortgage and can't get a loan modification, check out the Obama administration's standardized short-sale plan that's scheduled to roll out in the next several months.

The program, outlined Dec. 1 by the Treasury Department, is an attempt to streamline what has traditionally been a contentious, time-consuming process by requiring lenders and others to use nationally uniform documents, timelines and financial incentives.

A short sale involves a lender or investor agreeing to collect less than the balance owed on a mortgage debt out of the proceeds of a negotiated sale of the property. Often a short sale is the last alternative to foreclosure available to distressed homeowners and banks. Say you've lost your job and fallen behind on mortgage payments. With little or no income, you can't qualify for a modification program.

In this situation -- grim as it is -- your best move may be to see whether your lender will accept a short sale. Though the idea sounds straightforward, in practice it is not. First, the bank needs to be convinced that a short sale would yield it more money at the bottom line than a foreclosure would.

This usually means you need to bring in a real estate agent who knows the ropes and can pull together the key information needed by the bank: recent comparables on closed sales, local market trends and the likely selling price of your house.

You'll also need a buyer for the house -- one who'll pay a price acceptable to the bank and has financing to close the deal. If you happen to have a second mortgage or home equity credit line on the property, you'll also need to negotiate how much that lender will receive from the sale proceeds.

That can be tricky. In depressed real estate markets, the second-lien lender may be holding a note that's worthless in a foreclosure because plummeting property values have wiped out the collateral. Yet that same bank is in a pivotal position: It has the legal power to block the short sale by refusing to sign on to the deal.

Equally troublesome in short sales is the fact that banks, mortgage servicers and bond investors often have conflicting requirements for documentation and financial yields that can complicate and drag out the haggling for months.

Enter the Obama administration's new streamlining plan. Besides requiring lenders and servicers to use uniform documentation, pre-approved short-sale terms and accelerated turnaround times, the plan provides financial incentives for key players:

* Homeowners who successfully complete a short sale under the program receive $1,500 to defray relocation costs.

* Mortgage servicers can receive $1,000 per case.

* Investors get $1,000.

* Second-lien holders receive up to $3,000 from the sale proceeds.

Even real estate agents get something: The rules prohibit banks from forcing them to cut their commissions from the listing agreement as part of the final deal.

Sounds like a formula for encouraging a lot more short sales, right? The jury will be out on that for months, and most major lenders are still studying the fine print of the Obama program. But early reactions from big banks appear to be positive.

Dave Sunlin, a senior vice president for Bank of America Corp., said: "We're very pleased. We welcome any effort to reach standardization for all parties" involved in short sales.

Faith Schwartz, executive director of Hope Now -- a Washington-based group representing the country's largest banks, mortgage servicers, bond investors and consumer counseling organizations -- said the plan should bring "uniformity and standards" to a process usually characterized by "mayhem" among the negotiating parties.

Scott Brinkley, a senior vice president for First American Corp., a firm that provides market data for banks, said, "You're going to see a lot of cooperation" by lenders and investors.

But there could be a major pothole: The Obama plan tilts to consumers by requiring second-lien holders to drop all financial claims against short-selling borrowers beyond the $3,000 they take out of the deal.

Travis Hamel Olsen, chief operating officer of Loan Resolution Corp., a Scottsdale, Ariz., consulting firm, says the $3,000 payment won't be enough for many second-mortgage lenders. Today they frequently obtain additional short-sale compensation from sellers as the price of their participation -- in cash or through promissory notes -- far beyond $3,000.

"I'm concerned that that could limit participation" by second-lien holders, Olsen said.

Bottom line for homeowners who might benefit: Don't have wild expectations, but definitely ask your servicer whether it plans to participate and whether the forthcoming standardized plan for short sales might work for you.

Source: Los Angeles Times

Short Sales: The 5 Stages of residential dispossession Pt. 1

The 5 Stages of residential dispossession
Part 1: Short Sales

The process through which a home becomes Bank Owned or an REO (real estate owned) consists of approximately five stages.

1. Short Sale
2. NOD (notice of default)
3. Foreclosure
4. Auction
5. REO (real estate owned)

Over the next several weeks I will attempt to shed some light on this topic and hopefully provide some information or guidance that might help some homeowners avoid losing their home or at least minimize the impact of the inevitable.

Topic one (where a loan modification has failed) is the Short Sale and according to a recent article in the LA Times, the rate of foreclosure among outstanding mortgage loans in the Los Angeles metro area was 3.69% this October, compared with 1.75% in 2008. Those familiar with the real estate market in Q1 and Q2 of this year (2009) can appreciate what that could mean moving into the first part of next year... The national foreclosure average is 3% according to data released by First American CoreLogic, which tracks the mortgage market.

Delinquent loans 90 days or more past due constituted 10.9% of all mortgage loans in the Los Angeles area, up from 5.86% during the same month the year before. So it is likely that we’ll see a lot more short sales and foreclosures in 2010.

Please note that although I am a licensed real estate agent and member of the California Association of Realtors I am NOT and attorney, accountant or loan officer. If you need advice in any of these areas you should contact the appropriate professional. The information herein is meant to offer general information and although deemed to be accurate is not guaranteed.


The Short Sale

In the current real estate market, short sales and foreclosures represent a new traditional real estate transaction. It’s an unfortunate fact of life that over the past several years many homes were purchased for substantially more than their current value. In a recent Wall Street Journal piece “One in Four Borrowers Is Underwater “, writers’ Ruth Simon and James R. Hagerty state that nearly 10.7 million households , or about 23% of homeowners with mortgages had negative equity in the third quarter of 2009. It is estimated that more than 520,000 of these borrowers have received a notice of default.

A short sale is a lender approved sale of real estate in which the sale price is less than (or short of) the mortgage balance.

For agents, knowing how to maneuver the complexities of a short sale, on either side of the transaction is not merely a good skill to have in today’s market, it’s critical.

Distressed homeowners’ are in a race against the clock to avoid foreclosure and buyers need to identify sound real estate opportunities quickly to avoid wasting time and missing opportunity. In either case the agent must be able to evaluate all available options and identify or establish the components of an effective short-sale package.


Anatomy of a Successful Short Sale

Successful short sales require 3 elements:

1. Seller opportunity to get out of a bad situation with minimal credit damage.
2. Buyer gets a deal, purchases property below the true market value.
3. Lender nets more money than a foreclosure action would bring.


Sellers

It’s important to note that Short Sales will not work if the property has sufficient equity for the lender to foreclose, sell as an REO and at least break even. The homeowner must be "upside-down" in their loan for the lender to approve a short sale.

When a homeowner experiences a hardship and can no longer pay the mortgage the first and best option is a lender approved short sale to attempt to avoid foreclosure. Whereas there are still negative credit implications associated with a short sale, they are much less severe.

The first step is valuation, what is the current market value of the subject property? As stated above, if there is sufficient market value in a home a lender will not approve a short sale and perhaps a quick standard sale (even if it requires some money out of pocket) is the best solution.

Establishing the current market value of a home involves measuring the subject property against other properties in the neighborhood that have sold recently. An experienced agent, with working knowledge of an area can put together a Current Market Analysis or CMA or there are tools available online to get a rough idea of value. Understand the there are many factors from square footage, lot size and the age of a structure to amenities like pools, views and location in a given community etc. that can affect the value of one home as compared to another.

If it is determined that the current market value is significantly below the amount owed, then the second step is to contact the lender(s) for a short sale application and instructions specific to their policy. If the seller is working with an agent (and in most cases they should be) they need to execute the proper documentation to authorize the agent to deal directly with the lender and the initial call to the loss mitigation department or the person named in demand letters should be placed together. This is the best way to establish a working relationship, answer questions, verify information and get outline of what they want and how they will make a decision on a short sale.

Beyond these initial steps, any successful shot sale will require a properly prepared Short Sale Packet which can easily be in excess of 50 pages. Closing statements, purchase contracts, market statistics, financial documentation, disclosures and a plethora of other forms, agreements and miscellaneous information must be provided, however one of the more critical elements of the packet is the Hardship Letter.

The numbers are the only thing that a lender cares about, so the hardship letter should NOT be a sob story. It MUST be a factual description of a financial hardship that is leading to bankruptcy, foreclosure or both. The lender needs be convinced that the only other option is foreclosure, at which point they will analyze the situation and determine whether a short sale is a preferable direction.

It must be made evident that the borrower is headed for foreclosure or bankruptcy. The letter needs to give a clear picture of the financial condition and be backed up with documentation (pay stubs, medical bills, termination letters etc).

The average cost for a lender to foreclose is approximately $50,000 and there are the reserves that lenders are required hold to back up non-performing loans. Lenders don’t like to tie up resources to back up these loans and are generally open to alternatives.

Certainly there is more to consider. Pursuing a short sale is a complex process and in some cases, if caught in time it can be avoided. In others foreclosure is inevitable. If you are concerned about maintaining your mortgage or have questions about the process please call or email at your convenience


Buyers

A true Short Sale opportunity is where a homeowner owes more on their home than they will receive from a standard sale and a situation where the lender will approve a price that meets your budget.

Obviously for the buyers’ part, a purchase at the lowest possible price, that the lender will approve is the goal. Priorities for a buyer would be to establish that the homeowner is upside-down in their loan, that the target property is worth less than the total amount owed and that true hardship for the seller exists to convince the lender that a short sale is necessary. Also to be sure of clear title, that there are no prohibitive liens or other claims against the property that will stall the process or cause it to fail. If the loan is VA or FHA, the situation needs to meets their specific criteria for a short sale.

Buyers beware! All homes advertised as "Short Sale" are not necessarily short sales and potential buyers need to verify if and when the paperwork was filed with the lender(s) and whether that paperwork was properly completed. If not, you may end up wasting a lot of time and energy, the home will be foreclosed and you'll be back to square one. Considering that most short sales involve property that is already in default, time is of the essence. There must be enough time to complete the process before a foreclosure action is completed. This requires a willingness and cooperation from the seller and the lender as well as the motivation to work to avoid foreclosure.

Of course I'll suggest that you are best served by working with a licensed agent or Realtor who has short sale experience, however if you choose to go it alone, do your homework and remember that the sellers agent was retained by the seller, is working against the clock in an attempt to find a qualified buyer and to strike a deal with the lender. Many agents listing short sales are handling several at once. Your best interest may be best served by you being informed or using an experienced agent focused on you alone.

Los Angeles-area foreclosure rate up in October

Along the lines of what I’ve been posting, we’re all just passengers on this one… see LA Times piece "Los Angeles-area foreclosure rate increases in October" below.

The bright side in South Bay, Palos Verdes Peninsula and the beach cities is that more-than-likely, as with the last round we will not experience the same degree of depreciation (if any) as areas inland or across the country.

Inventory: Active/Sold

On the Palos Verdes Peninsula 90274 and 90275, inventory is currently low with 253 properties (SFRs, condos and town houses) available for sale. Per the MLS, there have been 74 closed sales November 1st through today (16 since December 1).

In the beach cities (Manhattan Beach 90266, Hermosa Beach 90254, South Redondo Beach 90277 and the Hollywood Riviera) there are 364 active listings and 126 sales since the 1st of November (39 so far in December).

Torrance (not including the Hollywood Riviera) 91 listed currently, 76 sold November 1 to present (19 of those since December 1st).

If you’d like numbers on additional areas, please send a request via email.

The slow-down in December is expected, interest rates (see below) are still outstanding and although prices in general may drop further during 2010 (most likely during Q1/Q2) the best properties are still selling.


Rates as of Friday, December 11, 2009

Conforming 30 Year Fixed
Rate Disc. Points APR
4.625% 0.750% 4.813% Details

Conforming Jumbo 30 Yr Fixed
Rate Disc. Points APR
4.875% 0.750% 5.049% Details

FHA 30 Yr Fixed
Rate Disc. Points APR
4.750% 0.608% 5.077% Details

FHA Jumbo 30 Yr Fixed
Rate Disc. Points APR
4.875% 0.950% 5.216% Details

Rates complements of: Andre Hemmersbach
American/California Financial (310) 713-3100


Los Angeles-area foreclosure rate increases in October
December 10, 2009 2:40 pm

While home prices in the Los Angeles area have steadily increased in recent months, indicating strengthening in the housing market, more and more people are finding themselves falling behind on their mortgage payments, according to a report out today.

In the Los Angeles metro area, the rate of foreclosure among outstanding mortgage loans was 3.69% in October, compared with 1.75% for the same month a year earlier. That compares with a 3% national foreclosure rate, according to data released by First American CoreLogic, which tracks the mortgage market.

Delinquent loans 90 days or more past due constituted 10.9% of all mortgage loans in the Los Angeles area, up from 5.86% during the same month the year before.

Whether a new wave of foreclosures will hit the market next year remains a matter of debate among experts. Some believe a glut of properties could flood in, pushing down prices, while others argue that lenders and the federal government are both determined to keep such a situation from occurring.

Source: L.A. Times by Alejandro Lazo
Photo: Associated Press

Interest rates far from the only answer

"The miserable have no other medicine but only hope” Measure for Measure by William Shakespeare (Act III, Scene I)

My intension is not to paint a picture of doom and gloom. I remain cautiously optimistic that with conscience and care, we can weather the storm. There are, however those who are quick to say we're in recovery, the worst has past and by this time next year our real estate troubles will be a distant memory. That’s a classic example of ignoring the elephant in the room...The posted article “Low interest rates are no panacea for region's housing” describes a dynamic that exists in hard-hit Inland Southern California. Although interest rates are low there's a lack of inventory creating fierce competition and many buyers are getting frustrated. Builders cannot justify building. Statistics nationally on NOD's and REO's indicate that there should be plenty of inventory, however the manner in which these properties are released on to the market is critical. Too much, too fast and we upset the apple cart, prices freefall again and buyers pull back. It’s been said again and again that low interest, tax breaks and lower home prices have created this surge in buying, but it's not on a solid foundation. As expressed by economist Esmael Adibi (below) until we put people back to work and stimulate other aspects of the economy we're still very much at risk. At this point what's most important is managing the over 7.5 million homeowners who are either at risk or in foreclosure and the banks will ultimately determine how this unfolds. Get it right and we get through the next several months and perhaps 2010 with positive momentum. One can only hope.


Low interest rates are no panacea for region's housing

By LESLIE BERKMAN
The Press-Enterprise

Although the interest rate on a 30-year mortgage is the lowest it has been in almost four decades, it is not the medicine that will revive Inland Southern California's housing market, real estate experts said Thursday.

Mortgage rates for fixed 30-year loans in the U.S. dropped to a record low amid indications the housing market is showing signs of life. A 30-year fixed mortgage fell to 4.71 percent for the week ended Thursday, the lowest since mortgage buyer Freddie Mac began compiling the data in 1971.

The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make home buying more affordable and prop up the housing market.

But Inland experts say a shortage of inventory is suppressing sales of existing homes. Also, the high cost of land that home builders acquired makes it impossible for most of them to construct houses that can sell cheaply enough to compete with the foreclosure-ridden resale market.

"The interest rates being as low as they are today are not promoting more sales because of the lack of homes for sale," said Wil Herring, owner of Mtg Experts in Moreno Valley.

While the rate of mortgage defaults remains high, fewer foreclosed houses are coming on the market, a trend that some experts say reflects an effort by lenders to modify mortgages for financially troubled homeowners and to control the number of foreclosed homes for sale to prop up prices.

Herring said there is "sheer frustration" among would-be first-time buyers who have to compete for the limited number of bank-owned homes, frequently having to make multiple offers and losing out to all-cash buyers.

Chapman University economist Esmael Adibi said the lower mortgage interest rate is a positive development because it makes homes more affordable and will be welcomed by someone who is currently house hunting. But he said it won't be enough to overcome the negative impact of a soft economy on home sales.

"The job outlook and overall economic condition trumps any improvement we will get on the mortgage front because if a person doesn't have a job or is not confident about his or her job, even with the improved affordability, that person will not commit to purchasing a house," Adibi said.

Alan Nevin, director of economic research for MarketPointe Realty Advisors in San Diego, a firm that advises home builders, said lower mortgage rates will do "virtually nothing for new home building because it is not sufficient to cause developers to risk breaking ground."

OVERPRICED LAND

The basic problem, Nevin said, is the cost that developers paid for land -- most likely purchased at the height of the housing boom in 2005 or 2006 -- is "almost higher than what they can sell the homes for."

Nevin said recently he studied the Hemet-San Jacinto area and discovered that most of the sales offices in housing developments were closed because the builders couldn't compete with the resale market. He said significant home building will not occur until the banks resell land in the failed projects at discounted prices to a new group of builders.

"I suspect over the course of 2010 you will begin to see new homes being built in small quantities but not by the guys who built them before," Nevin said.

Bloomberg News and The Associated Press contributed to this report.

Source: The Press-Enterprise Online

More Government pressure on the mortgage industry

It is certainly unfortunate that some of those with the greatest need are failing to provide the necessary paperwork… Some homeowner’s do not understand the loan modification process, while other are actually opting for a short sale or foreclosure rather than wait out any potential recovery. A two percent mortgage for five years sounds pretty attractive to me!

With the Fed’s forcing the issue perhaps those still waiting for a decision (1/3 of applicants according to the article) will get an answer. In the end, it seems the only real leverage the government has is this dreaded “laggers’ list” that will be made public knowledge in an attempt to shame financial institutions into doing a better job. With 14% of homeowners behind or already in foreclosure it’s going to take a Herculean effort. RD

Homeowners who may be eligible for assistance can call 888-995-HOPE, or visit http://www.makinghomeaffordable.gov/.


Gov't increases pressure on mortgage industry

By ALAN ZIBEL, AP Real Estate Writer
Monday, November 30, 2009

WASHINGTON - Faced with sluggish progress in its foreclosure-prevention effort, the Obama administration will spend the coming weeks cracking down on mortgage companies that aren't doing enough to help borrowers at risk of losing their homes.

Treasury Department officials said Monday they will step up pressure on the 71 companies participating in the government's $75 billion effort to stem the foreclosure crisis. They will start this week by sending three person "SWAT teams" to monitor the eight largest companies' work and requesting twice-daily reports on their progress.

The mortgage companies, also known as loan servicers, have had a hard time getting borrowers to complete the needed paperwork for the administration's loan modification program. Nearly 60 percent of the 375,000 borrowers who qualify to have their loan modifications completed by year-end have either submitted incomplete paperwork or none at all.

"Borrowers must understand the urgency of getting their completed paperwork in so they do not miss out on the opportunity for more affordable mortgage payments," said Phyllis Caldwell, who recently was named to lead the Treasury Department's homeownership preservation office.

The program, announced by President Barack Obama in February, allows homeowners to have their mortgage interest rate reduced to as low as 2 percent for five years.

The administration is feeling intense pressure from lawmakers and consumer advocates to speed up progress. As of early September, only about 1,700 homeowners had finished all the paperwork and received a new permanent loan. About one-third of borrowers who have submitted complete applications are still waiting for a decision.

In an effort to shame the companies into doing a better job, Treasury will publish a list next week of the mortgage companies that are lagging. While big lenders like Citigroup and Wells Fargo have made double-digit gains in the percentage of eligible borrowers they have signed up for trial modifications, other companies like Ocwen Financial and American Home Mortgage Servicing have only increased their borrower participation by 6 percentage points or less since July.

Paul Koches, executive vice president of Ocwen, said his company had already saved 90,000 of its roughly 370,000 distressed homeowners from foreclosure before the government program began. As of October, Ocwen had started trial modifications for 11 percent of its borrowers, up from 5 percent in July.

At American Home, spokeswoman Christine Sullivan said the company has a "large, dedicated team" working on the Obama plan, but also noted that the company modified more than 60,000 loans outside the Obama plan over the past year.

"We are addressing the needs of distressed borrowers and are confident that we are doing all that we can reasonably do to avoid foreclosure," she said in an e-mail.

Some companies have barely made any inroads. HomEq Servicing, a division of Barclays Capital, only signed up in August. As of October, it had only started 91 trial modifications out of a pool of nearly 41,000 eligible homeowners.

"We have solicited thousands of borrowers for the financial information and documentation necessary ... and expect the number of trial modifications to increase substantially in the coming weeks," company spokesman Brandon Ashcraft said, noting that the company has modified 45,000 loans outside the government program over the past two years.

The participating mortgage companies signed contracts earlier this year that give the government the right to withhold incentive payments or end their contracts with Treasury. But mortgage companies don't receive those payments until they make a modification permanent, so there is little leverage over companies that aren't performing well.

That difficulty, consumer advocates say, highlights the program's key flaw: Since participation was voluntary, the government has little it can do besides shaming the industry into doing better.

"There's no meaningful accountability," said Diane Thompson, counsel at the National Consumer Law Center. "If you just aren't doing the loan mods, so what?"

And then there's lender limbo. About one-third of borrowers have submitted complete applications but haven't received a decision.

"In our judgment, servicers to date have not done a good enough job" of making the modifications permanent, said Michael Barr, an assistant Treasury secretary. Companies, he said, "that don't meet their obligations under the program are going to suffer consequences."

Industry executives acknowledge there have been problems.

"The documents were confusing. Borrowers did not understand the process wasn't closed until the documents came in," Sanjiv Das, chief executive of Citigroup's mortgage unit, said earlier this month. "Even when the documents came in, they were not always complete."

Mortgage finance company Freddie Mac has hired an outside company, Titanium Solutions Inc., to send real estate agents around the country to knock on borrowers' doors and help them complete the paperwork.

"It can be a little bit intimidating," said Patrick Carey, Titanium's chief executive. "They don't, in many cases, understand exactly what is being asked of them."

Analysts, meanwhile, say the foreclosure crisis is likely to persist well into next year as rising unemployment pushes more people out of their homes.

About 14 percent of homeowners with mortgages were either behind on payments or in foreclosure at the end of September, a record level for the ninth straight quarter, according to the Mortgage Bankers Association.

Homeowners who may be eligible for assistance can call 888-995-HOPE, or visit http://www.makinghomeaffordable.gov/.

Source: The San Francisco Chronicle