Tuesday, November 13, 2012

Report: Single-Family Rental Demand Is Outstripping Supply

By Nick Timiraos For WSJ.com November 13, 2012, 8:00 AM
Demand for single-family rental housing is outstripping the available supply of homes, and some housing markets that have been hit hardest by the foreclosure crisis have seen rental demand jump by more than 25% in the past year, according to a report to be released Tuesday by real-estate firm CoreLogic CLGX -2.06%.

It shouldn’t be surprising that single family rental demand has picked up in recent years: There are many families who have lost their homes to foreclosure or that can’t qualify for mortgages given tighter underwriting standards.

But the magnitude of rental-demand gains is still eye-opening. Markets that include Port St. Lucie, Fla.; Riverside, Calif.; and Tucson, Ariz., have all seen rental demand jump by 25% over the past year, and 22 of 30 markets tracked by CoreLogic have seen year-over-year leasing gains.

The single-family rental market has attracted a glut of institutional investor capital over the past two years, as firms to seek to build scattered-site property management infrastructure for an asset class that has long been the domain of mom-and-pop owners and smaller investors.

Slightly more than half of all rental units in the U.S., or around 21 million units, are single-family homes. Around four in five of those unit owners are individual investors.

Investor demand for rentals shows little signs of weakening, according to the CoreLogic report. Leasing activity was up 7% from one year ago in August and up 12% from the beginning of this year, even though the inventory of homes for rent is down by 11% from one year ago.

As a result, it would take just 2.6 months to rent the available stock of for-lease homes in August, down from 3.2 months of supply last year and over 5 months in 2007. It took just six weeks for a listing to be rented, which was unchanged from one year ago but down from more than eight weeks in 2009.

Single-family rents, which tend to show less volatility in either direction than home prices, rose by 2% last year and have increased by 1% so far this year, after declining in 2009 and 2010. “While those increases are low, rent growth typically lags home price growth by about 12 months,” writes Sam Khater, senior economist at CoreLogic, in the report. He expects rent growth to increase “at a strong clip” late this year and throughout 2013, though not at the same rate as home prices.

The largest rent increases were found in North Port, Fla.; Cape Coral, Fla.; and Honolulu, where rents increased by more than 6%. But rents also rose in cities such as Houston and Raleigh, N.C., where the economy has fared better and the housing market wasn’t as hard hit by the bust. Large rental increases beyond the housing-bust markets “is indicative of the rising tide of demand for single-family rentals,” wrote Mr. Khater.

Thursday, November 8, 2012

American Voters Choose Obama To Lead Us - Down The Road To Ruin

Be careful what you wish for America, you might just get it.....

By Bill Frezza for Forbes.com

Despite a good look at the bankruptcy of entitlement democracy playing out across the euro zone, Americans have gone to the polls demanding to join the death spiral. Offered a clear choice, the promise of free stuff vanquished our abandoned heritage of freedom.

The ideals upon which this country were founded can now be buried alongside the discarded Constitution that used to protect them. Remember this moment so you can explain to your impoverished grandchildren that this is the day the sputtering American dream was finally laid to rest.

Six months ago, I confidently predicted that Americans would come to their senses and turn back the explosive growth of government unleashed by Barack Obama. Instead, the electorate doubled down, inviting him to “complete what he started.” And so he will, for there are still some people left who are not living on food stamps, welfare, disability, unemployment, Social Security, Medicare, Medicaid, government pensions, Pell grants, free school lunches, earned income tax credits, farm subsidies, or any of the 79 means-tested federal welfare programs that are sure to continue growing in the years ahead.

As a bonus, ObamaCare is scheduled to hit the economy just as the nation dives off the fiscal cliff. Like a hurricane brewing over warm Caribbean waters, a perfect storm of bad fiscal policy, bad tax policy, and bad social policy is being pumped up by the printing presses of the Federal Reserve. With Obama safely ensconced in the White House, Helicopter Ben can continue his QE-Infinity plan, monetizing our exploding national debt until the bottom falls out of our currency.

Like the proverbial dog that caught the bus, Obama now fully owns the economic crisis he worked so hard not to waste. After an opening flurry of progressive legislation, stalled thanks to the 2010 voter insurrection, Obama has since been ruling by decree. Returning to office with no need to worry about reelection and armed with the belief that he has the mandate of the people, nothing can stop him now.

It’s not hard to guess what lies ahead, and it’s certainly not an era of good feeling as The One trots out the vaunted “cooperation and compromise” skills he kept so well hidden his first term.
Watch as the business community hunkers down trying to salvage what it can. Watch the parade of WARN Act notices announcing layoffs held in abeyance at the President’s behest until after the election. Watch businesses start to fail, joining the disastrous parade of green energy “investments” that have characterized Obama’s first term. Watch as Argentinean-style capital flight and double digit inflation become the lead story of his second term.

Watch for down-corrections to the government-issued economic statistics designed to fool voters into believing that the economy was healing. Watch a torrent of pent-up regulations rain down on industry after industry already groaning under the weight of compliance costs. Watch the recession come back with a vengeance, assuming we ever get enough honest economic data out of the government to call one. And when the recovery Obama has been promising since the last election never materializes, turning the moribund state of the economy into the new normal, understand that you asked for it.

H.L. Mencken was right—voters do get what they deserve, good and hard. Which means it’s time for those of us who have been sounding the alarm to get out of the path of this runaway train and start looking out for our own families first.

It is perhaps too soon to start stocking up on bottled water and canned goods, as many wish they had in Greece. It may be too soon to buy real estate in a backup country, assuming you can identify one that will avoid the fallout of a failed America. It may not be too soon to start hoarding gold coins. But it is certainly time to disengage from the lost cause this great country once was and start putting together a personal Plan B.

Let the warring tribes we’ve been divided into struggle to redistribute the evaporating wealth of a nation in decline. Let radical egalitarians see what happens when they get the equality of outcome they demand. Let those on the dole try to collect on their precious “right” to free stuff when bureaucratic rationing replaces the market’s invisible hand once the cornucopia of goods and services start running dry.

Press pundits call business leaders selfish for trying to preserve a free market system that makes it possible to pay for the growing array of entitlements reducing our countrymen to a state of dependency. Angry mobs shake their fists at success claiming the rewards are unfair, foolishly believing you can have one without the other. Treasury officials recklessly borrow from foreign powers hoping our profligacy can go on forever. Politicians think they can extract enough money from the 1 percent to provide an unearned standard of living to the 99%—or at least to as many interest groups as it takes to cobble together an electoral majority looking to consume more and more as they produce less and less.

Do you want to see what Forward really means, what’s in store for our children, what the end game looks like? Then keep your eyes on Greece, the birthplace of democracy, as it slides into a war of all against all.

Good luck, America. We are going to need it.

Original Post: http://www.forbes.com/sites/billfrezza/2012/11/06/american-voters-choose-obama-to-lead-us-down-the-road-to-ruin/

Monday, June 4, 2012

Survey: Buyers Frustrated by Low Inventory, Rising Prices

Active home buyers are increasingly concerned about rising prices, prompting a growing number to slow down their purchase plans, according to a new survey.

The findings are from real-estate brokerage Redfin, which surveyed more than 1,200 home buyers in 18 metro areas who had toured a home since March 1.

The company found that 49% of respondents believe that it’s a good time to buy a home, down from 56% last quarter. The share of buyers who think it’s a good time to sell more than doubled, to 28% of respondents.

Nearly six in 10 respondents said that low inventory remained their top concern with buying right now—by far the most predominant worry of buyers. The supply of homes listed for sale nationally is down by 20% from one year ago, and markets such as Phoenix, Orlando and Oakland, Calif., have around half as many homes for sale as one year ago.

More than seven in 10 buyers said they had faced a competing offer when making an offer for a home.

Given those experiences, perhaps it isn’t surprising that 58% of buyers said they think prices will increase, up from 34% last quarter. Meanwhile, just 9% of buyers said that concerns about falling prices were making them reluctant to buy right now, down from 29% three months ago.

The lack of supply and the uptick in multiple offer situations is surprising to many buyers and could lead some frustrated buyers to stand back. More than one-quarter of buyers said they would stand back from the market if prices went up or they were in a multiple-offer situation, while 10% of respondents said they’d do what it takes to win a competitive bid.

The survey also found that 16% of buyers were worried about fatigue from bidding wars and that 21% were concerned about prices rising beyond what they could afford.

“The overwhelming sentiment among home buyers is that there aren’t enough good homes for sale,” said Glenn Kelman, Redfin’s chief executive. “Who would sell right now if he didn’t have to?”

Inventories are also low because banks have put fewer foreclosed properties on the market. The Redfin survey found that 57% of buyers were very interested in conventional sales, up from 48% three months ago. Buyer interest for new homes, foreclosures, and short sales showed little change from last quarter.

Follow Nick @NickTimiraos

Original Post: http://blogs.wsj.com/developments/2012/06/04/survey-buyers-frustrated-by-low-inventory-rising-prices/

Tuesday, May 8, 2012

Renting Prosperity

Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move—and how it will lead to the next boom.

By DANIEL GROSS May 4, 2012, 6:08 p.m. ET for WSJ.com

Photo illustration by The Wall Street Journal
In the American mind, renting has long symbolized striving—striving, that is, well short of achieving. But as we climb our way out of the Great Recession, it seems something has changed.

"The Great Gatsby," the pre-eminent American novel of financial ambition, overextension and downfall, offers a revealing vignette about the great American obsession: real estate. The narrator, Nick Carraway, can't afford to buy in the rarefied Long Island world inhabited by Gatsby, and by Tom and Daisy Buchanan. But he can afford to rent. "When a young man at the office suggested that we take a house together in a commuting town, it sounded like a great idea. He found the house, a weather-beaten cardboard bungalow at eighty a month, but at the last minute the firm ordered him to Washington, and I went out to the country alone," he notes. "I had a view of the water, a partial view of my neighbor's lawn, and the consoling proximity of millionaires—all for eighty dollars a month."

The economy needs the dynamism that renting enables as much as—if not more than—the stability that ownership engenders.

In the American mind, renting has long symbolized striving—striving, that is, well short of achieving. But as we climb our way out of the Great Recession, it seems something has changed. Americans are getting over the idea of owning the American dream; increasingly, they're OK with renting it. Homeownership is on the decline, and home rentership is on the rise. But the trend isn't limited to the housing market. Across the board—for goods ranging from cars to books to clothes—Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency that could fuel the next boom.


While downgrading the place of ownership in the American psyche may sound like a traumatic task, the cold, unsentimental fact about the American dream is that Americans never really owned it in the first place. For the past three decades, especially, consumers haven't so much bought their quality of life as they've borrowed it from banks and credit card companies. And since the Great Recession, Americans have been busy rebuilding their balance sheets and avoiding new financial encumbrances. When American consumers can't—or won't—borrow to purchase the goods and services they've come to consider part of their standard of living, how does the economy get back on its feet?

The answer lies in consumers following the example of corporations—that is, becoming more efficient. The reaction to extended leverage and foolish borrowing isn't to stop consuming and buying; it is to consume and buy more intelligently. That's what the Rentership Society is all about. And it starts at home. Literally. Housing is the biggest single component of consumption in the U.S. economy and the source of much of our present misery. According to the Bureau of Labor Statistics, the typical consumer spends about 32% of his or her budget on shelter. In the last decade, that generally meant borrowing a lot of money to take "ownership" of a home.

The vast mortgage-political-financial complex, for a variety of reasons, valued homeownership as a good in its own right. Democrats saw the extension of credit to people on the lower end of the income scale as a matter of social justice; Republicans thought homeownership would make people more bourgeois. Banks and Wall Street firms salivated at the fees mortgages could generate.


So, during the boom, the homeownership rate grew steadily, peaking at a record 69% in 2006, according to the Census Bureau. But those gains were short-lived and came at a truly massive cost: a huge mortgage bust, expensive bailouts of Fannie Mae and Freddie Mac, an overhang of millions of foreclosed properties and falling home prices. Ownership-boosters failed to note that homes purchased in 2005 and 2006 with no-money-down, interest-only mortgages weren't really bought. They were simply rented until the "owner" flipped them or walked away from the mortgage. Far from strengthening low-income neighborhoods, this destabilized them through the inevitability of foreclosure.

In the post-bust climate, renting has emerged as a much more economically efficient way to pay for housing. A one-year lease represents a far less onerous financial obligation than a 30-year mortgage. It's difficult to get into too much financial trouble as a renter. The homeownership rate has fallen from its peak in 2006 to 65.4% today. The foreclosure crisis, which has caused millions of Americans to turn over homes to lenders, is responsible for much of this decline. What's more, given the weak labor market and higher lending standards, more Americans today have a difficult time scraping together the required down payments.

For an increasing number of Americans, though, it simply makes more sense to rent these days. According to Moody's, by late 2011 it was cheaper to rent than to own in 72% of American metropolitan areas, up from 54% a decade ago. And the more people who do it, the more socially acceptable and desirable it becomes. The decline in the ownership rate means that about three million more households rent today than did at the height of the bubble.

It's tempting to view the rise of rentership as an economic step backward. Renters can't build up equity, and they have less control over their living standards than owners. Renting is generally seen as something you do when you've failed as a homeowner or are not yet ready to be one. But I'd argue the rise of rentership is a sign of a system adapting—albeit too slowly—to new realities.

[ReviewCover0505] Alamy
Renting has emerged as a much more economically efficient way to pay for housing, argues Daniel Gross.

The U.S. economy needs the dynamism that renting enables as much as—if not more than—it needs the stability that ownership engenders. In the current economy, there are vast gulfs between the employment pictures in different regions and states, from 12% unemployment in Nevada to 3% unemployment in North Dakota. But a steelworker in Buffalo, or an underemployed construction worker in Las Vegas, can't easily take his skills to where they are needed in North Dakota or Wyoming if he's underwater on his mortgage. Economists, in fact, have found that there is frequently a correlation between persistently high local unemployment rates and high levels of homeownership.

Home builders and property owners have caught on to the economic opportunity presented by the move toward rental. Fannie Mae and Freddie Mac have become reluctant owners of more than 200,000 properties thanks to the foreclosure crisis, working through the backlog, one painstaking foreclosure sale at a time. But in February, Fannie Mae said it would put up for sale some 2,490 homes as a package, asking for $321 million. The Wall Street Journal reported that an assortment of real estate companies and private-equity investors were considering making bids. The presumption was that these sophisticated investors would turn the homes into rental properties. No less a sage than Warren Buffett told CNBC in February that he'd love to buy "a couple hundred thousand" single-family homes for rentals.

The depressed home-building industry has also shifted gears to adapt to the new reality. Housing starts for multifamily units have risen sharply since 2009, according to the Census Bureau. In 2011, whereas single-family housing starts fell 9% from the year before, starts of structures with five or more units were up 60%. In the first quarter of 2012, starts of multifamily housing structures were up another 27%, while single-family starts were up only 16.7%.

What's more, the builders of these structures increasingly intend to rent them out. In 2007, only 62% of the housing units in buildings with two or more units were built for rent. In 2009, 84% of the units in such buildings were built to be rented. In 2011, 91% of the units in such structures were aimed at the rental market.

And the rising popularity of rentership is hardly contained to the housing market. Indeed, it has spurred the creation and growth of innovative businesses in a number of other realms—particularly those that cater to America's cash-strapped, credit-wary youth.

Take cars. The Bureau of Labor Statistics says that private transportation—owning and running a car—is the second largest cost for a typical American household, accounting for 16% of expenditures. Factoring in finance costs, depreciation, repairs, insurance, taxes and gas, AAA calculates that an owner of a midsize sedan who drives 15,000 miles a year spends $8,588 a year on his car.

Enter auto-sharing firm Zipcar. Founded in 2000, it grew by focusing on cities and college campuses. It uses information technology to manage its fleet, and control access—people get cards that let them into garages where cars are kept and into the cars themselves. Users in New York pay a $60 annual fee and then $8.75 per hour on weekdays and $13.75 per hour on weekends—no extra charge for gas or insurance or miles. As the U.S. economy contracted, Zipcar went into hyper-growth: from 225,000 members in 2008 to 650,000 members and 9,500 cars in November 2011. Zipcar, which went public in 2011, has had success in the predictable big cities like Boston, New York and San Francisco, but its vehicles can also be found on 350 college campuses and in smaller cities like Providence, R.I., and Portland, Ore. Large rental agencies like Enterprise and Avis have responded by rolling out similar services.

Or take textbooks. College textbooks are, in effect, rental goods. Students buy them at retail, use them for four months, and then resell them to the campus store or a used-book dealer. In 2010, the U.S. college-textbook market was worth about $4.5 billion, according to the American Association of Publishers. But why buy textbooks when you can spend less and rent them? Chegg.com, founded in 2001, has raised more than $200 million in funding and is aiming to displace the college bookstore. An undergrad can buy an economics textbook new for, say, $263. At Chegg.com, she can rent a hard copy of the same book for $94 for 180 days, or an electronic copy for $128 for the same period. As more students come to campus with Kindles, Nooks and other e-readers, the more efficient consumption of college textbooks is likely to grow rapidly.

Rent the Runway, another Rentership Society business, has likewise found a foothold on college campuses. The company was started in 2009 by Harvard Business School classmates Jennifer Hyman and Jennifer Fleiss. Ms. Hyman has called the company "the Netflix for fashion." As with Netflix, customers open accounts and then pay for the temporary use of goods sent to them through the mail. A Thread Social Poppy Sweetheart Dress (retail price: $365) rents for $50. Accessorize with Crislu Crystal Tear Earrings (retail $96, rent for $20). In business for less than two years, Rent the Runway has raised $31 million in venture capital, attracted one million customers and is turning a profit.

All these models involve more sharing than American consumers are typically accustomed to doing. But the culture is changing. Consider how quickly the attitude of consumers toward housing has changed. And I'm not just talking about the rising incidence, popularity and acceptance of home and apartment rental. At the height of the boom, people believed their homes generated cash by serving as a source of home equity credit, or by returning profits when they were sold. Today, not so much.

But thanks to another postrecession business, efficiency-seeking homeowners have come to realize that their homes can still generate cash. Airbnb, founded in August 2008, is dedicated to the promise that lots of people are willing to earn money by renting out a room in their home and that lots of people are willing to save money by crashing in strangers' abodes rather than in motels or hotels.

Only in America could entrepreneurs rapidly transform couch-surfing into a high-tech business worth more than $1 billion in the space of 36 months. With over 100,000 listings available in more than 16,000 cities and 186 countries, it's a real business. It has booked over 5 million nights. In July 2011, Airbnb raised $112 million from venture-capital firms Andreessen Horowitz, DST Global and General Catalyst. But the real value of Airbnb isn't necessarily what profits it brings to investors. Rather, it's the cash it puts into the hands of homeowners. That cash is not enough to turn around the economy. But it's part of a sea change in how people view the true value of their property and how they role of ownership in their lives as a whole.

Finally, perhaps, Americans are absorbing a piece of wisdom not from Gatsby, but from Thoreau: "And when the farmer has got his house, he may not be the richer but the poorer for it, and it be the house that has got him."

—Mr. Gross is economics editor at Yahoo Finance. This essay is adapted from his new book, "Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy," which will be published Tuesday by the Free Press.

A version of this article appeared May 5, 2012, on page C1 in some U.S. editions of The Wall Street Journal, with the headline: Renting Prosperity.

Wednesday, April 11, 2012

Housing regulator argues for debt forgiveness

By Robin Harding and Shahien Nasiripour in Washington

Fannie Mae and Freddie Mac

It may be cheaper for state-controlled lenders Fannie Mae and Freddie Mac to forgive some distressed mortgage debt than to postpone payments, their regulator said for the first time on Tuesday, in an important shift that could boost the struggling US housing market.
Edward DeMarco, the head of the Federal Housing Finance agency, said a ”preliminary” analysis showed that Fannie and Freddie might save $1.7bn by forgiving some principal rather than just postponing payments because of increased incentives from the US Treasury and the greater likelihood that such borrowers would repay.

“The anticipated benefit of principal forgiveness is that, by reducing foreclosures relative to other modification types, enterprise losses would be lowered and house prices would stabilise faster, thereby producing broader benefits to all market participants,” said Mr DeMarco.

About 12m borrowers, or one in five US homeowners with a mortgage, owe more than their property is worth, creating a huge drag on the housing market and the economic recovery. Fannie and Freddie own or guarantee roughly half of all outstanding home loans.

Mr DeMarco has fiercely resisted measures that would increase Fannie and Freddie’s losses for the sake of the wider economy, but his comments suggest a campaign by the Obama administration may have persuaded him that principal writedowns are now in the the agencies’ best interests.

His remarks came as the International Monetary Fund argued that the US could boost its economic recovery by writing off household debt more aggressively. In a chapter of its new World Economic Outlook the IMF said cutting household debts is a low cost way to limit the economic damage of a recession after a financial crisis.

“The need to really do something about this is still there more than three years after some of the flagship debt restructuring programmes were put in place [in the US],” said Daniel Leigh, the lead author of the IMF work.

The IMF highlighted two case studies – the US in 1933 and Iceland in the last couple of years – as successful examples of household debt restructuring.

In the wake of the Great Depression, President Franklin Roosevelt set up the Home Owners’ Loan Corporation, which bought and restructured one in five of all US mortgages and was wound up at a profit in 1951.

In Iceland, banks were persuaded to cut mortgages to 110 per cent of the value of a debtor’s assets and payments were reduced to reflect households’ ability to pay, spurring a recovery after a disastrous financial crisis.

Mr Leigh pointed to three flaws in the home affordable modification programme, or HAMP, the flagship US effort to write down the value of mortgages that are now worth more than the home they are secured on.

First, the programme didn’t provide large enough writedowns, so the remaining debts were still large and households defaulted anyway; second, lenders were not given enough incentives for writedowns; and third, the eligibility requirements were tight, so not many households were able to take part.
Mr Leigh welcomed the administration’s recent moves to boost writedowns and said it was important that Fannie and Freddie joined in. But Mr DeMarco noted the likelihood that some borrowers current on their payments may default to take advantage of a debt forgiveness programme and the cost of implementing such an initiative.

To avoid such “moral hazard” – the problem of households deliberately choosing to default in order to get their debts written down – the IMF said restructuring programmes should be limited to mortgages that are already in trouble on the date that relief is announced.

Under Mr DeMarco’s analysis, US taxpayers would pay Fannie and Freddie $3.8bn in leftover bailout funds from the troubled asset relief programme to write down mortgage principal, which after accounting for the $1.7bn in savings would result in a net cost to taxpayers of $2.1bn.

While a forgiveness programme would be cheaper than allowing borrowers to delay paying a portion of their property debt, an initiative targeting 691,000 borrowers still meant overall losses of roughly $54bn, according to Mr DeMarco. However, that cost does not take into account the economic benefits conferred by averted foreclosures.

“This is not about some huge difference-making programme that will rescue the housing market,” Mr DeMarco said. He will make a final decision later this month.

Original Post: http://www.ft.com/intl/cms/s/0/289c1214-8318-11e1-929f-00144feab49a.html#axzz1rkO4Z7F2

Thursday, February 16, 2012

HUD’s Donovan: Fannie, Freddie Should Embrace Loan Forgiveness

The Obama administration would like the federal regulator for Fannie Mae and Freddie Mac to begin reducing loan balances for certain troubled borrowers, a top official said Thursday.

“More and more economists across the political spectrum are recognizing [principal reduction] is a critical step,” said Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, in an interview with The Wall Street Journal. “If a family is in their home for 10, 15 years and has no hope of being able to build equity again, they’re going to give up at some point.”

Officials have said for more than a year that they’d like to see mortgage giants Fannie and Freddie adopt principal reduction, and several steps in recent weeks have put more pressure on the Federal Housing Finance Agency, the firms’ regulator, to approve write downs.

“Clearly it’s an important piece of the puzzle that Fannie and Freddie move forward on this,” said Mr. Donovan. Last month, the White House said it would triple incentive payments under an existing loan-modification program that subsidizes the cost of loan forgiveness and that it would offer them to Fannie and Freddie.

When the principal reduction program was rolled out two years ago, those incentive payments weren’t extended to Fannie and Freddie, and their regulator has said there are less costly ways to help borrowers avoid foreclosure. The firms are being propped up with massive taxpayer infusions of their own, and the FHFA is tasked with preserving the firms’ assets.

By providing new taxpayer funds, the administration is making it harder for the FHFA to maintain its stance that principal reduction is less costly because Treasury funds will effectively subsidize some of those losses. The FHFA has said it is currently evaluating the newest proposal.

The firms are “working right now…to make a decision on whether they are going to begin principal reduction,” said Mr. Donovan. “We certainly hope that they will start to do that based on these incentives. That’s why we made them available.”

Separately, Mr. Donovan said he remained “concerned” about the prospect of taxpayers being forced to backstop losses at the Federal Housing Administration. Budget projections this week showed that the agency could deplete its reserves this year. The FHA, which doesn’t make loans but instead insures lenders, has played a critical role supporting housing markets amid a sharp pullback by the rest of the market.

The agency could announce within days its plan to increase the premiums charged to borrowers in order to build up its reserves. HUD also announced in recent days settlements with two of its biggest lenders over fraudulent loan claims that will net more than $680 million for the agency.

But Mr. Donovan warned of precipitous actions to boost reserves that limit the availability of credit and undermine fragile housing markets. “This is a delicate balancing act because if we go too far…what we’re going to be doing is stalling the momentum that we have in the housing recovery,” he said. “Frankly, that not only hurts homeowners more broadly in the housing market, it hurts FHA because the value of our existing investments goes down.”

Original Post: http://blogs.wsj.com/developments/2012/02/16/huds-donovan-fannie-freddie-should-embrace-loan-forgiveness/

Monday, February 6, 2012

What The Mortgage Relief Plan Would Do For Homeowners


by Deborah L. Jacobs, Forbes Staff  for Forbes.com

After more than a year of wrangling over various mortgage relief proposals, influential state leaders seem close to adopting a plan that Pres. Obama announced Feb. 1. Attorney General Eric T. Schneiderman of New York and California’s attorney general, Kamala Harris have indicated they are closer to agreement than in the past.

There are two important elements of the plan and details of both have been a subject of fierce disagreement. One, which could be worth about $25 billion, relates to how much money would be allocated to benefit homeowners and the specific relief they would receive. The other involves the power states would have to investigate past practices by banks, oversee future ones and monitor compliance with the plan.

If the plan is adopted, here’s what it would do for homeowners in specific situations.

Mortgage underwater but current with payments. More than 10 million homeowners in the U.S., due to a decline in home prices, owe more on their mortgages than their houses are worth. So even though interest rates have declined, they have been unable to refinance. The latest plan would enable people who have been making loan payments on time to save about $3,000 a year on their mortgage by refinancing with lower-interest loans guaranteed by the Federal Housing Administration.

Mortgage underwater and behind with payments. Depending on how many states sign on to the plan, up to $17 billion would be set aside to reduce principal for homeowners who are behind on their payments and owe more than their houses are currently worth. The plan would not guarantee a minimum amount of mortgage relief by state.

Victims of foreclosure fraud. The plan would provide payments of about $1,800 apiece to approximately 750,000 families that have been the victim of an improper foreclosure practice. Since 2010, federal authorities have been investigating banks’ routine electronic notarization of documents being transferred from one financial institution to another as part of the foreclosure process–a practice known as robo-signing.

Compensation is likely to be offered to people who lost their homes between Jan. 1, 2008, and Dec. 31, 2011. They would not be required to give up their right to sue the financial institutions. Banks, among them the five biggest mortgage providers–Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial—want to be relieved of liability for future claims involving robo-signing.

In announcing the plan on Feb. 1, the President said he was “working to turn more foreclosed homes into rental housing.” So far such a plan is not contained in the pending proposal.

Deborah L. Jacobs, a lawyer and journalist, is the author of Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide. You can follow her articles on Forbes by clicking the red plus sign or the blue Facebook “subscribe” button to the right of her picture above any post. She is also on Twitter.

Original Post: http://www.forbes.com/sites/deborahljacobs/2012/02/06/what-the-mortgage-relief-plan-would-do-for-homeowners/

Tuesday, January 31, 2012

Flooring in Florida: Is This the Start of Something Good for the Housing Market?

Alex Villacorta
by Alex Villacorta, Contributor for Forbes.com Lifestyle 1/31/2012 @ 4:13PM

Have we turned the corner? Without a doubt, that is the most popular question I get about the housing market. No one can be 100% positive at this point, but a good start for any recovery is when markets build a “floor,”or foundation for which the fundamentals of price appreciation can be built. Given the positive signs we’ve seen recently, I started looking for patterns in various markets to determine if a recovery is starting, and if flooring is being laid anywhere.

After publishing our 2011 Year End Market Report and 2012 Forecast, some interesting trends were discovered in Florida. In 2011, all four Florida metros (Jacksonville, Orlando, Miami and Tampa) ranked in the highest 15 of all 50 metros for price growth over the year. In addition, our November 2011 market report showed three out of four of Florida’s metro markets in the highest performing markets on a quarterly basis. Finally, the 2012 forecast showed each of the areas continuing the trend of improving home values, while leading the country in gains.

It is important to note these markets received more than their fair share of price depreciation after the market peaked in 2006. Orlando had a 63% decline from the peak to the bottom of the market in 2009, and Miami’s prices slid 65% over the same period, so there is a lot of ground to make up.

So with that, it was time to dig deeper and see if flooring was being laid, and more importantly, if a clear pattern could be identified for what an early stage of a recovery looks like.

The first step was finding the fundamental drivers for what pushes prices up. Are there clear variables or consistencies across these markets, and would these variables drive similar market behaviors outside the sunshine state?

Both Orlando and Miami’s growth is being built on a foundation of increases in low tier and distressed home sales. Both these markets show:

  • Substantial improvement in values in their lower priced segments – below $70,000
  • Modest improvement in distressed home sale prices across all price tiers
  • Declining levels of distressed sales as a percentage of total sales

In Orlando, the lower priced segment experienced a whopping 19.8% increase in prices in 2011, while on a price per square foot basis their distressed only sales increased by 4.4%. These growth rates are significantly above the U.S. average.

Low tier home values in Miami jumped 15.28% in 2011, as compared to the top segment of that market which only returned a 1.8% yearly gain. And again, on a price per square foot basis, the distressed only segment across all price tiers saw healthy price increases of 4.9% through the year.

Now while the gains in the distressed segment were not as strong as that of the low price tiers in both markets, just the fact that REO sale values were increasing at all is important. A recovery in the distressed segment, regardless of the magnitude, creates a resistance to future losses across all price tiers as it is this segment that has created much of the pressure on prices over the past several years.

Along with the upward movement in price for the distressed market, the overall saturation of REO sales decreased in both Miami and Orlando. In Miami distressed sales as a percentage of all sales went down to 31% from 44% at the start of the year, well off the high point of over 50% seen in mid-2009. Orlando experienced a similar trend with current distressed sales representing 25% of total sales, a substantial improvement over the rate of 49% at the start of the year, and below the high of over 54% seen in mid-2009. These markets are coming off extreme highs in the percentage of REO sales down to levels closer to the US average of 25.3%. As these numbers are at, or even above the U.S. average, it is the movement of REO saturation that is extremely important, more so than the actual figure. The substantial decrease in REO saturation, especially in Orlando, is certainly helping prices to recover.

Another factor we analyzed was the type of transaction, and it appears that Miami in particular, has found a strong appetite for investing along with their appetite for spicy food. About 59% of Miami’s transactions were conducted with cash, followed by Orlando’s 48%. This is a significant increase from the national rate holding right around 30% over the last year as reported by the National Association of Realtors.

For 2012, we forecast anticipated growth of 8.7% and 5.6%, for Orland and Miami, respectively and expect to see each of these markets among the best performers for the year.

So, could the presence of low tier price increases, distressed home sale price increases, smaller percentages of distressed sale levels, and high levels of investor activity be what a floor looks like? Is it a blueprint for what a broader market recovery looks like as well? It seems very likely.

If it is, keep your eyes on Phoenix. Currently this market is showing strong growth in the low tier segment, notable gains in distressed sale prices and lower levels of distressed sales overall. We’ll continue reporting on other markets that reflect this same pattern in our monthly Market Reports.

I can’t ever remember a time when installing new flooring sounded this interesting.

Original Post: http://www.forbes.com/sites/alexvillacorta/2012/01/31/flooring-in-florida-is-this-the-start-of-something-good-for-the-housing-market/

Monday, January 23, 2012

Economists See Ways to Aid Housing Market

The underpinnings of a housing recovery are hiding in plain sight: sharp price declines, low mortgage rates and rising rents have made owning more affordable than renting in a growing number of markets.

Yet housing largely remains in a funk. The prospect of continued price declines—led by the oversupply of foreclosed homes—has deterred some potential buyers, while others can't qualify for loans.

Many economists, including some at the Federal Reserve, are urging President Barack Obama to do more, and the president will be "aggressive on housing" in his State of the Union address on Tuesday, his housing secretary said last week. The administration is already rebooting a refinancing initiative and putting finishing touches on programs to convert some foreclosed properties into rentals.

What more can be done? Economists cite three broad ideas that could advance a housing recovery.

First, local investors could play a greater role in spurring a recovery in their own communities. Some mom-and-pop investors have begun to buy up excess housing stock and rent it out.

These buyers are important to clear the large "shadow supply" of foreclosures. Banks owned around 440,000 homes at the end of October, but an additional 1.9 million loans were in some stage of foreclosure, according to Barclays Capital.

While there's no shortage of investor demand in many markets, financing remains an obstacle. In 2008, Fannie Mae and Freddie Mac, the main funders of mortgages, faced soaring losses from speculators and reduced to four from 10 the number of loans they would guarantee to any one owner. Fannie now backs as many as 10 loans, but some banks have kept lower limits.

"If that number were raised...to 25, you would very quickly start whittling down this very big backlog," said Lewis Ranieri, the mortgage-bond pioneer, in a speech last fall. He said loans should be made on conservative terms that include 30% or 35% down payments.

Today's investors differ from the speculators who earlier bought on the prospect of ever-rising values that inflated the real-estate bubble. In contrast, today's mostly all-cash buyers estimate values based on market rents. But economists say because they are underfunded and often the sole buyers, they are driving hard bargains that have homes selling below their replacement costs.

The mortgage-finance companies and their regulator "are ignoring the market fundamentals of who the buyers are and where the money is," said Tim Rood, a partner at the Collingwood Group, a housing-finance consultancy. "Right now, investors are treated like pariahs. You want to clear some inventory? Finance them."

For the past four years, prices of foreclosed and traditional homes fell in tandem, but in recent months, a new pattern has emerged. U.S. home prices were down 4.3% from one year ago in November. But after stripping out foreclosures and other "distressed" sales, prices were down just 0.6%, according to data firmCoreLogic.

Lawmakers also could consider eliminating capital-gains taxes on properties bought as a longer-term investment and converted to rentals as well as allowing them to accelerate the depreciation of those properties, said William Wheaton, a professor of economics and real estate at the Massachusetts Institute of Technology.

"We need to re-establish equilibrium. I don't want to see another spike in house prices, but the homeownership rate is dropping and we also don't want to see rental spikes," Prof. Wheaton said.

Second, policy makers could restore clarity to lending by finalizing a clutch of pending regulations. The government's extraordinary steps to rescue Fannie and Freddie helped prevent a cataclysmic shock but it has made no real movement to overhaul the companies and the nation's broader housing-finance machinery.

While prospects are dim for a revamp before the election, smaller steps to establish certainty around the rules for lending as well as handling soured mortgage loans could make banks less stingy with credit.

For example, Fannie and Freddie are pushing banks to repurchase any defaulted loans that they can prove ran afoul of underwriting standards, even if the loan went bad for another reason, such as job loss. The "blanket repurchase regime" has led banks "to focus only on the lowest-risk customers," said William Dudley, president of the New York Federal Reserve, in a speech this month.

Third, a growing number of economists are warning that the overhang of debt in some of the most distressed housing markets will linger for years, particularly if more borrowers default. They say mortgage investors and banks should consider reducing debt for more troubled homeowners.

Principal write-downs remain controversial and have high upfront costs. But the problem of negative equity looks unlikely to cure itself: In markets such as Las Vegas, more than six in 10 borrowers owe more than their homes are worth.

Banks are rightly worried that widespread debt forgiveness could encourage more borrowers to default, but several proposals seek to limit that moral hazard. Prof. Wheaton said investors in the loans should be given equity stakes in homes in order to deter all but the most desperate borrowers from seeking relief, and that relief should be limited to borrowers who are deeply underwater.

"This needs to be a shared responsibility," he said. "For borrowers silly enough to borrow enough at the top of the market, there was a lender stupid enough to lend."

Principal write-downs could also be done on an "earned" basis, where borrowers receive relief only if they stay current on their loans, said Daniel Alpert, managing partner at Westwood Capital, which has employed the technique when buying distressed mortgages.

Even then, write-downs will remain under-used until regulators or lawmakers simultaneously deal with the second mortgages, which are primarily held by banks, sitting behind many underwater first mortgages.

Mustering the political will to take any of these three steps wouldn't be easy. Given the state of the market, "there isn't a solution which will make everyone love you and cost no money," Mr. Ranieri says.

Indeed, no single idea will fix all of housing's problems. Many involve taking on more risk or rewarding bad behavior.

Write to Nick Timiraos at nick.timiraos@wsj.com

Original Post: http://online.wsj.com/article/SB10001424052970204301404577173001251941984.html?mod=WSJ_RealEstate_LeftTopNews

Tuesday, January 17, 2012

Dimon on Housing: ‘No One Is in Charge’

Bloomberg News
Jamie Dimon, chief executive of J.P. Morgan Chase & Co.

The government and the banking industry needs to get serious about fixing the housing market’s problems, but there’s no one leading the charge, said Jamie Dimon, the chief executive of J.P. Morgan Chase & Co., during the bank’s quarterly conference call on Friday.

“I would convene all the people involved in the business. I would close the door. I would stay there until we resolved a bunch of these issues so we could have a more healthy mortgage market,” he said. “You could fix all this if someone was in charge.”

Mr. Dimon ticked off a list of unresolved issues, including foreclosure delays, the fate of Fannie Mae and Freddie Mac, conflicts of interest between owners and servicers of first mortgages and second mortgages, and pending rules from the Dodd-Frank Act that will establish new rules of the road for mortgages that are pooled into bonds.

“There is no one really in charge of all of this. It is just kind of sitting there,” he said. A “holistic” approach to tackle those issues could lead to a faster recovery in housing, he said, endorsing the sentiment behind the Federal Reserve’s call to action on housing last week with its release of a 26-page white paper.

Mr. Dimon also elaborated on his view that housing markets have neared bottom. “In half the markets in America it is now cheaper to … buy than to rent. Housing is at all-time affordability,” he said. “What you need to see is employment.”

An stronger surge in job growth would boost household formation, which coupled with positive demographics, means that “you’re going to have a turn at one point,” he said. “I don’t know if it’s three months, six months, nine months, but it’s getting closer.”

Mr. Dimon said his bank had made mistakes in handling mortgage foreclosures, and said the bank “should pay for the mistakes we made.” But he added that banks have also offered millions of mortgage modifications, and that banks “are doing it as aggressively as we can.”

He also brushed aside calls for widespread principal reductions, saying that he didn’t agree “that somehow principal forgiveness would be the end-all, the be-all.”

Follow Nick @NickTimiraos

Thursday, January 12, 2012

Six Questions on Foreclosure-to-Rental Programs

Wednesday’s Journal looked at how one private-equity firm is making a bet on renting out single-family homes acquired through foreclosure. In the coming weeks, federal policy makers could roll out pilot programs to further test the concept. Here’s a look at what’s involved:

What is the government considering?

Government officials solicited more than 4,000 comments from the public last year on potential initiatives that would take foreclosed properties off the market and rent them out. The initiatives are likely to focus only on loans backed by federal entities Fannie Mae, Freddie Mac, and the Federal Housing Administration.

There are two different types of programs that officials are likely to consider. Under the first, the FHA could sell properties in bulk to investors who agree to rent them out. Bulk sales have been rare largely because investors tend to demand deep discounts that sellers haven’t been willing to accept.

A more likely option for Fannie and Freddie, if they move forward with any pilot programs, would be to set up pools of properties in which third-party investors would take a stake. Investors could be responsible for handling maintenance and day-to-day operation of the rental pool, with the mortgage-finance giants sharing in some of the returns.

How many homes are we talking about?

Fannie and Freddie held around 180,000 homes at the end of September, down from around 235,000 one year earlier. The FHA held around 35,000 homes at the end of November, down from 55,000 one year earlier.

The drop figures to be temporary because many loans backed by the FHA have fallen into foreclosure, but banks have been slow in taking back homes after they were caught fabricating documents in order to quickly repossess homes.

Why does the idea of renting out homes have appeal?

Officials like the idea for three reasons. The first is that a backlog of foreclosures estimated in the millions could roll onto housing markets in the coming years. The New York Fed estimates that banks and mortgage companies could take back 1.8 million properties in each of the next two years, up from 1.1 million in 2011 and 600,000 in 2010.

Second, there are signs that home prices of traditional homes are stabilizing in some parts of the country, even as distressed sales drag down property values. The gap between prices of traditional home sales and distressed home sales has widened in recent months. For the year ending in November, home prices were down by 4.3% as measured by real-estate firm CoreLogic. But prices were down by 0.6% when distressed sales are excluded.

Third, this is attractive because rents in many parts of the country are beginning to rise.

What parts of the country could see these types of programs?

In a white paper released by the Federal Reserve last week, officials identified 60 metro areas where federal entities have at least 250 foreclosed properties for sale — a scale that could be large enough to justify a rental program. The largest concentrations of foreclosures held by these entities were in Atlanta, with 5,000 units, followed by Chicago, Detroit, Phoenix, Los Angeles, and Riverside, Calif., which each have between 2,000 and 3,000 units.

While not all of these properties are good candidates for conversion to rental, preliminary estimates from the Fed suggest that around two-fifths of Fannie’s foreclosed properties could generate yields of 8%, which could be enough to warrant renting rather than selling the property.

Why can’t the private sector do this on its own?

Certainly, private investors have been building up operations in the rent-and-hold arena, and it’s possible that these types of rental transactions could happen anyway without any government involvement.

But there are two main obstacles facing investors: financing and scale. Most foreclosure investing has been done by local investors. But these outfits have faced challenges getting financing to buy enough homes to scale up a viable rental model. Institutional investors, meanwhile, have deeper pockets but banks have largely resisted big bulk sales of homes, making it harder for them to assemble big pools of homes.

Will this program have any impact on home prices?

To do so, the program would need to be quite large, and that isn’t likely to happen for some time. Michelle Meyer, an economist at Bank of America, says the proposed programs run the risk of being too small to have much impact.

Economists at Goldman Sachs estimate that moving all foreclosed properties from the for-sale market to the rental market would increase home prices nationally by around 0.5% in the first year and 1% in the second year. Of course, no one is talking here about moving all properties from the for-sale market to the rental market, so this shows the maximum effect of such initiatives. The real effect figures to be far more modest.

Original Post: http://blogs.wsj.com/developments/2012/01/12/six-questions-on-foreclosure-to-rental-programs/

Wednesday, January 4, 2012

Projection: Rents, Incomes to Grow Together

These are heady days for apartment owners: Demand is growing and supply of new rentals continues to lag. But are landlords getting ahead of themselves? Will a recovery take hold that allows people to afford heftier rents?

It turns out that the outlook isn’t so bad. Research from the real-estate forecasting firm Property & Portfolio Research, which is owned by CoStar Group, says median household income and average rent over the next five years will grow at similar rates. Nationally, PPR projects growth of 16.1% for median incomes between now and 2016, versus 15.6% for rents. (The data are from 54 major markets tracked by PPR.)

But conditions differ from market to market, depending on level of household formation and the pace of income growth. Conditions in places such as Raleigh, N.C., could spur landlords to raise rents at a higher rate in coming years. By contrast, new supply and prior rent growth in Washington, D.C. will likely moderate rental growth there, according to PPR.

Rent-to-income ratios nationally should remain basically steady, and below the prior peak reached in 2001. (Falling home prices and low mortgage rates could make buying a home newly attractive for some renters in coming years, although affordability has done little too boost the housing market so far.)

To be sure, renters won’t be happy to hear that their monthly rent is projected to jump to a national average of $1,436 in 2016, up from $1,242 in 2011, according to PPR. Higher rents and declines in home ownership are helping to fuel investors’ interest in the apartment market, even from developers that usually focus on malls and offices. Construction starts in multifamily in November jumped 25.3% from the prior month, according to the Commerce Department, although construction of new multifamily units remains low on a historical basis.

Readers, what do you think: Where is the rental market headed this year and after?

Original Post: http://blogs.wsj.com/developments/2012/01/04/projection-rents-incomes-to-grow-together/

Thursday, December 22, 2011

Wishing you and your loved ones Happy Holidays!

From Coldwell Banker Action Realty to you: Happy Holidays!

Mortgage Rates Keep Hitting Record Lows

December 22, 2011, 12:32 PM ET
By Mia Lamar and Nathalie Tadena

Bloomberg News
Freddie Mac says the 30-year fixed-rate mortgage was at a new record low.
Mortgage rates in the U.S. again touched record lows over the past week, according to Freddie Mac’s weekly survey of mortgage rates.

“Rates on 30-year fixed mortgages have been at or below 4% for the last eight weeks and now are almost 0.9 percentage point below where they were at the beginning of the year, which means that today’s home buyers are paying over $1,200 less per year on a $200,000 loan,” Freddie Mac Chief Economist Frank Nothaft said.

The 30-year fixed-rate mortgage averaged a new record low at 3.91% for the week ended Thursday, down from 3.94% the previous week and 4.81% a year ago. Rates on 15-year fixed-rate mortgages matched the prior week’s record low at 3.21%. A year ago, the 15-year fixed-rate mortgage rate averaged 4.15%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.85%, down from 2.86% last week and 3.75% a year ago. One-year Treasury-indexed ARM rates averaged 2.77%, down from 2.81% in the prior week and 3.4% last year.

To obtain the rates, 30-year and 15-year fixed-rate mortgages required an 0.7-point and 0.8-point payment, respectively. Five-year and one-year adjustable rate mortgages required an average 0.6-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.

The low rates could be helping to boost sales of existing homes, although falling prices are also pulling in buyers. Home sales in November hit the second-highest level of the year, rising 4% from October.

Original Post: http://blogs.wsj.com/developments/2011/12/22/mortgage-rates-keep-hitting-record-lows/

Wednesday, December 7, 2011

Why Home Prices Are (and Aren’t) Stabilizing

By Nick Timiraos
Getty Images

Home prices are falling again, but some analysts see a silver lining because the prices of homes that aren’t selling out of foreclosure have been holding steady.

CoreLogic reported that home prices in October declined by 1.3% from September and by 3.9% from one year ago. A separate index released Monday by LPS Applied Analytics showed that home prices in September had dropped by 1.2% from August.

“Many housing statistics are basically moving sideways,” said Mark Fleming, chief economist at CoreLogic.

Still, the CoreLogic index shows an important emerging trend where home prices are stabilizing after excluding distressed sales.

What’s the difference between distressed sales and non-distressed sales?

Unlike traditional owners, banks are often faster to cut prices in order to unload properties quickly—or what are called “distressed” sales. The upshot is that, the more homes being sold by lenders in any given month the faster prices tend to fall.

This was clear throughout the initial years of the housing bust. Prices declined most sharply in 2008 as banks dumped foreclosed properties at fire-sale prices. Owner-occupants are less likely to list their homes for sale in the winter months, too, which means that each winter there are also drops in prices because distressed sales account for a growing share of sales.

Are prices of distressed homes falling at the same rate as non-distressed homes?

That’s been the case up until recently. While total home prices were down by 3.9% from one year ago, prices were down by just 0.5% from one year ago when excluding distressed sales. In September, total prices were down by 3.8% from one year ago, but non-distressed prices were down by 2.1%.

This shows that while price declines are resuming, they are not yet falling from one-year ago for non-distressed homes. In fact, during the first nine months of 2011, prices of non-distressed homes remained relatively stable, with year-over-year declines between 2% and 3%.

Analysts at Barclays Capital called this “the most important trend in the housing industry right now,” in a report published on Monday.

Why would any stabilization of non-distressed prices matter?

If it’s true that prices of non-distressed homes are stabilizing, even as distressed homes continue to fall in price, it would mean that a distressed home is “increasingly being seen as a poor substitute for a non-distressed home,” writes Stephen Kim, the Barclays housing analyst. He says it’s possible that the “bifurcation between distressed and non-distressed homes will only widen with the passage of time.”

Won’t the overhang of foreclosures put pressure on non-distressed prices anyway?

That’s all too possible. There are more than two million loans in some stage of foreclosure, and it may be too early to argue that those won’t in some way impact the sales prices of non-distressed homes. For one, homes that sell out of foreclosure at significantly lower prices could be used by appraisers as “comparable” sales that may make banks less willing to lend at an agreed sales price for a non-distressed home.

In certain markets where many homes are selling out of foreclosure, it’s hard to simply set aside distressed homes. “You can’t deny the fact that if half of homes that sold in San Diego in a given year were distressed, that is the trend,” said Kyle Lundstedt, managing director at LPS.

What could happen if this trend holds up, with distressed prices falling and non-distressed prices staying flat?

It could stabilize something else: home-buyer confidence. “There is nothing that strikes fear in a homeowner’s heart than to hear that his home value has declined,” writes Mr. Kim of Barclays. “But if it was home price trends that got us into this funk, it stands to reason that a recovery in sentiment will be similarly ushered in once price declines have abated—which is precisely what the CoreLogic price data shows us.”

Original Post: http://blogs.wsj.com/developments/2011/12/06/why-home-prices-are-and-arent-stabilizing/

Wednesday, November 30, 2011

Q&A: Step-by-step guide to foreclosure

Q&A: Step-by-step guide to foreclosure
WEST PALM BEACH, Fla. – Nov. 29, 2011 – Question: I read in the paper that the banks are starting the foreclosures again. I just got served with a foreclosure lawsuit. Can you explain the process in layman’s terms?


Answer: Each state has different versions of the foreclosure process. In Florida and some other states, a lender must get permission from a judge before it can repossess your home.

When you are served with a foreclosure lawsuit, your lender files a “complaint” against you, laying out the facts as it sees it. It’s basically telling a story as to why it thinks that it should get your house as payment toward the debt that you owe.

Along with the complaint, it serves several other documents, such as the “summons,” which gives the court power over you, and the “lis pendens,” which is a document filed in the public records to let everyone know that the property is the subject of a lawsuit.

When you are served with a lawsuit, you typically have 20 days to respond or you will be in “default,” which means that you have waived all of your defenses to the lawsuit, allowing the bank to proceed with the foreclosure. This is not a good idea. At this point, your attorney will respond to the suit with a “motion to dismiss” or an “answer.” If your attorney feels that the bank has no chance to win based on everything that it alleged in the complaint, he or she will file a motion to dismiss the suit.

If, however, the suit is not defective as filed, your attorney will file an answer, in which he or she admits or denies each of the bank’s statements from the complaint. The answer also will also set forth your “affirmative defenses.”

An affirmative defense explains why the bank should not get your home even though you may not be making your mortgage payments.

At this point in the lawsuit, several months or more will have gone by and the attorneys will begin “discovery.” That’s the process of getting to the truth by asking each other questions and getting documents from the other side for review.

During the discovery phase, you and your lender will probably go to a “mediation.” In a mediation, both you and your lender will lay out your side of the story before an unbiased third party, the mediator, who will encourage you both to voluntarily settle the case. At a mediation, no one is forced to settle the case. Both sides need to agree.

The discovery process can take six months or more. Once it is complete, you or your lender may make a “motion for summary judgment,” which is basically saying to the court that your side of the case is so strong that there is no possible way for you to lose. Most foreclosure cases end at the summary judgment hearing because the judge rules for the lender. But if the judge thinks there are still some questions to be answered, there will be a trial. At trial, the judge (or jury) will determine the truth and decide who wins the case.

If you win, the lender has failed and you keep your house. If the lender wins, which is much more likely, the judge will set a date for your home to be sold, with the proceeds from the sale going toward paying your lender back for the money that you borrowed.

If the fair market value of your home is not enough to pay your loan back in full, your lender may ask for a “deficiency judgment.” That gives the lender the right to come after you for the difference between the market value of your home and the amount that you owe your lender.

If the sale brings more money than you owe your bank, you get back what’s left over. (Check with an attorney about the process for receiving any refund.)

If you hire an attorney, the entire process typically will take about two years, during which time you can be working with your lender toward a loan modification, short sale or deed in lieu of foreclosure. Of course, if all else fails, there is always bankruptcy, but that’s a different topic for another column.

About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

© 2011 the Sun Sentinel (Fort Lauderdale, Fla.), Gary M. Singer. Distributed by McClatchy-Tribune News Service.

Original Post: http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=267984