Original Article published in The Daily Business Review
November 5, 2009
by : Vanessa Blum
The Florida Supreme Court was asked Wednesday to adopt statewide mandatory mediation for residential foreclosures to help judges manage the flood of filings clogging courthouses.
The high court heard arguments on a task force report recommending mandatory mediation as part of a streamlined and uniform approach to the foreclosure crisis.
While questioning some specifics of the plan, justices seemed eager to help circuit courts deal with an onslaught of foreclosure cases — many involving unrepresented homeowners with a limited understanding of the legal process.
“What is the solution to what this court system has — a tsunami of these filings?” Justice Barbara Pariente asked a banking industry lawyer.
Lenders oppose some aspects of the plan, which they say would place an unfair financial burden on them.
“The goal is taking the burden off the court,” Pariente said in response to that concern. “We’re not just trying to, quote, help the borrower.”
Miami-Dade civil administrative judge Jennifer Bailey, who chaired the statewide task force, said mediation was not recommended to favor the interests of either borrowers or lenders, but to help courthouses manage an overload of cases.
“We are imposing structure on an extremely chaotic situation,” she said.
Through September, more than 291,200 foreclosure actions were filed statewide this year, Bailey said.
In Miami-Dade County, the court experienced a 474 percent increase in foreclosure filings from 2006 to 2008. The caseload has climbed 516 percent in Broward County and 496 percent in Palm Beach County.
The filings are swamping the courts and taking judicial energy away from other cases, said former Florida Bar president Alan Bookman of Pensacola, who served on the task force. “We’re not trying to favor the homeowner over the lender.
We’re trying to create a level playing field,” he said.
During the 90-minute hearing, lawyers discussed one example of how cases get dragged out and tie up court resources — the canceled foreclosure sale.
In Miami-Dade County, 65 percent of scheduled foreclosure sales each month are canceled. One reason is borrowers and loan servicers are working toward an agreement, lawyers said. Justice R. Fred Lewis called that 11th hour approach “nonsensical.” “Wouldn’t it be a better policy for a trial court to make sure that process is completed before the final judgment?” he asked. Lewis said it would be essential for each circuit to ensure the independence of mediation agencies, saying a bias toward either side would be “devastating to the process.” He also wanted to know when results from each program should be expected. “Will the crisis be passed before we have them in place?” Lewis asked.
Justice Charles Canady suggested financial interests, not negotiation, might delay some foreclosure sales.
“Lenders are making a business decision that they don’t want the sale to go forward,” he said. “They would rather inventory these houses and wait for a better time in the market.”
Fort Lauderdale attorney Marc Ben-Ezra, whose law firm, Ben-Ezra & Katz, has represented lenders in about 30,000 foreclosures in two years, said Canady’s concern is an “urban myth.” Lenders want foreclosures resolved as quickly as possible, he said.
“We’re generally graded by our clients on how efficiently we can complete the process,” Ben-Ezra said.
A more significant reason for delay is borrowers who don’t appreciate the seriousness of their situation until “a final judgment is bearing down on them,” he said.
Improving early communication between borrowers and lenders is a major goal of the task force. The plan calls for mediation on homestead property at the lender’s expense unless the lender and borrower agree otherwise.
In addition, the task force recommended a central foreclosure Web site to provide information on foreclosure counseling, access to court dockets and resources for borrowers.
Under the proposals, lenders would be required to verify the contents of their complaint at the time of filing, and parties wishing to cancel or reschedule foreclosure sales would have to file a motion listing their reasons.
In cases where borrowers have not been located, the task force recommends a new form for process servers to fill out to demonstrate the steps they took before abandoning a search.
Three circuits including Miami-Dade already have adopted mediation programs administered by the Collins Center, a nonprofit Tallahassee think tank. The service costs $750 per case.
Chief Justice Peggy Quince said embracing mandatory mediation could create a monopoly for the center, and she called that prospect “disturbing.”
Critics of the task force plan mainly object to the financial burden and legal hurdles placed on lenders, which already lose money on most foreclosure actions.
Mediation fees alone could cost banks more than $20 million a year, said task force member Lee Haworth, chief circuit judge in Sarasota County. He wrote a dissenting report suggesting borrowers and lenders should split the cost of mediation when possible.
“People who have the ability to contribute toward the mediation process should step up and do it,” Haworth told the court. “Both sides need skin in the game.”
He said a determination could be built into the mediation process itself so it would not burden judges. Without such protection, he said, the “Donald Trumps of the world” could get a free mediation.
But most homeowners who default on their loans are not sophisticated investors and are overwhelmed and confused by the foreclosure process, Bailey told the panel.
“Most of the people we’re talking about, this is the most complex transaction they have ever dealt with in their entire life.”
Re-posted by Joseph Sloboda
Thursday, November 5, 2009
Tuesday, August 18, 2009
Believe it or not, get ready for possible property tax increase !
Originally from the South Florida Sun-Sentinel.com
Get ready homeowners: County and most cities in Broward propose tax hikes
By Scott Wyman
South Florida Sun Sentinel
4:30 PM EDT, August 17, 2009
Twenty-six of 31 cities, as well as Broward County government, both hospital districts and the local children services agency, are looking at raising tax rates and fees on property owners this year.
Rates in five cities — Pembroke Pines, Weston, West Park, Miramar and Hillsboro Beach — could jump more than 25 percent. Eighteen communities also are considering charging property owners more for fire protection next year.
The proposals are in response to the worst decline in Broward's tax roll in decades. The rate hikes would allow officials to avoid severe cuts to public safety and communities. Still, local governments are looking at reducing hours at parks and libraries, laying off employees and freezing salaries.
Charlotte Greenbarg, president of the Broward Coalition, an umbrella group of homeowner and condo associations, predicts a tax revolt because people expected lower taxes as a result of falling home values. She fears the tax bills will drive more families into foreclosure by adding to existing financial problems.
"It is an outrageous lack of responsibility," Greenbarg said. "These governments are living in a world that doesn't exist any more and are literally bleeding people dry."
The Property Appraiser's Office mailed the first batch of preliminary tax notices to residents last week, detailing their new property value and tentative bill. The agency expects to finish the mailing by Aug. 21 and is bracing for a deluge of complaints.
"I don't ever remember rate increases this high," Property Appraiser Lori Parrish said.
The impact will vary according to how long residents have owned their property.
Longtime owners built large tax exemptions during the real estate boom and would pay higher taxes in many cases this year. Because of their exemptions, they do not pay taxes at their home's full market value and won't benefit from the decline in real estate prices. Residents who bought homes more recently could see some savings despite higher rates because their homes are taxed more closely to current values.
A longtime owner of a home valued last year at $200,000 in Hollywood, for example, would pay an extra $222 to the city in taxes and fees, while a new owner of the same home would pay $76 more if the property's value declined at the county average.
Local governments lived off the windfall from rising property values during Florida's real estate boom, allowing officials to keep tax rates stable while collecting more money. But the taxable value of property in Broward has declined two consecutive years, falling 10.5 percent this year from $166.4 billion to $147.2 billion.
Some officials argue higher tax rates are all but unavoidable given the harsh economic realities. Under the proposed rates, most local governments are looking at bringing in no more in taxes than they did last year.
"I'm sensitive to what residents are facing and I want to try to keep the rate the same as last year, but I don't know if it's doable," said Hallandale Beach Mayor Joy Cooper, whose city is exploring a 19.9 percent rate hike. "Services cost money, and the main way to pay for them is property taxes and service charges."
Weston has not raised its rates in 15 years, but lists a 27.6 percent increase on the preliminary tax notice. Mayor Eric Hersh believes residents will understand an increase this year because the city won't have to cut police or fire protection or reduce amenities like recreational programs."
When you start acting like a distressed city, you become one," Hersh said.
Among Broward cities, only Fort Lauderdale, Pembroke Park, Lauderdale-by-the-Sea and Sea Ranch Lakes have not proposed higher tax rates. Fort Lauderdale is avoiding an increase by tapping rainy day reserves, not filling vacant jobs and even letting the grass in city parks grow longer.
Some governments set high rates on the preliminary notices to give officials flexibility as they further discuss their budget deficits. Governments will set the final tax rates in late September following public hearings on their budgets.
County commissioners have vowed not to raise rates this year, but County Administrator Bertha Henry included a 6.7 percent increase on the tax notices because budget negotiations with Sheriff Al Lamberti continue over how much he should cut. The Sheriff's Office comprises about half of the county's operations funded by property taxes, and commissioners want him to cover about half the $109 million budget deficit.
Parkland listed a 21.9 percent increase on the tax notices, but Mayor Michael Udine doubts if the final result will be that high. The city has made cuts in its building department and parks programs, and Udine expects the city will wind up with a combination of a higher tax rate and additional cuts.
"Everyone out there is having financial issues and we need to bring this budget in as bare bones as possible," Udine said.
Originally posted by
Scott Wyman can be reached at swyman@sunsentinel.com or 954-356-4511.
Get ready homeowners: County and most cities in Broward propose tax hikes
By Scott Wyman
South Florida Sun Sentinel
4:30 PM EDT, August 17, 2009
Twenty-six of 31 cities, as well as Broward County government, both hospital districts and the local children services agency, are looking at raising tax rates and fees on property owners this year.
Rates in five cities — Pembroke Pines, Weston, West Park, Miramar and Hillsboro Beach — could jump more than 25 percent. Eighteen communities also are considering charging property owners more for fire protection next year.
The proposals are in response to the worst decline in Broward's tax roll in decades. The rate hikes would allow officials to avoid severe cuts to public safety and communities. Still, local governments are looking at reducing hours at parks and libraries, laying off employees and freezing salaries.
Charlotte Greenbarg, president of the Broward Coalition, an umbrella group of homeowner and condo associations, predicts a tax revolt because people expected lower taxes as a result of falling home values. She fears the tax bills will drive more families into foreclosure by adding to existing financial problems.
"It is an outrageous lack of responsibility," Greenbarg said. "These governments are living in a world that doesn't exist any more and are literally bleeding people dry."
The Property Appraiser's Office mailed the first batch of preliminary tax notices to residents last week, detailing their new property value and tentative bill. The agency expects to finish the mailing by Aug. 21 and is bracing for a deluge of complaints.
"I don't ever remember rate increases this high," Property Appraiser Lori Parrish said.
The impact will vary according to how long residents have owned their property.
Longtime owners built large tax exemptions during the real estate boom and would pay higher taxes in many cases this year. Because of their exemptions, they do not pay taxes at their home's full market value and won't benefit from the decline in real estate prices. Residents who bought homes more recently could see some savings despite higher rates because their homes are taxed more closely to current values.
A longtime owner of a home valued last year at $200,000 in Hollywood, for example, would pay an extra $222 to the city in taxes and fees, while a new owner of the same home would pay $76 more if the property's value declined at the county average.
Local governments lived off the windfall from rising property values during Florida's real estate boom, allowing officials to keep tax rates stable while collecting more money. But the taxable value of property in Broward has declined two consecutive years, falling 10.5 percent this year from $166.4 billion to $147.2 billion.
Some officials argue higher tax rates are all but unavoidable given the harsh economic realities. Under the proposed rates, most local governments are looking at bringing in no more in taxes than they did last year.
"I'm sensitive to what residents are facing and I want to try to keep the rate the same as last year, but I don't know if it's doable," said Hallandale Beach Mayor Joy Cooper, whose city is exploring a 19.9 percent rate hike. "Services cost money, and the main way to pay for them is property taxes and service charges."
Weston has not raised its rates in 15 years, but lists a 27.6 percent increase on the preliminary tax notice. Mayor Eric Hersh believes residents will understand an increase this year because the city won't have to cut police or fire protection or reduce amenities like recreational programs."
When you start acting like a distressed city, you become one," Hersh said.
Among Broward cities, only Fort Lauderdale, Pembroke Park, Lauderdale-by-the-Sea and Sea Ranch Lakes have not proposed higher tax rates. Fort Lauderdale is avoiding an increase by tapping rainy day reserves, not filling vacant jobs and even letting the grass in city parks grow longer.
Some governments set high rates on the preliminary notices to give officials flexibility as they further discuss their budget deficits. Governments will set the final tax rates in late September following public hearings on their budgets.
County commissioners have vowed not to raise rates this year, but County Administrator Bertha Henry included a 6.7 percent increase on the tax notices because budget negotiations with Sheriff Al Lamberti continue over how much he should cut. The Sheriff's Office comprises about half of the county's operations funded by property taxes, and commissioners want him to cover about half the $109 million budget deficit.
Parkland listed a 21.9 percent increase on the tax notices, but Mayor Michael Udine doubts if the final result will be that high. The city has made cuts in its building department and parks programs, and Udine expects the city will wind up with a combination of a higher tax rate and additional cuts.
"Everyone out there is having financial issues and we need to bring this budget in as bare bones as possible," Udine said.
Originally posted by
Scott Wyman can be reached at swyman@sunsentinel.com or 954-356-4511.
Wednesday, July 8, 2009
Obama mortgage plan needs work
Many borrowers are not getting help under president's modification or refinancing plan. Officials don't expect problems to be fixed until the fall.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: July 8, 2009: 8:10 AM ET
NEW YORK (CNNMoney.com) -- Mr. President, help us get one of your mortgage workouts now.
That's what many borrowers are saying nearly five months after President Obama unveiled his housing rescue plan. The program is beset with problems, say borrowers, housing counselors and even the president himself.
Loan servicers are overwhelmed by the numbers of homeowners applying for loan modifications or refinancing. Borrowers are frustrated that their paperwork is being lost, and calls are not returned. Administration officials are racing to roll out new features to improve the program.
Even Obama acknowledges that the program is failing to stem the foreclosure tidal wave.
"Our mortgage program has actually helped to modify mortgages for a lot of our people, but it hasn't been keeping pace with all the foreclosures that are taking place," Obama said last month.
CNNMoney.com has heard from hundreds of troubled homeowners who've run into roadblocks. The complaints are often the same: a lack of responsiveness by servicers.
Even many of those whose applications are deemed complete say they never receive final approval or are told they can't be helped now because they haven't missed a payment.
"We are trying to refinance but are getting the runaround from the bank," Janeen, a Los Angeles homeowner, wrote on a CNNMoney.com Talkback. "[T]hey keep stalling, missing appointments and forgetting to send us paperwork."
Administration officials say they are well aware of the problems and are leaning on the banks to do better. Servicers will have to report the results of their efforts within the next month or two, opening them up to public and government scrutiny, said Seth Wheeler, senior adviser at the Treasury Department.
But don't expect the hurdles to go away anytime soon.
"Immediately, we want to see an improvement in borrower experience, but I don't think that means we will see a resolution of every hiccup in the process," Wheeler said. "We should see over the course of the summer real improvement, but those challenges will linger well into the fall certainly."
Under the Obama plan, people with little or no equity in their home can refinance to take advantage of today's low mortgage rates. The plan allows people to participate even if they have loans of up to 125% of the value of their property, as long as they meet other criteria.
Also, eligible borrowers who are in or at risk of default may be able to lower their monthly payments to no more than 31% of their pre-tax income through a loan modification. Homeowners, servicers and mortgage investors can receive incentives to entice them to participate.
Announced in February and implemented by most servicers starting in April, the program has produced more than 200,000 trial modifications and 20,000 refinancings. Borrowers in the loan modification program must make three on-time payments before the adjustment is considered official.
Foreclosures rising
While the administration often highlights that the program has helped a lot of people in a short period of time, it has a long way to go if it is to truly stem the foreclosure crisis, experts say.
Nearly 1.5 million homes have received a foreclosure filing in the first five months of the year, according to RealtyTrac. Defaults are on track to hit 3.5 million this year, according to Mark Zandi of Moody's Economy.com.
Foreclosures in process jumped in the first quarter by 22% over the previous quarter, according to data released last week by the Office of the Comptroller of the Currency and Office of Thrift Supervision. The number of mortgages that were more than 60 days past-due rose 7%, but delinquencies among prime borrowers with the best credit backgrounds soared nearly 20% as rising unemployment takes its toll.
"This system is not running at the level of efficiency that it has to," said Barry Zigas, director of housing policy for the Consumer Federation of America.
Getting through to the banks isn't easy.
Distressed borrowers have told CNNMoney.com that they are in danger of losing their homes because their banks are not able to handle the flood of applications for the president's foreclosure prevention plan. In addition to problems with lost documents and endless waits on hold, borrowers complain they never receive an answer or are told they can't be helped because they are still current with payments.
Tanya in Jacksonville, Fla., wrote in the Talkback that she has contacted her servicer 27 times since applying for a loan modification in April, faxed all the documents six times and is still not getting help. "So still I wait. Still I have no assistace[sic] in my loan!"
"Now it has been a month since I returned all the proper paper work and have received no correspondence," wrote Craig of Howell, Mich., who is seeking to refinance. "I call the loan officer I spoke with at least once a week and she refuses to return my phone calls!! Getting a person on the phone who is [knowledgeable] is next to impossible since everyone there makes Forest Gump look like Albert Einstein. I'm simply fed up with this whole process."
Housing counselors, who help distressed borrowers navigate the system, are quite familiar with stories such as these. Much of the bottlenecks stem from the fact that servicers have not hired nor trained enough staff, nor have they fully updated their computer systems to handle the administration's program, said Bruce Dorpalen, director of housing counseling for Acorn Housing.
"There's no excuse for this," he said. "The servicers are not able to make decisions, or good decisions."
Still ramping up
Banks and government officials say the foreclosure prevention program is very complicated, requiring a lot of training, system upgrading and documentation. Therefore, the institutions need time to ramp up.
"We have a new plan that's also more complex than any other plan," said Faith Schwartz, who heads Hope Now, a coalition of servicers, community groups and mortgage investors working to stem foreclosures. "The banks have tripled, quadrupled their staffs. It will be effective. We'll see more in the fall."
Citigroup (C, Fortune 500), for instance, said it is trying to resolve cases as expeditiously as possible, while JPMorgan Chase (JPM, Fortune 500) has touted the fact that it had approved 87,000 applications by June 30. Both banks said they are looking to improve.
TheTreasuryDepartment is pressuring servicers to streamline the application process. And officials say they will check to make sure banks are following the guidelines.
The soon-to-be-issued reports will include how many loan modifications and refinancings have been extended and how many are underway at each institution. Servicers with low approval levels or high complaint figures will raise red flags. Also, the administration has hired Freddie Mac (F, Fortune 500), the mortgage finance firm now under the government's control, to check the applications that have been approved and rejected.
"It's not just that we're hoping that servicers get out there and get results," Wheeler said.
First Published: July 8, 2009: 4:49 AM ET
Many borrowers are not getting help under president's modification or refinancing plan. Officials don't expect problems to be fixed until the fall.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: July 8, 2009: 8:10 AM ET
NEW YORK (CNNMoney.com) -- Mr. President, help us get one of your mortgage workouts now.
That's what many borrowers are saying nearly five months after President Obama unveiled his housing rescue plan. The program is beset with problems, say borrowers, housing counselors and even the president himself.
Loan servicers are overwhelmed by the numbers of homeowners applying for loan modifications or refinancing. Borrowers are frustrated that their paperwork is being lost, and calls are not returned. Administration officials are racing to roll out new features to improve the program.
Even Obama acknowledges that the program is failing to stem the foreclosure tidal wave.
"Our mortgage program has actually helped to modify mortgages for a lot of our people, but it hasn't been keeping pace with all the foreclosures that are taking place," Obama said last month.
CNNMoney.com has heard from hundreds of troubled homeowners who've run into roadblocks. The complaints are often the same: a lack of responsiveness by servicers.
Even many of those whose applications are deemed complete say they never receive final approval or are told they can't be helped now because they haven't missed a payment.
"We are trying to refinance but are getting the runaround from the bank," Janeen, a Los Angeles homeowner, wrote on a CNNMoney.com Talkback. "[T]hey keep stalling, missing appointments and forgetting to send us paperwork."
Administration officials say they are well aware of the problems and are leaning on the banks to do better. Servicers will have to report the results of their efforts within the next month or two, opening them up to public and government scrutiny, said Seth Wheeler, senior adviser at the Treasury Department.
But don't expect the hurdles to go away anytime soon.
"Immediately, we want to see an improvement in borrower experience, but I don't think that means we will see a resolution of every hiccup in the process," Wheeler said. "We should see over the course of the summer real improvement, but those challenges will linger well into the fall certainly."
Under the Obama plan, people with little or no equity in their home can refinance to take advantage of today's low mortgage rates. The plan allows people to participate even if they have loans of up to 125% of the value of their property, as long as they meet other criteria.
Also, eligible borrowers who are in or at risk of default may be able to lower their monthly payments to no more than 31% of their pre-tax income through a loan modification. Homeowners, servicers and mortgage investors can receive incentives to entice them to participate.
Announced in February and implemented by most servicers starting in April, the program has produced more than 200,000 trial modifications and 20,000 refinancings. Borrowers in the loan modification program must make three on-time payments before the adjustment is considered official.
Foreclosures rising
While the administration often highlights that the program has helped a lot of people in a short period of time, it has a long way to go if it is to truly stem the foreclosure crisis, experts say.
Nearly 1.5 million homes have received a foreclosure filing in the first five months of the year, according to RealtyTrac. Defaults are on track to hit 3.5 million this year, according to Mark Zandi of Moody's Economy.com.
Foreclosures in process jumped in the first quarter by 22% over the previous quarter, according to data released last week by the Office of the Comptroller of the Currency and Office of Thrift Supervision. The number of mortgages that were more than 60 days past-due rose 7%, but delinquencies among prime borrowers with the best credit backgrounds soared nearly 20% as rising unemployment takes its toll.
"This system is not running at the level of efficiency that it has to," said Barry Zigas, director of housing policy for the Consumer Federation of America.
Getting through to the banks isn't easy.
Distressed borrowers have told CNNMoney.com that they are in danger of losing their homes because their banks are not able to handle the flood of applications for the president's foreclosure prevention plan. In addition to problems with lost documents and endless waits on hold, borrowers complain they never receive an answer or are told they can't be helped because they are still current with payments.
Tanya in Jacksonville, Fla., wrote in the Talkback that she has contacted her servicer 27 times since applying for a loan modification in April, faxed all the documents six times and is still not getting help. "So still I wait. Still I have no assistace[sic] in my loan!"
"Now it has been a month since I returned all the proper paper work and have received no correspondence," wrote Craig of Howell, Mich., who is seeking to refinance. "I call the loan officer I spoke with at least once a week and she refuses to return my phone calls!! Getting a person on the phone who is [knowledgeable] is next to impossible since everyone there makes Forest Gump look like Albert Einstein. I'm simply fed up with this whole process."
Housing counselors, who help distressed borrowers navigate the system, are quite familiar with stories such as these. Much of the bottlenecks stem from the fact that servicers have not hired nor trained enough staff, nor have they fully updated their computer systems to handle the administration's program, said Bruce Dorpalen, director of housing counseling for Acorn Housing.
"There's no excuse for this," he said. "The servicers are not able to make decisions, or good decisions."
Still ramping up
Banks and government officials say the foreclosure prevention program is very complicated, requiring a lot of training, system upgrading and documentation. Therefore, the institutions need time to ramp up.
"We have a new plan that's also more complex than any other plan," said Faith Schwartz, who heads Hope Now, a coalition of servicers, community groups and mortgage investors working to stem foreclosures. "The banks have tripled, quadrupled their staffs. It will be effective. We'll see more in the fall."
Citigroup (C, Fortune 500), for instance, said it is trying to resolve cases as expeditiously as possible, while JPMorgan Chase (JPM, Fortune 500) has touted the fact that it had approved 87,000 applications by June 30. Both banks said they are looking to improve.
TheTreasuryDepartment is pressuring servicers to streamline the application process. And officials say they will check to make sure banks are following the guidelines.
The soon-to-be-issued reports will include how many loan modifications and refinancings have been extended and how many are underway at each institution. Servicers with low approval levels or high complaint figures will raise red flags. Also, the administration has hired Freddie Mac (F, Fortune 500), the mortgage finance firm now under the government's control, to check the applications that have been approved and rejected.
"It's not just that we're hoping that servicers get out there and get results," Wheeler said.
First Published: July 8, 2009: 4:49 AM ET
Wednesday, June 24, 2009
Prison survival tips for Madoff
Experts don't see a 'camp cupcake' for Madoff as they offer suggestions to keep out of danger.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: June 24, 2009: 1:43 PM ET
NEW YORK (CNNMoney.com) -- When Ponzi scheme mastermind Bernard Madoff is sentenced on Monday, he'll be sent to a real prison with real bars and violent offenders, not a "country club" for white collar crooks, consultants say.
Madoff, age 71, faces a maximum sentence of 150 years in the federal prison system. This is based on his confession to 11 felony counts for orchestrating the largest Ponzi scheme of all time. For decades, Madoff stole billions of dollars from thousands of victims, while masquerading as a legitimate businessman through his investment firm.
The length of Madoff's maximum sentence, which is based on the sweeping magnitude of his crimes, gives him an incentive to escape and virtually ensures that he'll be sent to a prison instead of a minimum-security camp, according to prison consultants.
"Madoff, he's not going to a camp, ever," said Larry Levine, founder of Wall Street Prison Consultants and a former inmate of the federal prison system. "His sentence is too long, so he becomes a flight risk. And then it gets into the severity of his crime. If you have more than 10 years, you can't get a camp."
No camp for Madoff
Camps are generally preferred by convicts, because they're deemed as safer, with fewer restrictions, consultants said.
"Prison camps are open facilities," said Alan Ellis, an attorney, prison consultant and author of the "Federal Prison Guidebook." "They are not surrounded by a fence. They generally house first-time offenders, non-violent offenders, people who are not going to be troublemakers."
Larry Levine speaks from first-hand experience. During his 10-year sentence for ties to organized crime, he said he served in 11 federal facilities, including high, medium and low security prisons, and minimum-security prison camps.
He said his favorite facility was Federal Prison Camp Nellis, on an air force base near Las Vegas. That's where Martha Stewart's co-conspirator in insider trading, Peter Bacanovic, served five months. The facility has since closed.
Madoff will most likely serve time in a medium-security prison, consultants believe -- his non-violent history will keep him out of maximum-security, but his sentence is too long to justify low-security.
Madoff's next home
Madoff's lawyer, Ira Lee Sorkin, would not comment on whether he'll request a specific prison for his client. The Federal Bureau of Prisons has the final say in such matters. BOP spokeswoman Felicia Ponce said the bureau tries to place inmates within 500 miles of their families, but she would not comment on where Madoff will be sent.
But Alan Ellis believes Madoff will probably land in one of the closest medium-security prisons to his family in Manhattan, where he lived in a $7 million apartment until his March 12 guilty plea. Since then, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a temporary federal facility, prior to his prison transfer.
Ellis identified the most likely prisons for Madoff's term as Federal Correctional Institution Otisville, about 70 miles northwest of New York City, and FCI Fairton in nearby New Jersey. He said that Madoff might also be sent to FCI Ray Brook in upstate New York and FCI McKean in northwestern Pennsylvania. All are medium-security.
In a medium-security prison, prisoners are fenced behind a double-layered razor-wire perimeter with electronic detection systems, according to Felicia Ponce of the BOP. Inmates share cells, which are closely monitored after lights-out by patrolling officers, she said. They are subject to cell searches and pat-downs in the near-constant search for weapons and other contraband. They work menial jobs, often in kitchens or laundry rooms, where they are paid 12 to 40 cents an hour.
Madoff's prison survival strategy
"You're going to find a lot of people in medium who have a violent background," said Ellis, noting that the top concerns of his soon-to-be-incarcerated clients are "fear of prison assault" and "fear of the unknown."
Levine said that Madoff might be targeted by other prisoners as "an economic terrorist" and blamed as a general scapegoat for the financial woes of family members on the outside, even if they had nothing do with his Ponzi scheme.
"There will be people who think that Bernie can give them stock tips, but I don't see anyone being his big pal," said Levine. " I believe he'll be treated like an outcast."
Levine said that Madoff should always "maintain high visibility" as a security precaution.
"Try to stay in an area where there's a lot of people watching you, where the guards are watching you," Levine said, when asked what his advice would be for Madoff. "Do not become confrontational with anybody. Respect people; be polite. Don't borrow anything from anyone.
Don't become beholden to anyone."
If Madoff feels that he's in danger, then he can report the threat to correctional officers and request protective custody, said Ponce. If that happens, he would be separated from the general inmate population and put into a special housing unit while the prison staff investigated his claims, she said.
In this regard, Madoff's fame -- or infamy -- might actually help keep him out of danger, the consultants said.
"If he gets assaulted while he's in there, that's big news, and the BOP hates publicity," said Levine. "If anything comes down on Madoff, it's going to come down on the warden."
re-posted by Joseph Sloboda
Experts don't see a 'camp cupcake' for Madoff as they offer suggestions to keep out of danger.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: June 24, 2009: 1:43 PM ET
NEW YORK (CNNMoney.com) -- When Ponzi scheme mastermind Bernard Madoff is sentenced on Monday, he'll be sent to a real prison with real bars and violent offenders, not a "country club" for white collar crooks, consultants say.
Madoff, age 71, faces a maximum sentence of 150 years in the federal prison system. This is based on his confession to 11 felony counts for orchestrating the largest Ponzi scheme of all time. For decades, Madoff stole billions of dollars from thousands of victims, while masquerading as a legitimate businessman through his investment firm.
The length of Madoff's maximum sentence, which is based on the sweeping magnitude of his crimes, gives him an incentive to escape and virtually ensures that he'll be sent to a prison instead of a minimum-security camp, according to prison consultants.
"Madoff, he's not going to a camp, ever," said Larry Levine, founder of Wall Street Prison Consultants and a former inmate of the federal prison system. "His sentence is too long, so he becomes a flight risk. And then it gets into the severity of his crime. If you have more than 10 years, you can't get a camp."
No camp for Madoff
Camps are generally preferred by convicts, because they're deemed as safer, with fewer restrictions, consultants said.
"Prison camps are open facilities," said Alan Ellis, an attorney, prison consultant and author of the "Federal Prison Guidebook." "They are not surrounded by a fence. They generally house first-time offenders, non-violent offenders, people who are not going to be troublemakers."
Larry Levine speaks from first-hand experience. During his 10-year sentence for ties to organized crime, he said he served in 11 federal facilities, including high, medium and low security prisons, and minimum-security prison camps.
He said his favorite facility was Federal Prison Camp Nellis, on an air force base near Las Vegas. That's where Martha Stewart's co-conspirator in insider trading, Peter Bacanovic, served five months. The facility has since closed.
Madoff will most likely serve time in a medium-security prison, consultants believe -- his non-violent history will keep him out of maximum-security, but his sentence is too long to justify low-security.
Madoff's next home
Madoff's lawyer, Ira Lee Sorkin, would not comment on whether he'll request a specific prison for his client. The Federal Bureau of Prisons has the final say in such matters. BOP spokeswoman Felicia Ponce said the bureau tries to place inmates within 500 miles of their families, but she would not comment on where Madoff will be sent.
But Alan Ellis believes Madoff will probably land in one of the closest medium-security prisons to his family in Manhattan, where he lived in a $7 million apartment until his March 12 guilty plea. Since then, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a temporary federal facility, prior to his prison transfer.
Ellis identified the most likely prisons for Madoff's term as Federal Correctional Institution Otisville, about 70 miles northwest of New York City, and FCI Fairton in nearby New Jersey. He said that Madoff might also be sent to FCI Ray Brook in upstate New York and FCI McKean in northwestern Pennsylvania. All are medium-security.
In a medium-security prison, prisoners are fenced behind a double-layered razor-wire perimeter with electronic detection systems, according to Felicia Ponce of the BOP. Inmates share cells, which are closely monitored after lights-out by patrolling officers, she said. They are subject to cell searches and pat-downs in the near-constant search for weapons and other contraband. They work menial jobs, often in kitchens or laundry rooms, where they are paid 12 to 40 cents an hour.
Madoff's prison survival strategy
"You're going to find a lot of people in medium who have a violent background," said Ellis, noting that the top concerns of his soon-to-be-incarcerated clients are "fear of prison assault" and "fear of the unknown."
Levine said that Madoff might be targeted by other prisoners as "an economic terrorist" and blamed as a general scapegoat for the financial woes of family members on the outside, even if they had nothing do with his Ponzi scheme.
"There will be people who think that Bernie can give them stock tips, but I don't see anyone being his big pal," said Levine. " I believe he'll be treated like an outcast."
Levine said that Madoff should always "maintain high visibility" as a security precaution.
"Try to stay in an area where there's a lot of people watching you, where the guards are watching you," Levine said, when asked what his advice would be for Madoff. "Do not become confrontational with anybody. Respect people; be polite. Don't borrow anything from anyone.
Don't become beholden to anyone."
If Madoff feels that he's in danger, then he can report the threat to correctional officers and request protective custody, said Ponce. If that happens, he would be separated from the general inmate population and put into a special housing unit while the prison staff investigated his claims, she said.
In this regard, Madoff's fame -- or infamy -- might actually help keep him out of danger, the consultants said.
"If he gets assaulted while he's in there, that's big news, and the BOP hates publicity," said Levine. "If anything comes down on Madoff, it's going to come down on the warden."
re-posted by Joseph Sloboda
Monday, June 22, 2009
Foreclosures grind on as lenders fail to modify loans
After reading this article in Fridays USA Today I felt ill - it is amazing how many people are unable to get through this process because of the unwillingness of the lenders and servicers to help the homeowners. If you find yourself in a position like this, please call our offices as soon as possible for a "no cost" telephone consultation where we will hopefully be able to assist you and get you on the right track and eventually help save your home. (however to be clear, if you choose to retain us for our services there will be fees asscoiated with our service beyond the initial consultation)
Original Article from Thursday, June 18, 2009
By Stephanie Armour, USA TODAY
The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.
Details of the plan were unveiled in early March. The goal is to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments.
Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.
Homeowners who apply for mortgage modifications are finding that banks typically are taking 45 to 60 days to respond to inquiries, according to a report this month by NeighborWorks America, a provider of foreclosure-prevention counseling.
Some homeowners who applied for mortgage modifications five months ago still have no answer on whether they will be able to arrange smaller monthly payments, leaving them uncertain whether they'll keep their homes or lose them shortly.
"Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff at Naroff Economic Advisors. "No one will admit they're doing this."
Naroff also says banks today are dealing with even more demand for mortgages, including refinancings, than during the peak of the housing bubble in 2006, and the backlog is likely to get worse as more homeowners lose their jobs. Mortgage delinquencies have been growing in areas where unemployment has been rising fast, and even homeowners who successfully get modified mortgages could face trouble later if their incomes or home values fall.
Lenders say they're doing the best they can with a tsunami of requests, but some industry officials say delays are hampering efforts to revive the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," says Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
This month, Sen. Jack Reed, D-R.I., and 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan and called for a new strategy to get lenders to respond to homeowners faster.
"Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer," it said.
Robin and Craig Doyle of Woodland Hills, Calif., have been trying to get a loan modification through their lender, JPMorgan Chase, since February.
Robin, who does freelance writing from home, said she initially was told to send a letter describing her hardship, paycheck stubs, tax returns and other information.
She assembled a 200-page file and sent it along. A month later, she was told she had to redo the information because the file she'd sent had become outdated.
Another time, Robin says, she was told her file had been mistakenly closed altogether. On another occasion, she was told the request couldn't be processed because she hadn't included information about a homeowner association fee, even though her family doesn't belong to such an association.
"I've had to resend it four times," says Robin, 35. "It's making me sick. It's been five months. I've spent hours and hours on this and sleepless nights. It's foremost on my mind. I look at my beautiful home and wonder if I'll have it next month."
The Doyles pay $5,031 a month on a mortgage of $947,000. They have an interest-only loan at a 6.3% rate that will reset in about seven years. On interest-only loans, borrowers pay only interest for a specific period to temporarily reduce the payments. After that, they pay interest and principal.
Craig, a writer in the television and movie industry, is still finding work but not as much as before. This is the first month the family has failed to make its mortgage payment.
"I feel like Obama's plan has done absolutely nothing," says Craig, 38.
Jennifer Zuccarelli, a Chase spokeswoman, says there were miscommunications in the Doyles' case, and the bank is working to resolve the situation. It also has added about 950 loan counselors the past six months.
"We're hiring hundreds more every month," Zuccarelli says.
After USA TODAY contacted Chase for comment, the Doyles say the bank told them the next week to resubmit their application. They later were told they don't qualify for the Obama plan because their loan amount is too high.
Bonuses for mortgage collectors
Other major lenders say they are beefing up staffing to process modification requests. Some say it has taken time because details of the Obama administration's plan weren't outlined until March.
Under the plan, if the borrower's monthly payment is reduced by 6% or more but not below a 31% mortgage-debt-to-income ratio, the servicer can receive success payments of up to $1,000 for three years, provided the borrower stays current.
Once a three-month trial period is complete and loan documents are signed, the servicer is entitled to a one-time $1,000 incentive payment and the investor receives a $1,500 check.
The investor incentive is important because the program is targeted mainly at hard-to-modify loans in certain mortgage-backed securities.
Loan modifications can help borrowers by reducing mortgage principal, the interest rate or the term of the loan. The government also has set aside money to help up to 5 million families refinance into safer long-term mortgages from risky kinds of adjustable mortgages whose payments could soar to unaffordable levels.
Those who don't qualify for either refinancing help or loan modifications under the government's program are counseled on other alternatives to foreclosure, such as short sales where lenders agree to a home's sale for less than the mortgage balance.
Bank of America reports that it modified about 232,000 mortgages last year. During the first four months of this year, it has completed about 157,000 modifications — all before the Obama housing rescue plan went into effect.
To settle claims brought by attorneys general in 11 states, Bank of America last year agreed to modify loans for homeowners holding riskier loans that often balloon into larger monthly payments later. The claims involved mortgages that originated with Countrywide Financial, which Bank of America took over in 2008.
Bank of America expects to begin processing applications from homeowners who are current with their mortgage within a few weeks.
Treasury Department officials say 16 mortgage servicers — the companies that collect homeowners' monthly payments — have signed up to participate in the program. They say they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a Treasury spokeswoman.
Lenders say they need to take time to review each application so that the modifications are meaningful. Some economists also warn that rushing approvals could result in modifications that only delay foreclosures rather than prevent them.
'I don't know who to trust'
Some applicants who were turned down say they don't understand why.
Judy Lederman, 49, of Scarsdale, N.Y., a freelance writer after losing her full-time job in public relations a year ago, says she tried to get a modification with Chase about three months ago. She has an interest-only loan at 5.25% that resets in one year. How high it will rise depends on interest rates then.
She says Chase denied her request a few weeks ago because she has an adjustable-rate mortgage, but other borrowers with ARMs are getting modifications under the Obama plan.
"They kept me on hold and waiting for months. I bent over backwards to get them what they needed, but it was like no one was home," Lederman says. "I really don't know what else to do. I don't know who to trust."
The day after USA TODAY called Chase for comment, Lederman says the bank called her. She says the representative told her she was turned down because of missing information and that new forms to apply for a modification were being expedited to her home. "There was some miscommunication, but we have reconnected with the borrowers and are working on finding solutions for them," Zuccarelli says regarding the complaints about Chase
After reading this article in Fridays USA Today I felt ill - it is amazing how many people are unable to get through this process because of the unwillingness of the lenders and servicers to help the homeowners. If you find yourself in a position like this, please call our offices as soon as possible for a "no cost" telephone consultation where we will hopefully be able to assist you and get you on the right track and eventually help save your home. (however to be clear, if you choose to retain us for our services there will be fees asscoiated with our service beyond the initial consultation)
Original Article from Thursday, June 18, 2009
By Stephanie Armour, USA TODAY
The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.
Details of the plan were unveiled in early March. The goal is to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments.
Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.
Homeowners who apply for mortgage modifications are finding that banks typically are taking 45 to 60 days to respond to inquiries, according to a report this month by NeighborWorks America, a provider of foreclosure-prevention counseling.
Some homeowners who applied for mortgage modifications five months ago still have no answer on whether they will be able to arrange smaller monthly payments, leaving them uncertain whether they'll keep their homes or lose them shortly.
"Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff at Naroff Economic Advisors. "No one will admit they're doing this."
Naroff also says banks today are dealing with even more demand for mortgages, including refinancings, than during the peak of the housing bubble in 2006, and the backlog is likely to get worse as more homeowners lose their jobs. Mortgage delinquencies have been growing in areas where unemployment has been rising fast, and even homeowners who successfully get modified mortgages could face trouble later if their incomes or home values fall.
Lenders say they're doing the best they can with a tsunami of requests, but some industry officials say delays are hampering efforts to revive the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," says Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
This month, Sen. Jack Reed, D-R.I., and 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan and called for a new strategy to get lenders to respond to homeowners faster.
"Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer," it said.
Robin and Craig Doyle of Woodland Hills, Calif., have been trying to get a loan modification through their lender, JPMorgan Chase, since February.
Robin, who does freelance writing from home, said she initially was told to send a letter describing her hardship, paycheck stubs, tax returns and other information.
She assembled a 200-page file and sent it along. A month later, she was told she had to redo the information because the file she'd sent had become outdated.
Another time, Robin says, she was told her file had been mistakenly closed altogether. On another occasion, she was told the request couldn't be processed because she hadn't included information about a homeowner association fee, even though her family doesn't belong to such an association.
"I've had to resend it four times," says Robin, 35. "It's making me sick. It's been five months. I've spent hours and hours on this and sleepless nights. It's foremost on my mind. I look at my beautiful home and wonder if I'll have it next month."
The Doyles pay $5,031 a month on a mortgage of $947,000. They have an interest-only loan at a 6.3% rate that will reset in about seven years. On interest-only loans, borrowers pay only interest for a specific period to temporarily reduce the payments. After that, they pay interest and principal.
Craig, a writer in the television and movie industry, is still finding work but not as much as before. This is the first month the family has failed to make its mortgage payment.
"I feel like Obama's plan has done absolutely nothing," says Craig, 38.
Jennifer Zuccarelli, a Chase spokeswoman, says there were miscommunications in the Doyles' case, and the bank is working to resolve the situation. It also has added about 950 loan counselors the past six months.
"We're hiring hundreds more every month," Zuccarelli says.
After USA TODAY contacted Chase for comment, the Doyles say the bank told them the next week to resubmit their application. They later were told they don't qualify for the Obama plan because their loan amount is too high.
Bonuses for mortgage collectors
Other major lenders say they are beefing up staffing to process modification requests. Some say it has taken time because details of the Obama administration's plan weren't outlined until March.
Under the plan, if the borrower's monthly payment is reduced by 6% or more but not below a 31% mortgage-debt-to-income ratio, the servicer can receive success payments of up to $1,000 for three years, provided the borrower stays current.
Once a three-month trial period is complete and loan documents are signed, the servicer is entitled to a one-time $1,000 incentive payment and the investor receives a $1,500 check.
The investor incentive is important because the program is targeted mainly at hard-to-modify loans in certain mortgage-backed securities.
Loan modifications can help borrowers by reducing mortgage principal, the interest rate or the term of the loan. The government also has set aside money to help up to 5 million families refinance into safer long-term mortgages from risky kinds of adjustable mortgages whose payments could soar to unaffordable levels.
Those who don't qualify for either refinancing help or loan modifications under the government's program are counseled on other alternatives to foreclosure, such as short sales where lenders agree to a home's sale for less than the mortgage balance.
Bank of America reports that it modified about 232,000 mortgages last year. During the first four months of this year, it has completed about 157,000 modifications — all before the Obama housing rescue plan went into effect.
To settle claims brought by attorneys general in 11 states, Bank of America last year agreed to modify loans for homeowners holding riskier loans that often balloon into larger monthly payments later. The claims involved mortgages that originated with Countrywide Financial, which Bank of America took over in 2008.
Bank of America expects to begin processing applications from homeowners who are current with their mortgage within a few weeks.
Treasury Department officials say 16 mortgage servicers — the companies that collect homeowners' monthly payments — have signed up to participate in the program. They say they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a Treasury spokeswoman.
Lenders say they need to take time to review each application so that the modifications are meaningful. Some economists also warn that rushing approvals could result in modifications that only delay foreclosures rather than prevent them.
'I don't know who to trust'
Some applicants who were turned down say they don't understand why.
Judy Lederman, 49, of Scarsdale, N.Y., a freelance writer after losing her full-time job in public relations a year ago, says she tried to get a modification with Chase about three months ago. She has an interest-only loan at 5.25% that resets in one year. How high it will rise depends on interest rates then.
She says Chase denied her request a few weeks ago because she has an adjustable-rate mortgage, but other borrowers with ARMs are getting modifications under the Obama plan.
"They kept me on hold and waiting for months. I bent over backwards to get them what they needed, but it was like no one was home," Lederman says. "I really don't know what else to do. I don't know who to trust."
The day after USA TODAY called Chase for comment, Lederman says the bank called her. She says the representative told her she was turned down because of missing information and that new forms to apply for a modification were being expedited to her home. "There was some miscommunication, but we have reconnected with the borrowers and are working on finding solutions for them," Zuccarelli says regarding the complaints about Chase
Searching for a bottom in the housing market
Sales look like they could rebound soon, but you can't say the same for prices.
By Janet Morrissey, contributor
June 19, 2009: 4:23 AM ET
NEW YORK (Fortune) -- Sales in the decimated housing market may finally be bottoming, but don't expect home prices to stop dropping before mid-2010 at the earliest, analysts and economists say.
Indeed, prices in the battered housing market could get a lot worse before they get better as an avalanche of specialized adjustable rate mortgages, known as option ARMs and Alt-A mortgages, are slated to reset over the next 18 to 24 months, and rising unemployment causes a surge in the number of prime mortgages going into default. All of this is expected to trigger another round of foreclosures and cause home prices to tumble at least another 20% before the market rebounds, according to market analysts and economists.
Market bulls believe home prices could bottom in the second half of 2010, but the bears warn it could be 2013 before they finally trough. And once prices do reach a low, it could be years before they significantly rebound.
"This is clearly the worst housing crisis since the Depression," says John Burns, president of John Burns Real Estate Consulting. Losses from the housing meltdown totaled $3.6 trillion at the end of 2008, and will likely approach $5 trillion by the time the crisis ends, predicts Lawrence Yun, chief economist with the National Association of Realtors.
Nevertheless, there have been signs in recent months that the industry may be stabilizing -- at least when it comes to sales. Consumer confidence in May shot up to its highest level in eight months, housing starts jumped more than 17% in May from the previous month, and most importantly, a recent report by the National Association of Realtors shows sales of existing homes climbed 2.9% in April.
"We are at or near bottom in terms of sales," says Yun. "We are seeing strong buying activity, particularly in those boom and bust markets, where prices have declined significantly. Buyers are coming in and fighting over properties -- there is multiple bidding in California and Florida."
"Sales are the first indicator" of a bottom, concurs Elliot Eisenberg, a senior economist with the National Association of Home Builders. "Even though there's more pain to come in certain markets and the prices may go down further and there's more defaults ahead," sales are going up, he says.
Bob Curran, managing director at Fitch Ratings, is a lot more cautious, noting that one month of gains doesn't make a trend -- existing home sales are still off 3.5% from a year ago. "You'd want to see a string of months -- ideally three months -- to say with confidence that a bottom has been reached," he says.
Buying off the bottom
Much of the recent sales increase is related to distressed homes, as a stampede of homebuyers snap up properties in foreclosure or through short sales on the cheap. "Foreclosure sales have picked up pretty dramatically in the past four months," says Alex Barron, a senior research analyst at Agency Trading Group Inc.
Yun estimates about 50% of current sales involve distressed properties, and he expects this trend to continue as foreclosures soar in the months ahead. About 2 million properties were in foreclosure in 2008, and he expects this number to climb to 2.5 million this year.
The foreclosure floodgates are expected to swing wider in the second half of the year as rates reset on option ARMs, and high unemployment triggers defaults on prime mortgages. Many of the option ARMS issued over the past few years were in markets that saw the biggest run-up in home prices and are now seeing the biggest corrections.
At the end of the first quarter, one out of eight U.S. households with a mortgage was either late on its monthly loan payment or in the foreclosure process, according to the Mortgage Bankers Association. Jay Brinkmann, chief economist with the MBA, says defaults among prime mortgages accounted for 50% of the increase in foreclosures in the last quarter.
The pending flood of foreclosures could mean buying opportunities for bargain hunters -- as long as they're prepared to hang onto the house for a number of years. "If you're a renter who just missed this cycle and didn't get in, right now is a great time to buy if your issue is the monthly mortgage payment," says Burns.
Although prices may fall further, low mortgage rates and President Obama's $8,000 first-time homebuyer tax credit make current prices attractive, especially in heavily-beaten down areas, such as California, Arizona, Nevada and California. "I think there are great deals out there," says UBS analyst David Goldberg. "But you have to have a long-term time horizon."
Some speculate that the pending surge in foreclosures and recent uptick in mortgage rates could push fence-sitting homebuyers, worried about rising rates, to jump into the market. Also, some home seekers may rush to score a bargain before the Obama Administration's $8,000 credit for first-time homebuyers expires at year end. The tax credit has already helped to boost sales, especially in states, such as California, which are offering their own tax credit in addition to the federal one, says Curran.
Sales vs. prices
While sales may be increasing, home prices are a different story, in part because of rising interest rates and surging unemployment. The average rate on a 30-year fixed rate mortgage climbed to 5.59% last week -- its highest since Dec. 11 -- but retreated slightly to 5.38% this week, according to Freddie Mac. The nation's unemployment rate spiked to its loftiest level in more than a quarter of a century in May at 9.4%. Burns is predicting the jobless rate will hit 12% by 2011.
National home prices plunged 19.1% in the first quarter, according to the Standard & Poor's/Case-Shiller National Home Price index -- the biggest quarterly decline in the index's 21-year history. Home prices are off 32% on average from their peak in mid-2006. Average prices have not been this low since the fourth quarter of 2002, the Case-Shiller report says.
"We're about two-thirds of the way through the pricing correction on a percentage basis," says Joshua Shapiro, chief U.S. economist with MFR Inc., an economic consulting and analysis firm. He expects prices to slide at least another 20% over the next 18 months.
"There's still pain to come in parts of Florida, California and Michigan, where there's still a tremendous amount of oversupply," says Eisenberg. "Prices will have to come down further and it will take a while to burn off the excess inventory that's floating around there."
Brinkmann expects to see prices start to rebound in 2011. While a bottom may be reached within the next year, it will be many months, and possibly years, before prices significantly come back. "I think that once prices bottom out, they're going to stay flat for several years," says Burns
Re-posted by Joseph Sloboda
Sales look like they could rebound soon, but you can't say the same for prices.
By Janet Morrissey, contributor
June 19, 2009: 4:23 AM ET
NEW YORK (Fortune) -- Sales in the decimated housing market may finally be bottoming, but don't expect home prices to stop dropping before mid-2010 at the earliest, analysts and economists say.
Indeed, prices in the battered housing market could get a lot worse before they get better as an avalanche of specialized adjustable rate mortgages, known as option ARMs and Alt-A mortgages, are slated to reset over the next 18 to 24 months, and rising unemployment causes a surge in the number of prime mortgages going into default. All of this is expected to trigger another round of foreclosures and cause home prices to tumble at least another 20% before the market rebounds, according to market analysts and economists.
Market bulls believe home prices could bottom in the second half of 2010, but the bears warn it could be 2013 before they finally trough. And once prices do reach a low, it could be years before they significantly rebound.
"This is clearly the worst housing crisis since the Depression," says John Burns, president of John Burns Real Estate Consulting. Losses from the housing meltdown totaled $3.6 trillion at the end of 2008, and will likely approach $5 trillion by the time the crisis ends, predicts Lawrence Yun, chief economist with the National Association of Realtors.
Nevertheless, there have been signs in recent months that the industry may be stabilizing -- at least when it comes to sales. Consumer confidence in May shot up to its highest level in eight months, housing starts jumped more than 17% in May from the previous month, and most importantly, a recent report by the National Association of Realtors shows sales of existing homes climbed 2.9% in April.
"We are at or near bottom in terms of sales," says Yun. "We are seeing strong buying activity, particularly in those boom and bust markets, where prices have declined significantly. Buyers are coming in and fighting over properties -- there is multiple bidding in California and Florida."
"Sales are the first indicator" of a bottom, concurs Elliot Eisenberg, a senior economist with the National Association of Home Builders. "Even though there's more pain to come in certain markets and the prices may go down further and there's more defaults ahead," sales are going up, he says.
Bob Curran, managing director at Fitch Ratings, is a lot more cautious, noting that one month of gains doesn't make a trend -- existing home sales are still off 3.5% from a year ago. "You'd want to see a string of months -- ideally three months -- to say with confidence that a bottom has been reached," he says.
Buying off the bottom
Much of the recent sales increase is related to distressed homes, as a stampede of homebuyers snap up properties in foreclosure or through short sales on the cheap. "Foreclosure sales have picked up pretty dramatically in the past four months," says Alex Barron, a senior research analyst at Agency Trading Group Inc.
Yun estimates about 50% of current sales involve distressed properties, and he expects this trend to continue as foreclosures soar in the months ahead. About 2 million properties were in foreclosure in 2008, and he expects this number to climb to 2.5 million this year.
The foreclosure floodgates are expected to swing wider in the second half of the year as rates reset on option ARMs, and high unemployment triggers defaults on prime mortgages. Many of the option ARMS issued over the past few years were in markets that saw the biggest run-up in home prices and are now seeing the biggest corrections.
At the end of the first quarter, one out of eight U.S. households with a mortgage was either late on its monthly loan payment or in the foreclosure process, according to the Mortgage Bankers Association. Jay Brinkmann, chief economist with the MBA, says defaults among prime mortgages accounted for 50% of the increase in foreclosures in the last quarter.
The pending flood of foreclosures could mean buying opportunities for bargain hunters -- as long as they're prepared to hang onto the house for a number of years. "If you're a renter who just missed this cycle and didn't get in, right now is a great time to buy if your issue is the monthly mortgage payment," says Burns.
Although prices may fall further, low mortgage rates and President Obama's $8,000 first-time homebuyer tax credit make current prices attractive, especially in heavily-beaten down areas, such as California, Arizona, Nevada and California. "I think there are great deals out there," says UBS analyst David Goldberg. "But you have to have a long-term time horizon."
Some speculate that the pending surge in foreclosures and recent uptick in mortgage rates could push fence-sitting homebuyers, worried about rising rates, to jump into the market. Also, some home seekers may rush to score a bargain before the Obama Administration's $8,000 credit for first-time homebuyers expires at year end. The tax credit has already helped to boost sales, especially in states, such as California, which are offering their own tax credit in addition to the federal one, says Curran.
Sales vs. prices
While sales may be increasing, home prices are a different story, in part because of rising interest rates and surging unemployment. The average rate on a 30-year fixed rate mortgage climbed to 5.59% last week -- its highest since Dec. 11 -- but retreated slightly to 5.38% this week, according to Freddie Mac. The nation's unemployment rate spiked to its loftiest level in more than a quarter of a century in May at 9.4%. Burns is predicting the jobless rate will hit 12% by 2011.
National home prices plunged 19.1% in the first quarter, according to the Standard & Poor's/Case-Shiller National Home Price index -- the biggest quarterly decline in the index's 21-year history. Home prices are off 32% on average from their peak in mid-2006. Average prices have not been this low since the fourth quarter of 2002, the Case-Shiller report says.
"We're about two-thirds of the way through the pricing correction on a percentage basis," says Joshua Shapiro, chief U.S. economist with MFR Inc., an economic consulting and analysis firm. He expects prices to slide at least another 20% over the next 18 months.
"There's still pain to come in parts of Florida, California and Michigan, where there's still a tremendous amount of oversupply," says Eisenberg. "Prices will have to come down further and it will take a while to burn off the excess inventory that's floating around there."
Brinkmann expects to see prices start to rebound in 2011. While a bottom may be reached within the next year, it will be many months, and possibly years, before prices significantly come back. "I think that once prices bottom out, they're going to stay flat for several years," says Burns
Re-posted by Joseph Sloboda
Wednesday, June 17, 2009
Senator wants to sweeten home buyer tax credit
Posted by Carla Fried
June 16, 2009 2:59 pm
Last week Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia — who made his fortune as a real estate broker, I should point out — wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.
“The first-time home buyer tax credit has made a difference,” said Isakson when announcing the bill. “First-time home buyers used it and the market stabilized, but we don’t have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can.”
There’s just one big catch. If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers. Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.
A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson’s bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.
re-posted by Joseph Sloboda
Posted by Carla Fried
June 16, 2009 2:59 pm
Last week Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia — who made his fortune as a real estate broker, I should point out — wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.
“The first-time home buyer tax credit has made a difference,” said Isakson when announcing the bill. “First-time home buyers used it and the market stabilized, but we don’t have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can.”
There’s just one big catch. If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers. Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.
A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson’s bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.
re-posted by Joseph Sloboda
Thursday, June 11, 2009
Government readies emergency small biz loans
Starting next week, struggling companies will be able to apply for up to $35,000 in debt-relief loans through a new stimulus program.
By Emily Maltby, CNNMoney.com staff writer
Last Updated: June 8, 2009: 6:13 PM ET
NEW YORK (CNNMoney.com) -- One week before its emergency loan program is slated to launch, the Small Business Administration issued guidelines for banks and borrowers on how the new loans will work.
Called "America's Recovery Capital," ARC loans are designed to make up to $35,000 available to struggling small business owners to temporarily help them keep up with payments on existing loans, including credit card debt. Authorized as part of February's stimulus bill, the program has been under development for four months. Many banks were waiting for the SBA's procedural guidance, released Monday, before deciding whether or not to participate.
Here's a primer on how the emergency loans will work.
Eligibility: Sorry, startups, this isn't for you. ARC loans are only open to businesses that have been in operation for at least two years and have been profitable in at least one of the last two years. (Startup businesses can apply for financing through other SBA programs, including the agency's flagship 7(a) loan program.)
Borrowers can use ARC loans to make payments for up to six months on their existing debt, with no repayment due on the loan for another year. After that, the business has five years to pay back the loan principal. The government covers the interest payments.
Applicants must prove they are experiencing financial hardship, as evidenced by declining sales (a drop of at least 20% over the past year), frozen credit lines, rising business costs (again, 20% or more in the past year), or difficulty meeting payroll, paying rent or making loan payments.
But borrowers also have to be running a "viable" business. The SBA wants to see cash-flow projections for at least the next two years illustrating that the business will be able to repay its ARC loan and other debt obligations. Borrowers must have "acceptable" business credit scores, and they can't be more than 60 days past due on any loan they'd like ARC funds to help cover. Lenders may also require collateral to back up the loan.
Qualifying debt: Because of arcane government rules, ARC loans can't be used to make payments on loans backed by the SBA before Feb. 17, 2009, the date the stimulus bill took effect. However, borrowers can use the loans for relief from virtually any other business debt, including a commercial mortgage or lease, home equity loans used to finance business operations, bank loans made outside the SBA program, notes payable to suppliers, and credit card debt.
That last one is a key feature. Borrowers can use ARC loans to cover payments on their personal credit cards if the money was borrowed for business expenses. "We do recognize the merging of the owners' and businesses' finances," says Eric Zarnikow, the SBA's associate administrator for capital access.
How to apply: The SBA won't make ARC loans directly. As with most of its lending programs, it will instead offer guarantees on loans made by banks. If the business owner defaults, the SBA pays off the debt. (The business owner still takes a hit on their credit report.)
Each bank will set its own procedures and timeline for issuing loans, so business owners looking to apply should contact a participating bank. For a list of banks that make SBA loans, click here. Each business can receive only one ARC loan, for a maximum of $35,000, but that loan can be used to make payments on more than one debt.
The SBA will begin processing applications for the loans on June 15, but individual banks may take longer to draft their own application procedures.
What's in it for banks: ARC loans are a sweet deal for borrowers: They carry no fees, require no payments for at least a year, and have their interest payments fully subsidized by the government.
That, and the fact that they're specifically targeted at businesses in trouble, makes them especially risky. Banks have been wrangling with the SBA for years about underwriting standards for their small business loans: The government can penalize lenders for high default rates in their portfolios, which has made some banks nervous about participating in the ARC loan program. Collecting the government guarantee on a loan gone bad can be onerous, and banks have to absorb the administrative costs of pursuing delinquent loans and liquidating those that default. The SBA says it expects ARC loans to default at a higher rate than its other programs, and will adjust its expectations for lenders accordingly.
Because the loans are fully guaranteed by the government, ARC loans are fairly safe for banks. But the interest rate on them isn't very competitive. The SBA has set the interest rate it will pay for the loans at prime plus 2%. For June, that rate would be 5.25%.
That's a lower interest rate than the SBA sets for its other loan programs. However, unlike ARC loans, those programs don't offer a 100% loan guarantee -- on a traditional SBA loan, if a business defaults, banks would be stuck with some of the loss.
Availability: The SBA estimates that around 10,000 small businesses will receive ARC loans, but it's uncertain how quickly the loans will be dispersed. "It's a little challenging to anticipate what the demand will be," Zarnikow says. "There will be ramp-up time as lenders train operators."
In the Recovery Act, Congress allocated $255 million to support the ARC loan program. That money covers only the program's subsidies, for interest payments and defaults, allowing the money to stretch to support a larger dollar-volume of lending. Each lender will be limited to 50 loans per week. If a bank makes less than 50 loans, they can carry the unused allocation over to other weeks, but lenders will be capped at a maximum of 1,000 loans through the program's duration.
The ARC loan program is scheduled to run through Sept. 30, 2010, or until its funding runs out, whichever comes first.
First Published: June 8, 2009: 6:01 PM ET
Re-Posted by Joseph Sloboda
Starting next week, struggling companies will be able to apply for up to $35,000 in debt-relief loans through a new stimulus program.
By Emily Maltby, CNNMoney.com staff writer
Last Updated: June 8, 2009: 6:13 PM ET
NEW YORK (CNNMoney.com) -- One week before its emergency loan program is slated to launch, the Small Business Administration issued guidelines for banks and borrowers on how the new loans will work.
Called "America's Recovery Capital," ARC loans are designed to make up to $35,000 available to struggling small business owners to temporarily help them keep up with payments on existing loans, including credit card debt. Authorized as part of February's stimulus bill, the program has been under development for four months. Many banks were waiting for the SBA's procedural guidance, released Monday, before deciding whether or not to participate.
Here's a primer on how the emergency loans will work.
Eligibility: Sorry, startups, this isn't for you. ARC loans are only open to businesses that have been in operation for at least two years and have been profitable in at least one of the last two years. (Startup businesses can apply for financing through other SBA programs, including the agency's flagship 7(a) loan program.)
Borrowers can use ARC loans to make payments for up to six months on their existing debt, with no repayment due on the loan for another year. After that, the business has five years to pay back the loan principal. The government covers the interest payments.
Applicants must prove they are experiencing financial hardship, as evidenced by declining sales (a drop of at least 20% over the past year), frozen credit lines, rising business costs (again, 20% or more in the past year), or difficulty meeting payroll, paying rent or making loan payments.
But borrowers also have to be running a "viable" business. The SBA wants to see cash-flow projections for at least the next two years illustrating that the business will be able to repay its ARC loan and other debt obligations. Borrowers must have "acceptable" business credit scores, and they can't be more than 60 days past due on any loan they'd like ARC funds to help cover. Lenders may also require collateral to back up the loan.
Qualifying debt: Because of arcane government rules, ARC loans can't be used to make payments on loans backed by the SBA before Feb. 17, 2009, the date the stimulus bill took effect. However, borrowers can use the loans for relief from virtually any other business debt, including a commercial mortgage or lease, home equity loans used to finance business operations, bank loans made outside the SBA program, notes payable to suppliers, and credit card debt.
That last one is a key feature. Borrowers can use ARC loans to cover payments on their personal credit cards if the money was borrowed for business expenses. "We do recognize the merging of the owners' and businesses' finances," says Eric Zarnikow, the SBA's associate administrator for capital access.
How to apply: The SBA won't make ARC loans directly. As with most of its lending programs, it will instead offer guarantees on loans made by banks. If the business owner defaults, the SBA pays off the debt. (The business owner still takes a hit on their credit report.)
Each bank will set its own procedures and timeline for issuing loans, so business owners looking to apply should contact a participating bank. For a list of banks that make SBA loans, click here. Each business can receive only one ARC loan, for a maximum of $35,000, but that loan can be used to make payments on more than one debt.
The SBA will begin processing applications for the loans on June 15, but individual banks may take longer to draft their own application procedures.
What's in it for banks: ARC loans are a sweet deal for borrowers: They carry no fees, require no payments for at least a year, and have their interest payments fully subsidized by the government.
That, and the fact that they're specifically targeted at businesses in trouble, makes them especially risky. Banks have been wrangling with the SBA for years about underwriting standards for their small business loans: The government can penalize lenders for high default rates in their portfolios, which has made some banks nervous about participating in the ARC loan program. Collecting the government guarantee on a loan gone bad can be onerous, and banks have to absorb the administrative costs of pursuing delinquent loans and liquidating those that default. The SBA says it expects ARC loans to default at a higher rate than its other programs, and will adjust its expectations for lenders accordingly.
Because the loans are fully guaranteed by the government, ARC loans are fairly safe for banks. But the interest rate on them isn't very competitive. The SBA has set the interest rate it will pay for the loans at prime plus 2%. For June, that rate would be 5.25%.
That's a lower interest rate than the SBA sets for its other loan programs. However, unlike ARC loans, those programs don't offer a 100% loan guarantee -- on a traditional SBA loan, if a business defaults, banks would be stuck with some of the loss.
Availability: The SBA estimates that around 10,000 small businesses will receive ARC loans, but it's uncertain how quickly the loans will be dispersed. "It's a little challenging to anticipate what the demand will be," Zarnikow says. "There will be ramp-up time as lenders train operators."
In the Recovery Act, Congress allocated $255 million to support the ARC loan program. That money covers only the program's subsidies, for interest payments and defaults, allowing the money to stretch to support a larger dollar-volume of lending. Each lender will be limited to 50 loans per week. If a bank makes less than 50 loans, they can carry the unused allocation over to other weeks, but lenders will be capped at a maximum of 1,000 loans through the program's duration.
The ARC loan program is scheduled to run through Sept. 30, 2010, or until its funding runs out, whichever comes first.
First Published: June 8, 2009: 6:01 PM ET
Re-Posted by Joseph Sloboda
Wednesday, June 10, 2009
With the rates on the 10yr Treasury at 7 month highs we are seeing rates for 30yr Fixed Mortgages on the rise. If you are in the market to purchase a home or to refinance your current mortgage I strongly suggest that you look into locking your rates. Contact me directly for more information (see this story below)
Treasury yields at 7-month highs
Government debt prices tumble as stocks rally, new debt is prepped for auction and Russia says it will sell some of its holdings.
By Catherine Clifford, CNNMoney.com staff writer
June 10, 2009: 9:28 AM ET
NEW YORK (CNNMoney.com) -- Treasury yields soared to 7-month highs Wednesday as global stocks rallied, the government prepared to sell $19 billion in 10-year notes and Russia said it would reduce its share of U.S. debt.
The benchmark 10-year note fell 10/32 to 93-23/32, and its yield rose to 3.90% from 3.86% late Tuesday.
The benchmark yield reached as high as 3.93% before retreating. The yield was at its highest levels since settling Nov. 3 at 3.96%. Bond prices and yields move in opposite directions.
The 2-year note dipped less than 1/32 to 99-5/32, and its yield was 1.32%. The yield on the 3-
month note held steady at 0.18%.
The 30-year bond sank 27/32 to 92-21/32, after being down more than a point earlier. Its yield jumped to 4.71% from 4.65%.
Stock rally: Stocks were higher throughout the world, and were set to open with gains in the United States. Asian indexes ended up between 2% and 4% and European markets were up between 1% and 2% at midday.
Investors tend to buy rallying stocks because they offer greater returns than government debt.
Debt sale: The government continued to sell large amounts of debt to fund the stimulus aimed at boosting the economy. On Wednesday, $19 billion in a reopened 10-year note was slated for auction.
The government sold $35 billion in 3-year notes Tuesday in an auction that met with strong demand from investors.
But one analyst said the performance of the 3-year sale was not necessarily a harbinger of the 10-year reopening.
The 7-year gap in maturity "changes the landscape," said Nick Kalivas, vice president of financial research at MF Global. "Furthermore it has been noted that investors have been rolling down the curve," or putting a premium on shorter dated notes.
Debt prices have fallen under the weight of supply. As prices have fallen, however, yields have shot higher, boosting home mortgage rates with them.
In an effort to combat the mortgage rate rise, the government is buying back debt. The Federal Reserve was scheduled to purchase an undisclosed amount of debt Wednesday as part of its $300 billion quantitative easing campaign.
Russia: Also weighing on Treasury prices was Russia's announcement that it will reduce the share of U.S. debt in its forex reserve holdings, according to Reuters.
About 30% of its $404 billion in reserves are held in Treasurys, Reuters reported. A Russian official said the Treasurys were purchased as a safe haven during the height of the international banking crisis, and will be sold in order to purchase International Monetary Fund bonds and investments in commercial bank deposits.
Lending rates: One key bank-to-bank rate moved lower. The 3-month Libor edged to 0.64% from 0.65%, according to Bloomberg.com.
The overnight Libor rate ticked down to 0.26% from to 0.27% the day prior.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money. The closely-watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor.
reposted from cnnmoney.com by Joseph Sloboda
Treasury yields at 7-month highs
Government debt prices tumble as stocks rally, new debt is prepped for auction and Russia says it will sell some of its holdings.
By Catherine Clifford, CNNMoney.com staff writer
June 10, 2009: 9:28 AM ET
NEW YORK (CNNMoney.com) -- Treasury yields soared to 7-month highs Wednesday as global stocks rallied, the government prepared to sell $19 billion in 10-year notes and Russia said it would reduce its share of U.S. debt.
The benchmark 10-year note fell 10/32 to 93-23/32, and its yield rose to 3.90% from 3.86% late Tuesday.
The benchmark yield reached as high as 3.93% before retreating. The yield was at its highest levels since settling Nov. 3 at 3.96%. Bond prices and yields move in opposite directions.
The 2-year note dipped less than 1/32 to 99-5/32, and its yield was 1.32%. The yield on the 3-
month note held steady at 0.18%.
The 30-year bond sank 27/32 to 92-21/32, after being down more than a point earlier. Its yield jumped to 4.71% from 4.65%.
Stock rally: Stocks were higher throughout the world, and were set to open with gains in the United States. Asian indexes ended up between 2% and 4% and European markets were up between 1% and 2% at midday.
Investors tend to buy rallying stocks because they offer greater returns than government debt.
Debt sale: The government continued to sell large amounts of debt to fund the stimulus aimed at boosting the economy. On Wednesday, $19 billion in a reopened 10-year note was slated for auction.
The government sold $35 billion in 3-year notes Tuesday in an auction that met with strong demand from investors.
But one analyst said the performance of the 3-year sale was not necessarily a harbinger of the 10-year reopening.
The 7-year gap in maturity "changes the landscape," said Nick Kalivas, vice president of financial research at MF Global. "Furthermore it has been noted that investors have been rolling down the curve," or putting a premium on shorter dated notes.
Debt prices have fallen under the weight of supply. As prices have fallen, however, yields have shot higher, boosting home mortgage rates with them.
In an effort to combat the mortgage rate rise, the government is buying back debt. The Federal Reserve was scheduled to purchase an undisclosed amount of debt Wednesday as part of its $300 billion quantitative easing campaign.
Russia: Also weighing on Treasury prices was Russia's announcement that it will reduce the share of U.S. debt in its forex reserve holdings, according to Reuters.
About 30% of its $404 billion in reserves are held in Treasurys, Reuters reported. A Russian official said the Treasurys were purchased as a safe haven during the height of the international banking crisis, and will be sold in order to purchase International Monetary Fund bonds and investments in commercial bank deposits.
Lending rates: One key bank-to-bank rate moved lower. The 3-month Libor edged to 0.64% from 0.65%, according to Bloomberg.com.
The overnight Libor rate ticked down to 0.26% from to 0.27% the day prior.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money. The closely-watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor.
reposted from cnnmoney.com by Joseph Sloboda
Friday, June 5, 2009
Mortgage rates have been rising steadily over the last few weeks and if ever there was a time to "lock in" your rate then that it is NOW.
With current CPI, PPI and Unemployment reports being surprising optimistic and the belief on Wall Street that "the worst is over" the rates on the 10yr Treasury have started to sky rocket. This in turn is forcing mortgage rates to move up by more than a full % point in the last 4 weeks.
There has never been a better time for a qualified buyer or a homeowner looking to refinance than right now. it is my belief that rates will continue to increase over the year (they always do in the Summer anyway) additionally I believe that inflation will continue to rise through the year which will also have a negative on interest rates on mortgages, credit cards, car loans . . . everything.
Interested in purchasing a home or refinancing out of your high rate or adjustable rate mortgage, then please contact Joe Sloboda @ (954) 557-4653 if you have questions on how I may help you - or you can email me at jsloboda@hgmortgage.net
You can also visit my website at www.fastneasyhomeloan.com
see a recent article from CnnMoney below that really puts this into perspective
Mortgage rates soar
30-year fixed jumps to 5.65%; ARMs mostly higher.
By Julianne Pepitone, CNNMoney.com
June 4, 2009: 4:24 PM ET
NEW YORK (CNNMoney.com) -- Home mortgage rates jumped in the most recent week, with the average 30-year fixed rate rising to 5.65%, according to a report released Thursday.
The 30-year fixed rose from 5.45% last week, according to a weekly national survey from Bankrate.com.
"Mortgage rates posted another strong move higher this week, as the focus among bond investors has shifted to concerns about budget deficits and inflation," the report said.
Mortgage rates move in tandem with Treasury yields. In particular, the 30-year fixed mortgage rate tracks the benchmark 10-year Treasury yield.
"The Federal Reserve, with more than $1 trillion remaining in their stated mortgage- and government-bond buyback program, could accelerate or possibly increase those purchases in an effort to bring rates lower," the report said.
A separate Wednesday report showed U.S. mortgage applications fell last week, reflecting a plunge in demand for home refinancing loans. A report last week showed the largest quarter-over-quarter increase in troubled mortgages since record-keeping began in 1972.
Even as mortgage rates continue to rise, they still remain much lower than last year, when the average 30-year fixed mortgage rate was 6.52%, according to Bankrate.com.
To translate the difference in mortgage rate into dollars for a homeowner, consider a $200,000 loan. At 6.52%, the monthly payment would come out to $1,266.77, or $112 higher than the $1,154.47 monthly payment at 5.65%.
Other rates: The average 15-year fixed rate mortgage jumped to 5.06% from 4.86% the week prior.
The average jumbo 30-year fixed rate ticked up to 6.68 % from 6.6%. Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). They have higher rates than smaller "conforming" loans, which do have guarantees.
Adjustable-rate mortgages were mixed, the report said, with the average 1-year ARM slipping to 5.01% and the 5-year ARM jumping to 5.2%.
re-posted by Joseph Sloboda
With current CPI, PPI and Unemployment reports being surprising optimistic and the belief on Wall Street that "the worst is over" the rates on the 10yr Treasury have started to sky rocket. This in turn is forcing mortgage rates to move up by more than a full % point in the last 4 weeks.
There has never been a better time for a qualified buyer or a homeowner looking to refinance than right now. it is my belief that rates will continue to increase over the year (they always do in the Summer anyway) additionally I believe that inflation will continue to rise through the year which will also have a negative on interest rates on mortgages, credit cards, car loans . . . everything.
Interested in purchasing a home or refinancing out of your high rate or adjustable rate mortgage, then please contact Joe Sloboda @ (954) 557-4653 if you have questions on how I may help you - or you can email me at jsloboda@hgmortgage.net
You can also visit my website at www.fastneasyhomeloan.com
see a recent article from CnnMoney below that really puts this into perspective
Mortgage rates soar
30-year fixed jumps to 5.65%; ARMs mostly higher.
By Julianne Pepitone, CNNMoney.com
June 4, 2009: 4:24 PM ET
NEW YORK (CNNMoney.com) -- Home mortgage rates jumped in the most recent week, with the average 30-year fixed rate rising to 5.65%, according to a report released Thursday.
The 30-year fixed rose from 5.45% last week, according to a weekly national survey from Bankrate.com.
"Mortgage rates posted another strong move higher this week, as the focus among bond investors has shifted to concerns about budget deficits and inflation," the report said.
Mortgage rates move in tandem with Treasury yields. In particular, the 30-year fixed mortgage rate tracks the benchmark 10-year Treasury yield.
"The Federal Reserve, with more than $1 trillion remaining in their stated mortgage- and government-bond buyback program, could accelerate or possibly increase those purchases in an effort to bring rates lower," the report said.
A separate Wednesday report showed U.S. mortgage applications fell last week, reflecting a plunge in demand for home refinancing loans. A report last week showed the largest quarter-over-quarter increase in troubled mortgages since record-keeping began in 1972.
Even as mortgage rates continue to rise, they still remain much lower than last year, when the average 30-year fixed mortgage rate was 6.52%, according to Bankrate.com.
To translate the difference in mortgage rate into dollars for a homeowner, consider a $200,000 loan. At 6.52%, the monthly payment would come out to $1,266.77, or $112 higher than the $1,154.47 monthly payment at 5.65%.
Other rates: The average 15-year fixed rate mortgage jumped to 5.06% from 4.86% the week prior.
The average jumbo 30-year fixed rate ticked up to 6.68 % from 6.6%. Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). They have higher rates than smaller "conforming" loans, which do have guarantees.
Adjustable-rate mortgages were mixed, the report said, with the average 1-year ARM slipping to 5.01% and the 5-year ARM jumping to 5.2%.
re-posted by Joseph Sloboda
Thursday, June 4, 2009
Countrywide's Mozilo charged with fraud
Securities and Exchange Commission charges Countrywide founder with fraud.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: June 4, 2009: 4:27 PM ET
NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission on Thursday said it had filed securities fraud charges against former Countrywide Chief Executive Angelo Mozilo and two other former executive.
The trio are being charged with deliberately misleading investors about the significant credit risk Countrywide took to build and maintain its market share.
Mozilo was also charged with insider trading for selling his Countrywide stock for nearly $140 million in profits while knowing that Countrywide's business model was deteriorating.
The SEC alleges that Mozilo, along with former COO and President David Sambol and former CFO Eric Sieracki, misled the market by falsely assuring investors that Countrywide was primarily a prime-quality mortgage lender.
"This is the tale of two companies," said Robert Khuzami, director of the SEC's Division of Enforcement. "Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk."
From 2005 to 2007, Countrywide engaged in an unprecedented expansion of its underwriting guidelines and was writing riskier and riskier loans, according to the SEC. The senior executives knew that defaults and delinquencies would rise.
"Angelo Mozilo privately described one Countrywide product as 'toxic,' and said another's performance was so uncertain that Countrywide was 'flying blind,' " Khuzami said.
An attorney for Mozilo could not be reached immediately for comment.
Responding to reports of an investigation last month, the lawyer told CNNMoney.com that the "persistent innuendo" that Mozilo sold Countrywide shares because he knew of problems within the mortgage lender is "scandalous" and "inconsistent" with the facts.
"We do not believe there is any fair basis for allegations to be made against Mr. Mozilo," attorney David Siegel said in an e-mail on May 13. "All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time."
Mozilo, who founded the company in a New York apartment, built Countrywide into the nation's largest mortgage lender. But Countrywide buckled during the housing meltdown and was acquired last year by Bank of America (BAC, Fortune 500).
Mozilo became a poster boy for the subprime crisis. He reportedly stood to collect a windfall of $115 million in the $4 billion sale to Bank of America. But after facing heavy criticism from lawmakers, Mozilo said he would forfeit $37.5 million in payments tied to the deal.
CNN Senior Producer Scott Spoerry contributed to this report.
First Published: June 4, 2009: 3:37 PM ET
Securities and Exchange Commission charges Countrywide founder with fraud.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: June 4, 2009: 4:27 PM ET
NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission on Thursday said it had filed securities fraud charges against former Countrywide Chief Executive Angelo Mozilo and two other former executive.
The trio are being charged with deliberately misleading investors about the significant credit risk Countrywide took to build and maintain its market share.
Mozilo was also charged with insider trading for selling his Countrywide stock for nearly $140 million in profits while knowing that Countrywide's business model was deteriorating.
The SEC alleges that Mozilo, along with former COO and President David Sambol and former CFO Eric Sieracki, misled the market by falsely assuring investors that Countrywide was primarily a prime-quality mortgage lender.
"This is the tale of two companies," said Robert Khuzami, director of the SEC's Division of Enforcement. "Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk."
From 2005 to 2007, Countrywide engaged in an unprecedented expansion of its underwriting guidelines and was writing riskier and riskier loans, according to the SEC. The senior executives knew that defaults and delinquencies would rise.
"Angelo Mozilo privately described one Countrywide product as 'toxic,' and said another's performance was so uncertain that Countrywide was 'flying blind,' " Khuzami said.
An attorney for Mozilo could not be reached immediately for comment.
Responding to reports of an investigation last month, the lawyer told CNNMoney.com that the "persistent innuendo" that Mozilo sold Countrywide shares because he knew of problems within the mortgage lender is "scandalous" and "inconsistent" with the facts.
"We do not believe there is any fair basis for allegations to be made against Mr. Mozilo," attorney David Siegel said in an e-mail on May 13. "All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time."
Mozilo, who founded the company in a New York apartment, built Countrywide into the nation's largest mortgage lender. But Countrywide buckled during the housing meltdown and was acquired last year by Bank of America (BAC, Fortune 500).
Mozilo became a poster boy for the subprime crisis. He reportedly stood to collect a windfall of $115 million in the $4 billion sale to Bank of America. But after facing heavy criticism from lawmakers, Mozilo said he would forfeit $37.5 million in payments tied to the deal.
CNN Senior Producer Scott Spoerry contributed to this report.
First Published: June 4, 2009: 3:37 PM ET
Joseph Sloboda
Tuesday, June 2, 2009
Pending home sales rebounding
Number of signed sales contracts continues bounce off record lows for third consecutive month.
By Les Christie CNNMoney.com staff writer
Last Updated: June 2, 2009: 10:05 AM ET
NEW YORK (CNNMoney.com) -- The number of home sales contracts signed in April continued to bouce back from record lows hit last winter, according to a widely watched industry report.
This is the third consecutive month of gains.
The Pending Home Sales Index from the National Association of Realtors rose 6.7% in April after jumping 3.2% in March. That was far above the forecasts of experts surveyed by Briefing.com, who predicted a 0.5% increase. The index was 3.3% higher than 12 months earlier.
Pending home sales are a forward-looking indicator since many of the contracts don't result in completed deals for many weeks or months.
"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, NAR's chief economist in a prepared statement. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers."
The credit allows many homebuyers who have not owned a home in the past three years to claim up to an $8,000 refund on their taxes. The result has been a flood of first-time homebuyers even into lukewarm markets like Indianapolis, according to Glenn Bill, an agent there for Century 21 Sheetz.
"Our first-time homebuyer market is exploding," he said. "That's one good thing to come out of the stimulus package."
Low prices
Also driving sales is falling home prices. The national median home price is down more than 30%, according to the S&P/Case-Shiller Home Price Index. That has drawn many bargain-hunting homebuyers back into the market.
Mortgage rates in April were also very favorable, averaging well under 5% for a 30-year, fixed-rate loan. However, rates have risen recently.
All those factors have raised NAR's index of affordability to near record highs. It went up to 174.8 in April from an upwardly revised 171.9 in March, its second highest monthly reading ever. This index measures the relationship between home prices, mortgage interest rates and family income.
Regionally, the biggest improvement in home sales came in the Northeast, where they shot up 32.6%. Sales ramped up 9.8% in the Midwest, inched up 1.8% in the West and cooled 0.2% in the South.
Also boosting sales, according to NAR president Charles McMillan, a Coldwell Banker broker in Dallas, is that some states and non-profit agencies are helping first-time homebuyers come up with down payments.
"Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location," he said.
The Department of Housing and Urban Development announced last week an additional program that enables homebuyers to add the tax credit to their down payments on FHA mortgages at closing, which should also help to enhance affordability and give a push to home sales.
First Published: June 2, 2009: 10:00 AM ET
Joseph Sloboda
Number of signed sales contracts continues bounce off record lows for third consecutive month.
By Les Christie CNNMoney.com staff writer
Last Updated: June 2, 2009: 10:05 AM ET
NEW YORK (CNNMoney.com) -- The number of home sales contracts signed in April continued to bouce back from record lows hit last winter, according to a widely watched industry report.
This is the third consecutive month of gains.
The Pending Home Sales Index from the National Association of Realtors rose 6.7% in April after jumping 3.2% in March. That was far above the forecasts of experts surveyed by Briefing.com, who predicted a 0.5% increase. The index was 3.3% higher than 12 months earlier.
Pending home sales are a forward-looking indicator since many of the contracts don't result in completed deals for many weeks or months.
"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, NAR's chief economist in a prepared statement. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers."
The credit allows many homebuyers who have not owned a home in the past three years to claim up to an $8,000 refund on their taxes. The result has been a flood of first-time homebuyers even into lukewarm markets like Indianapolis, according to Glenn Bill, an agent there for Century 21 Sheetz.
"Our first-time homebuyer market is exploding," he said. "That's one good thing to come out of the stimulus package."
Low prices
Also driving sales is falling home prices. The national median home price is down more than 30%, according to the S&P/Case-Shiller Home Price Index. That has drawn many bargain-hunting homebuyers back into the market.
Mortgage rates in April were also very favorable, averaging well under 5% for a 30-year, fixed-rate loan. However, rates have risen recently.
All those factors have raised NAR's index of affordability to near record highs. It went up to 174.8 in April from an upwardly revised 171.9 in March, its second highest monthly reading ever. This index measures the relationship between home prices, mortgage interest rates and family income.
Regionally, the biggest improvement in home sales came in the Northeast, where they shot up 32.6%. Sales ramped up 9.8% in the Midwest, inched up 1.8% in the West and cooled 0.2% in the South.
Also boosting sales, according to NAR president Charles McMillan, a Coldwell Banker broker in Dallas, is that some states and non-profit agencies are helping first-time homebuyers come up with down payments.
"Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location," he said.
The Department of Housing and Urban Development announced last week an additional program that enables homebuyers to add the tax credit to their down payments on FHA mortgages at closing, which should also help to enhance affordability and give a push to home sales.
First Published: June 2, 2009: 10:00 AM ET
Joseph Sloboda
Thursday, May 28, 2009
Mortgage rates: 30-year still rising
Home lending rates jump higher, with the 30-year fixed rate spiking to 5.45% in the week ended Wednesday.
By Catherine Clifford, CNNMoney.com staff writer
Last Updated: May 28, 2009: 9:16 AM ET
NEW YORK (CNNMoney.com) -- Home mortgage rates jumped in the most recent week, pulled higher by rising Treasury yields, according to a report released Thursday.
The average 30-year fixed mortgage rate rose to 5.45% in the week ended Wednesday, up from 5.24% last week, according to a weekly national survey from Bankrate.com.
Even as mortgage rates continue to rise, they still remain much lower than last year, when the average 30-year fixed mortgage rate was 6.20%, according to Bankrate.com.
To translate the difference in mortgage rate into dollars for a homeowner, consider a $200,000 loan. At 6.2%, the monthly payment would come out to $1,224.94, or $95 higher than the $1,129.31 monthly payment at 5.45%.
Mortgage rates move in tandem with Treasury yields. In particular, the 30-year fixed mortgage rate tracks the benchmark, 10-year Treasury yield. In recent days, that benchmark yield has spiked to levels not seen since November 2008.
With the government spending hand-over-fist to jumpstart the economy, the Treasury has been forced to sell unprecedented amounts of debt. The volume of supply has pushed down prices, sending yields higher. Yields and prices move in opposite direction.
Rising mortgage rates could slow a housing recovery, which the Obama administration has been working hard to jumpstart in an effort to start pulling the economy out of its recession.
Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
First Published: May 28, 2009: 8:43 AM ET
Home lending rates jump higher, with the 30-year fixed rate spiking to 5.45% in the week ended Wednesday.
By Catherine Clifford, CNNMoney.com staff writer
Last Updated: May 28, 2009: 9:16 AM ET
NEW YORK (CNNMoney.com) -- Home mortgage rates jumped in the most recent week, pulled higher by rising Treasury yields, according to a report released Thursday.
The average 30-year fixed mortgage rate rose to 5.45% in the week ended Wednesday, up from 5.24% last week, according to a weekly national survey from Bankrate.com.
Even as mortgage rates continue to rise, they still remain much lower than last year, when the average 30-year fixed mortgage rate was 6.20%, according to Bankrate.com.
To translate the difference in mortgage rate into dollars for a homeowner, consider a $200,000 loan. At 6.2%, the monthly payment would come out to $1,224.94, or $95 higher than the $1,129.31 monthly payment at 5.45%.
Mortgage rates move in tandem with Treasury yields. In particular, the 30-year fixed mortgage rate tracks the benchmark, 10-year Treasury yield. In recent days, that benchmark yield has spiked to levels not seen since November 2008.
With the government spending hand-over-fist to jumpstart the economy, the Treasury has been forced to sell unprecedented amounts of debt. The volume of supply has pushed down prices, sending yields higher. Yields and prices move in opposite direction.
Rising mortgage rates could slow a housing recovery, which the Obama administration has been working hard to jumpstart in an effort to start pulling the economy out of its recession.
Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
First Published: May 28, 2009: 8:43 AM ET
Wednesday, May 20, 2009
Renewed HOPE for Homeowners
Renewed HOPE for Homeowners
Congress passed a bill amending HOPE for Homeowners that may make the program more useful.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 20, 2009: 5:06 PM ET
NEW YORK (CNNMoney.com) -- One of the biggest disappointments of the foreclosure prevention fight has been HOPE for Homeowners, a plan Congress passed in an attempt to help as many as 400,000 underwater, delinquent borrowers from going into foreclosure.
In its first five months, HOPE for Homeowners helped one family stay in its home.
Congress and the Obama administration are hoping to do a lot better than that.
On Wednesday, President Obama signed into law a bill that attempts to correct the program's problems. The president said the program had many provisions that discouraged servicers from using it.
"This bill removes those hurdles," Obama said. The original bill, which took effect Oct. 1, was intended to help defaulting homeowners by having banks voluntarily reduce mortgage balances to 90% of a home's current market value. The loan would then be refinanced into a mortgage insured by the Federal Housing Administration (FHA).
The idea was that the lenders take "haircuts" and the government would then bail them out of any future losses by insuring the new loan.
As a result, most of the big lenders didn't offer the program, which was strictly voluntary though heavily encouraged by the Bush and Obama administrations. "The lender basically short-sells the mortgage into the plan, and there's no more chance for upside," said Tom Kelly, a spokesman for JP Morgan Chase (JPM, Fortune 500).
The new version of HOPE sweetens the FHA-refinance option - for lenders. It only requires servicers to reduce balances to 93% of market values instead of 90%. It also pays servicers $1,000 for every Hope-refinanced loan.
For example, borrowers who owed $220,000 on a house valued at $200,000 would need their mortgage balances reduced to $180,000 to qualify for an original HOPE for Homeowners refi. That's a $40,000 writeoff. Under the new plan, lenders would have to forgive $34,000.
But the biggest change is that it authorizes FHA's parent agency, the Department of Housing and Urban Development (HUD), to share future home-price appreciation with investors, up to the appraised value of the property when the existing loan was first issued. The original bill gave HUD the right to share potential profits 50/50 with homeowners, but now some of HUD's share would go to the original investors.
Also certain to increase servicer utilization of HOPE for Homeowners is a change in Treasury Department policy announced late last month. Treasury will require any servicer that signs up to participate in the Making Home Affordable program, the administration's mortgage modification plan, to evaluate borrower eligibility for Hope for Homeowners as well.
If borrowers don't fit into the Making Home Affordable program but are viable for HOPE, the servicers must offer them this option.
Industry insiders say they hope the changes will spur more lenders to use the plan.
"It's very important that it becomes a better program," said Faith Schwartz, director of Hope Now, a coalition of lenders, servicers, mortgage investors and community advocates. "We need the FHA to provide another outlet for refinancing these problem loans."
The final bill removed a provision that would have authorized bankruptcy court judges to lower mortgage balances to reflect current market values. Supporters of this "cramdown" believed it would pressure lenders into making more affordable modifications for at-risk borrowers. But the Senate removed that from their version of the bill and the House followed suit.
First Published: May 20, 2009: 5:00 PM ET
Congress passed a bill amending HOPE for Homeowners that may make the program more useful.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 20, 2009: 5:06 PM ET
NEW YORK (CNNMoney.com) -- One of the biggest disappointments of the foreclosure prevention fight has been HOPE for Homeowners, a plan Congress passed in an attempt to help as many as 400,000 underwater, delinquent borrowers from going into foreclosure.
In its first five months, HOPE for Homeowners helped one family stay in its home.
Congress and the Obama administration are hoping to do a lot better than that.
On Wednesday, President Obama signed into law a bill that attempts to correct the program's problems. The president said the program had many provisions that discouraged servicers from using it.
"This bill removes those hurdles," Obama said. The original bill, which took effect Oct. 1, was intended to help defaulting homeowners by having banks voluntarily reduce mortgage balances to 90% of a home's current market value. The loan would then be refinanced into a mortgage insured by the Federal Housing Administration (FHA).
The idea was that the lenders take "haircuts" and the government would then bail them out of any future losses by insuring the new loan.
As a result, most of the big lenders didn't offer the program, which was strictly voluntary though heavily encouraged by the Bush and Obama administrations. "The lender basically short-sells the mortgage into the plan, and there's no more chance for upside," said Tom Kelly, a spokesman for JP Morgan Chase (JPM, Fortune 500).
The new version of HOPE sweetens the FHA-refinance option - for lenders. It only requires servicers to reduce balances to 93% of market values instead of 90%. It also pays servicers $1,000 for every Hope-refinanced loan.
For example, borrowers who owed $220,000 on a house valued at $200,000 would need their mortgage balances reduced to $180,000 to qualify for an original HOPE for Homeowners refi. That's a $40,000 writeoff. Under the new plan, lenders would have to forgive $34,000.
But the biggest change is that it authorizes FHA's parent agency, the Department of Housing and Urban Development (HUD), to share future home-price appreciation with investors, up to the appraised value of the property when the existing loan was first issued. The original bill gave HUD the right to share potential profits 50/50 with homeowners, but now some of HUD's share would go to the original investors.
Also certain to increase servicer utilization of HOPE for Homeowners is a change in Treasury Department policy announced late last month. Treasury will require any servicer that signs up to participate in the Making Home Affordable program, the administration's mortgage modification plan, to evaluate borrower eligibility for Hope for Homeowners as well.
If borrowers don't fit into the Making Home Affordable program but are viable for HOPE, the servicers must offer them this option.
Industry insiders say they hope the changes will spur more lenders to use the plan.
"It's very important that it becomes a better program," said Faith Schwartz, director of Hope Now, a coalition of lenders, servicers, mortgage investors and community advocates. "We need the FHA to provide another outlet for refinancing these problem loans."
The final bill removed a provision that would have authorized bankruptcy court judges to lower mortgage balances to reflect current market values. Supporters of this "cramdown" believed it would pressure lenders into making more affordable modifications for at-risk borrowers. But the Senate removed that from their version of the bill and the House followed suit.
First Published: May 20, 2009: 5:00 PM ET
Wednesday, May 13, 2009
Existing home sales rise in 1Q 2009
Florida’s existing home, condo sales rise in 1Q 2009
ORLANDO, Fla. – May 12, 2009 – Sales of existing single-family homes in Florida rose 25 percent in first quarter 2009 compared to the same period a year earlier, according to the latest housing statistics from the Florida Association of Realtors® (FAR). A total of 31,412 existing homes sold statewide in 1Q 2009; during the same period the year before, a total of 25,071 existing homes sold. It marks the third consecutive quarter that Florida has reported higher existing home sales; sales levels in the third and fourth quarters of 2008 were higher than the corresponding three-month period of the previous year, according to FAR.
Sales of existing condominiums statewide in the first quarter rose 19 percent compared to the same time the previous year. This marks the second three-month period for increased statewide sales in both the existing home and condo markets compared to year-ago levels.
Statewide sales activity in 1Q 2009 also increased over 4Q 2008’s sales figure in both the existing home and existing condo markets, FAR records show. For 1Q 2009, statewide sales of existing homes rose 4.14 percent over the 4Q 2008 figure; existing condo sales statewide in 1Q 2009 increased 21.1 percent over the 4Q 2008 level.
“Many first-time homebuyers are entering the market now to take advantage of current low mortgage rates, plentiful housing inventory and affordable homeownership opportunities,” says 2009 FAR President Cynthia Shelton, CCIM (Certified Commercial Investment Member). “Typical homebuyers are realizing that now is the time to buy – they can find the Florida home of their dreams at a cost they can afford. Homeownership has always offered a wide range of benefits, including building financial security and increasing a sense of community, but the advantages offered in today’s market are unique.
”One such advantage is a dream come true for first-time homebuyers in Florida, she adds, thanks to a new program that the 2009 Florida Legislature approved through the adoption of the state’s general budget last week. Lawmakers passed a provision setting aside $30.1 million for the Florida Homebuyer Opportunity Program, which will help with downpayment assistance. Beginning July 1, those who qualify for the federal $8,000 first-time homebuyers tax credit will be able to apply for downpayment assistance before they close on the purchase of their home, and then repay the amount borrowed when they get their tax refund.
Shelton adds, “The beauty of this program is that the state will be paid back and, conceivably, more potential homebuyers could take advantage before the Dec. 1, 2009, expiration of the $8,000 federal first time homebuyer tax credit. While details of the program are still being worked out, we are all very excited about the incredible opportunity this offers for thousands of Florida families. It’s $8,000 more reasons to buy your first Florida home!”
Fifteen of Florida’s metropolitan statistical areas (MSAs) reported increased sales of existing homes in the first quarter compared to the same three-month-period a year earlier, while 12 MSAs showed gains in condo sales.
The statewide existing-home median sales price was $141,000 in the first quarter; a year earlier, it was $202,300 for a decrease of 30 percent. According to industry analysts with the National Association of Realtors® (NAR), there remains a significant downward distortion in the current median price due to many discounted sales, including a large number of foreclosures. The median is a typical market price where half the homes sold for more, half for less.
In the year-to-year quarterly comparison for condo sales, 10,143 units sold statewide for the quarter compared to 8,554 in 1Q 2008 for a 19 percent increase. The statewide existing-condo median sales price was $110,100 for the three-month period; in 1Q 2008, it was $177,000 for a decrease of 38 percent.
Continuing low mortgage rates remain another favorable influence on the housing sector. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 5.06 percent in 1Q 2009; one year earlier, it averaged 5.88 percent.
© 2009 FLORIDA ASSOCIATION OF REALTORS
ORLANDO, Fla. – May 12, 2009 – Sales of existing single-family homes in Florida rose 25 percent in first quarter 2009 compared to the same period a year earlier, according to the latest housing statistics from the Florida Association of Realtors® (FAR). A total of 31,412 existing homes sold statewide in 1Q 2009; during the same period the year before, a total of 25,071 existing homes sold. It marks the third consecutive quarter that Florida has reported higher existing home sales; sales levels in the third and fourth quarters of 2008 were higher than the corresponding three-month period of the previous year, according to FAR.
Sales of existing condominiums statewide in the first quarter rose 19 percent compared to the same time the previous year. This marks the second three-month period for increased statewide sales in both the existing home and condo markets compared to year-ago levels.
Statewide sales activity in 1Q 2009 also increased over 4Q 2008’s sales figure in both the existing home and existing condo markets, FAR records show. For 1Q 2009, statewide sales of existing homes rose 4.14 percent over the 4Q 2008 figure; existing condo sales statewide in 1Q 2009 increased 21.1 percent over the 4Q 2008 level.
“Many first-time homebuyers are entering the market now to take advantage of current low mortgage rates, plentiful housing inventory and affordable homeownership opportunities,” says 2009 FAR President Cynthia Shelton, CCIM (Certified Commercial Investment Member). “Typical homebuyers are realizing that now is the time to buy – they can find the Florida home of their dreams at a cost they can afford. Homeownership has always offered a wide range of benefits, including building financial security and increasing a sense of community, but the advantages offered in today’s market are unique.
”One such advantage is a dream come true for first-time homebuyers in Florida, she adds, thanks to a new program that the 2009 Florida Legislature approved through the adoption of the state’s general budget last week. Lawmakers passed a provision setting aside $30.1 million for the Florida Homebuyer Opportunity Program, which will help with downpayment assistance. Beginning July 1, those who qualify for the federal $8,000 first-time homebuyers tax credit will be able to apply for downpayment assistance before they close on the purchase of their home, and then repay the amount borrowed when they get their tax refund.
Shelton adds, “The beauty of this program is that the state will be paid back and, conceivably, more potential homebuyers could take advantage before the Dec. 1, 2009, expiration of the $8,000 federal first time homebuyer tax credit. While details of the program are still being worked out, we are all very excited about the incredible opportunity this offers for thousands of Florida families. It’s $8,000 more reasons to buy your first Florida home!”
Fifteen of Florida’s metropolitan statistical areas (MSAs) reported increased sales of existing homes in the first quarter compared to the same three-month-period a year earlier, while 12 MSAs showed gains in condo sales.
The statewide existing-home median sales price was $141,000 in the first quarter; a year earlier, it was $202,300 for a decrease of 30 percent. According to industry analysts with the National Association of Realtors® (NAR), there remains a significant downward distortion in the current median price due to many discounted sales, including a large number of foreclosures. The median is a typical market price where half the homes sold for more, half for less.
In the year-to-year quarterly comparison for condo sales, 10,143 units sold statewide for the quarter compared to 8,554 in 1Q 2008 for a 19 percent increase. The statewide existing-condo median sales price was $110,100 for the three-month period; in 1Q 2008, it was $177,000 for a decrease of 38 percent.
Continuing low mortgage rates remain another favorable influence on the housing sector. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 5.06 percent in 1Q 2009; one year earlier, it averaged 5.88 percent.
© 2009 FLORIDA ASSOCIATION OF REALTORS
Foreclosures: "April was a shocker"
Foreclosures: 'April was a shocker'
A record number of foreclosure filings took place during April, but the number of repossessions fell 11%.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 13, 2009: 8:04 AM ET
NEW YORK (CNNMoney.com) -- Foreclosures in April exceeded even March's blistering pace with a record 342,000 homes receiving notices of default, auction notices or undergoing bank repossessions, according to a regular industry report.
One of every 374 U.S. homes received a filing during the month, the highest monthly rate that RealtyTrac, an online marketer of foreclosed properties, has recorded in four-plus years of record keeping.
"April was a shocker," said Rick Sharga, a spokesman for RealtyTrac. "I would have bet on a dip because March foreclosures were so high.
Instead, filings inched up 1% from March and rose 32% compared with April 2008.
There were 63,900 bank repossessions, the last stop in the foreclosure process. More than 1.3 million homes have now been lost to foreclosure since the market meltdown began in August 2007.
The increasing foreclosures will force RealtyTrac to rethink its forecasts, according to Sharga. "We had been predicting 3.4 million filings for the year," he said, "but we'll blow those numbers out of the water."
The lion's share of April's filings were ones in the early stages of the process, such as notices of default, according to James Saccacio, RealtyTrac's CEO. Bank repossessions actually fell 11% for the month, compared with March. That's due, according to Saccacio, to the many legislative and company moratoriums that have prevented the foreclosure process from starting on delinquent loans. Because fewer loans entered the process in past months, there had been fewer getting all the way to repossession. But now that those moratoriums are over, the volume of foreclosure filings is increasing. "It's likely that we'll see a corresponding spike in [repossessed properties] as these loans move through the foreclosure process over the next few months," Saccacio said in a prepared statement.
Ten states accounted for 75% of all foreclosure activity, and they fell generally into two categories: one-time bubble markets and the rust belt. California, which easily outpaced every other state with with 96,560 filings. Other hard-hit former boom towns were Florida, Nevada and Arizona. Those rust belts towns with the most filings were Illinois, Ohio and Michigan. Georgia, Texas and Virginia filled out the rest of the top 10 list.
Nevada, with one filing for every 68 households had the highest foreclosure rate in the land. Florida, with one for every 135 households ranked second; and California, with one for every 138, was third. Las Vegas continued to be the worst-hit metro area. It had more than 14,000 filings in April, one for every 56 households and 20% more than in March.
The Cape Coral-Fort Myers, Fla., area was second with one in 57, a 31% month-over-month rise. Merced, Calif., where home prices have plunged almost two-thirds from their peak, had the third-highest rate. Five other California metro areas ranked in the top 10: Modesto was fourth, Riverside-San Bernardino fifth, Bakersfield sixth, Vallejo seventh and Stockton eighth. Miami and Orlando rounded out the list.
Raised expectations - Not helping, of course, is the steady erosion of home prices. The National Association of Realtors reported record home price losses Tuesday.
"[The home price decline] will lead to more foreclosures," said Mike Larson, a real estate analyst for Weiss Research.
The loss of home values put many more mortgage borrowers underwater, meaning they owe more on their loans than their homes are worth. That increases foreclosure rates in two ways: Underwater borrowers have no home equity to draw on should to pay for unexpected expenses such as big medical bills or major car or home repairs. That's makes them more likely to miss payments. And when home values fall far below mortgage balances, homeowners often walk away from their loans.
"There has been much more 'deed-in-lieu-of foreclosure' activity lately," said Sharga. This is a transaction in which borrowers simply tell their banks that they're not going to pay their mortgage and hand back their keys, and deeds, to their lenders.
"People are making the rational financial decision to walk away from underwater homes," he said.
re-posted by : Joe Sloboda
First Published: May 13, 2009: 4:35 AM ET
A record number of foreclosure filings took place during April, but the number of repossessions fell 11%.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 13, 2009: 8:04 AM ET
NEW YORK (CNNMoney.com) -- Foreclosures in April exceeded even March's blistering pace with a record 342,000 homes receiving notices of default, auction notices or undergoing bank repossessions, according to a regular industry report.
One of every 374 U.S. homes received a filing during the month, the highest monthly rate that RealtyTrac, an online marketer of foreclosed properties, has recorded in four-plus years of record keeping.
"April was a shocker," said Rick Sharga, a spokesman for RealtyTrac. "I would have bet on a dip because March foreclosures were so high.
Instead, filings inched up 1% from March and rose 32% compared with April 2008.
There were 63,900 bank repossessions, the last stop in the foreclosure process. More than 1.3 million homes have now been lost to foreclosure since the market meltdown began in August 2007.
The increasing foreclosures will force RealtyTrac to rethink its forecasts, according to Sharga. "We had been predicting 3.4 million filings for the year," he said, "but we'll blow those numbers out of the water."
The lion's share of April's filings were ones in the early stages of the process, such as notices of default, according to James Saccacio, RealtyTrac's CEO. Bank repossessions actually fell 11% for the month, compared with March. That's due, according to Saccacio, to the many legislative and company moratoriums that have prevented the foreclosure process from starting on delinquent loans. Because fewer loans entered the process in past months, there had been fewer getting all the way to repossession. But now that those moratoriums are over, the volume of foreclosure filings is increasing. "It's likely that we'll see a corresponding spike in [repossessed properties] as these loans move through the foreclosure process over the next few months," Saccacio said in a prepared statement.
Ten states accounted for 75% of all foreclosure activity, and they fell generally into two categories: one-time bubble markets and the rust belt. California, which easily outpaced every other state with with 96,560 filings. Other hard-hit former boom towns were Florida, Nevada and Arizona. Those rust belts towns with the most filings were Illinois, Ohio and Michigan. Georgia, Texas and Virginia filled out the rest of the top 10 list.
Nevada, with one filing for every 68 households had the highest foreclosure rate in the land. Florida, with one for every 135 households ranked second; and California, with one for every 138, was third. Las Vegas continued to be the worst-hit metro area. It had more than 14,000 filings in April, one for every 56 households and 20% more than in March.
The Cape Coral-Fort Myers, Fla., area was second with one in 57, a 31% month-over-month rise. Merced, Calif., where home prices have plunged almost two-thirds from their peak, had the third-highest rate. Five other California metro areas ranked in the top 10: Modesto was fourth, Riverside-San Bernardino fifth, Bakersfield sixth, Vallejo seventh and Stockton eighth. Miami and Orlando rounded out the list.
Raised expectations - Not helping, of course, is the steady erosion of home prices. The National Association of Realtors reported record home price losses Tuesday.
"[The home price decline] will lead to more foreclosures," said Mike Larson, a real estate analyst for Weiss Research.
The loss of home values put many more mortgage borrowers underwater, meaning they owe more on their loans than their homes are worth. That increases foreclosure rates in two ways: Underwater borrowers have no home equity to draw on should to pay for unexpected expenses such as big medical bills or major car or home repairs. That's makes them more likely to miss payments. And when home values fall far below mortgage balances, homeowners often walk away from their loans.
"There has been much more 'deed-in-lieu-of foreclosure' activity lately," said Sharga. This is a transaction in which borrowers simply tell their banks that they're not going to pay their mortgage and hand back their keys, and deeds, to their lenders.
"People are making the rational financial decision to walk away from underwater homes," he said.
re-posted by : Joe Sloboda
First Published: May 13, 2009: 4:35 AM ET
Tuesday, May 12, 2009
Home prices slide by 14%
Home prices slide 14%
National median home price falls a record 13.8% in first quarter of 2009, primarily because the market is flooded with lower-priced foreclosures and short sales.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 12, 2009: 10:05 AM ET
NEW YORK (CNNMoney.com) -- The steep slide in home price accelerated at a record pace during the first three months of 2009, according to an industry report issued Tuesday.
The national median home price of single family homes sold during the first quarter fell 13.8% to $169,000 year over year, and 6.2% compared with the last quarter 2008, according to the National Association of Realtors (NAR). That was the largest year-over-year decline in the 30-year history of the report.
NAR attributed much of the loss to two factors: First-time homebuyers, who are often entry-level buyers, accounted for about half of all purchases during the quarter. And many buyers took advantage of the deeply discounted prices of foreclosed properties and short sales. These "distressed properties" typically sell for 20% less than traditional homes, according to NAR. These homes also accounted for about half of all transactions.
"Traditional homes in good condition have held their value much better, so owners shouldn't be overly concerned about median prices," said NAR president Charles McMillan, in a prepared statement.
Sales volume was weak as well. Homes sold at a 4.59 million annualized rate during the quarter, off 3.2% from the last three months of 2008 and down 6.8% from first quarter 2008.
NAR's chief economist, Lawrence Yun, characterized it as a lull before an upturn. "Housing affordability conditions are at record high levels, " he said, "and we expect a measurable increase in home sales during the second half of the year, which would help stabilize prices in most areas."
First Published: May 12, 2009: 10:00 AM ET
National median home price falls a record 13.8% in first quarter of 2009, primarily because the market is flooded with lower-priced foreclosures and short sales.
By Les Christie, CNNMoney.com staff writer
Last Updated: May 12, 2009: 10:05 AM ET
NEW YORK (CNNMoney.com) -- The steep slide in home price accelerated at a record pace during the first three months of 2009, according to an industry report issued Tuesday.
The national median home price of single family homes sold during the first quarter fell 13.8% to $169,000 year over year, and 6.2% compared with the last quarter 2008, according to the National Association of Realtors (NAR). That was the largest year-over-year decline in the 30-year history of the report.
NAR attributed much of the loss to two factors: First-time homebuyers, who are often entry-level buyers, accounted for about half of all purchases during the quarter. And many buyers took advantage of the deeply discounted prices of foreclosed properties and short sales. These "distressed properties" typically sell for 20% less than traditional homes, according to NAR. These homes also accounted for about half of all transactions.
"Traditional homes in good condition have held their value much better, so owners shouldn't be overly concerned about median prices," said NAR president Charles McMillan, in a prepared statement.
Sales volume was weak as well. Homes sold at a 4.59 million annualized rate during the quarter, off 3.2% from the last three months of 2008 and down 6.8% from first quarter 2008.
NAR's chief economist, Lawrence Yun, characterized it as a lull before an upturn. "Housing affordability conditions are at record high levels, " he said, "and we expect a measurable increase in home sales during the second half of the year, which would help stabilize prices in most areas."
First Published: May 12, 2009: 10:00 AM ET
Wednesday, May 6, 2009
More than one in five homeowners underwater
NEW YORK, May 6 (Reuters) - Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said on Wednesday.
U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.
U.S. homes lost $704 billion in value during the first quarter and have depreciated $3.8 trillion in the past 12 months, according to analysis of the reports.
Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.
By comparison, 17.6 percent of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and 14.3 percent were underwater in the third quarter of last year, the reports showed.
Nine consecutive quarters of declines have left eight regions -- including the Modesto, California, Stockton, California, and Fort Myers, Florida regions -- with median value declines of more than 50 percent since those markets peaked.
In 85 of the 161 markets covered in the report, the annualized change over the past five years is negative or flat, the reports showed.
But in an early sign of improvement, 17 metropolitan areas across the country -- notably several hard-hit markets in California, including Los Angeles, San Diego and Modesto -- have seen two or more consecutive quarters of smaller year-over-year declines in home values, the reports showed.
Meanwhile, potential sellers appear to be holding back until evidence of an improved housing market. In a separate survey of homeowner sentiment, nearly one-third, or 31 percent, of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market, the reports showed.
"Slowing declines in select markets are a bright spot or, at least, what passes for one given current market conditions," Dr. Stan Humphries, Zillow vice president of data and analytics, said in a statement.
"Unfortunately, given the magnitude of the current rates of decline, we're still many months away from a bottom even as depreciation slows," he said. "Moreover, the additional information we have this quarter on 'shadow inventory,' with one-third of homeowners indicating they would like to put their home on the market if conditions improve, confirms our earlier fears that a bottom in home values could be quite protracted."
"By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat. I'm doubtful that we'll see the bottom until 2010, and thereafter it's increasingly clear that we're likely to have a long bottom before we see meaningful recovery in home values," Humphries said.
Of all transactions is the past 12 months, 20.4 percent were foreclosures, up slightly from 19.9 percent in the fourth quarter, while 11.9 percent of homes sold were short sales, also up slightly from 10.9 percent in the fourth quarter, the reports showed
re-posted by : Joseph Sloboda
U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.
U.S. homes lost $704 billion in value during the first quarter and have depreciated $3.8 trillion in the past 12 months, according to analysis of the reports.
Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.
By comparison, 17.6 percent of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and 14.3 percent were underwater in the third quarter of last year, the reports showed.
Nine consecutive quarters of declines have left eight regions -- including the Modesto, California, Stockton, California, and Fort Myers, Florida regions -- with median value declines of more than 50 percent since those markets peaked.
In 85 of the 161 markets covered in the report, the annualized change over the past five years is negative or flat, the reports showed.
But in an early sign of improvement, 17 metropolitan areas across the country -- notably several hard-hit markets in California, including Los Angeles, San Diego and Modesto -- have seen two or more consecutive quarters of smaller year-over-year declines in home values, the reports showed.
Meanwhile, potential sellers appear to be holding back until evidence of an improved housing market. In a separate survey of homeowner sentiment, nearly one-third, or 31 percent, of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market, the reports showed.
"Slowing declines in select markets are a bright spot or, at least, what passes for one given current market conditions," Dr. Stan Humphries, Zillow vice president of data and analytics, said in a statement.
"Unfortunately, given the magnitude of the current rates of decline, we're still many months away from a bottom even as depreciation slows," he said. "Moreover, the additional information we have this quarter on 'shadow inventory,' with one-third of homeowners indicating they would like to put their home on the market if conditions improve, confirms our earlier fears that a bottom in home values could be quite protracted."
"By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat. I'm doubtful that we'll see the bottom until 2010, and thereafter it's increasingly clear that we're likely to have a long bottom before we see meaningful recovery in home values," Humphries said.
Of all transactions is the past 12 months, 20.4 percent were foreclosures, up slightly from 19.9 percent in the fourth quarter, while 11.9 percent of homes sold were short sales, also up slightly from 10.9 percent in the fourth quarter, the reports showed
re-posted by : Joseph Sloboda
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