Los Angeles Homes

Negative equity traps one third of American borrowers

2012-03-02T12:54:00.002-08:00

U.S. Housing stepping towards recovery

After several false starts, housing is flashing the strongest
signals yet of a sustainable rebound. While foreclosures continue
to depress prices, buyers are wading back into the market, lured
by rising employment and record-low mortgage rates. Six years
into the biggest real estate collapse since the Great Depression,
housing may become a net contributor to the U.S. economy for the
first time since 2005. “There are definitely green shoots in
the housing market, no argument about that,” said Peter de
Bruin, an economist at ABN Amro Group Economics in Amsterdam.
Speculation that new home sales will rebound has boosted shares
of homebuilders, with the 11-member Standard & Poor (SPY)’s
1500 Homebuilding index up 17 percent this year, compared with a
9.3 percent gain for the Standard & Poor’s 500 Index.

Apply stimulus vigorously: Fed Williams

Recent signs of improvement in the U.S. economy are encouraging
but the rebound has been anemic and the Federal Reserve must
"keep applying monetary policy stimulus vigorously," San
Francisco Federal Reserve President John Williams said on
Thursday. Despite a recent drop in the unemployment rate to 8.3
percent, Williams said he expected it to remain above 8 percent
into next year and to be "well over" 7 percent for several years
to come. Strained household finances, a weak housing market and
tight credit conditions are likely to hold down spending growth
for some time, he added. The economy should grow about 2.25
percent this year and 2.75 percent in 2013, he said, adding the
main threat to his forecast was the debt crisis in Europe. The
San Francisco Fed chief is known as a monetary policy "dove" who
is more concerned with the threat of high joblessness than high
inflation.

Olick - Negative equity traps one third of American borrowers

As home sales begin a slow recovery and potential buyers dip
their toes back in real estate's still-troubled waters, many of
them face a huge barrier to entry: Negative equity, that is,
borrowers who owe more on their mortgages than their homes are
currently worth. One point 1 million, or 22.8 percent, of all
residential properties with a mortgage were in negative equity at
the end of the fourth quarter of 2011, according to a new report
from CoreLogic. Combine negative equity and near-negative equity,
and about one third of all borrowers cannot sell their homes
without either putting up some cash to pay off the mortgage or
the closing costs or without the bank agreeing to a short sale.
That's when the home is sold for less than the value of the
mortgage. The prime culprit in rising negative equity is falling
home prices, and home prices are falling because distressed
property sales are rising. Sales of properties in some stage of
foreclosure made up a full 24 percent of all home sales in Q4, up
from 20 percent in Q3, according to RealtyTrac. As previously
noted, home sales are rising, but largely on the backs of
investors buying distressed, low-end properties. With one third
of borrowers stuck in their underwater homes, there is unlikely
to be much movement at all this spring in the move-up market.

Economy awaits liftoff

A flurry of economic reports issued Thursday captured some solid
recent gains in the U.S. economy. But Thursday’s reports also
showed that a healthier job market hasn’t translated into
bigger paychecks for workers or a surge in consumer spending. And
the progress of the past few months is now threatened by a rise
in gasoline prices. “When you get this sort of hodgepodge and
not-so-good results, you start to see the true nature of this
recovery,” said Sean Snaith, director of the University of
Central Florida’s Institute for Economic Competitiveness. A
healthier job market hasn’t produced bigger paychecks or a
surge in consumer spending. The housing market is still weak. A
European recession threatens to hold back U.S. growth. The
economy grew at a 3 percent annual rate at the end of last year.
“It’s a very subpar recovery,” said Beth Ann Bovino, senior
economist at Standard & Poor’s. “Historically, after a
recession ends, we would see 5 percent growth."

Government foreclosure to rental pilot programs not needed

Housing markets are complex and varied, and a government pilot
program to turn bank-owned properties into rentals could be
disruptive and counter productive in some markets, according to
the National Association of Realtors. NAR urges the Federal
Housing Finance Agency (FHFA) to proceed cautiously with its Real
Estate-Owned (REO) Initiative pilot program to sell homes
repossessed by government agencies to private investors to
convert into rental units. According to a recent NAR analysis,
while the overall visible inventory of foreclosures has been
trending down across the country, there is a noticeable
difference in foreclosure inventories in states that require
judicial proceedings to foreclose on a property versus
inventories in states that do not require the court’s
intervention. NAR urges that a national advisory board be created
to ensure that current and future REO-to-rental pilot programs
truly benefit the local community, minimize taxpayer losses and
stabilize home values, and suggests substantial participation of
local market experts, especially licensed real estate
professionals, who have unparalleled knowledge of local market
conditions.

Fannie REO inventory declines 27% in 2011

For the first time since the collapse, Fannie sold more REO than
it repossessed. In 2011, the government-sponsored enterprise
acquired nearly 200,000 properties and sold more than 243,000,
the most in the company's history. Total repossessions of REO
homes declined nearly 24% from the year before, due mostly to the
slowdown caused by servicers correcting affidavit and other
documentation problems. The Federal Housing Finance Agency began
a pilot program in February to more efficiently sell bulk REO
held by Fannie and Freddie Mac to investors. About 23% of Fannie
Mae's REO inventory is located in California followed by 11.5% in
Florida. According to the filing, the average amount of days
between the last mortgage payment and the completion of the
foreclosure process was 890 days in Florida on Fannie Mae loans.
California, a nonjudicial state, was second at 529 days.

DSnews.com - Rise in Underwater Homes

Negative equity homes known as underwater homes shot up to 22.8
percent, during the fourth quarter of 2011, according to
CoreLogic. Third quarter numbers showed 10.7 million properties
to be in negative equity, or 22.1 percent. Borrowers with less
than 5 percent equity in their homes, also known as near-negative
equity, stood at 2.5 million for the fourth quarter. In total,
those with negative equity and near-negative equity equaled 27.8
percent of all residential properties. Nationally, the total
mortgage debt outstanding on underwater properties stood at $2.8
trillion in the fourth quarter, compared to $2.7 trillion in the
previous quarter. The states with the highest level of negative
equity were Nevada (61 percent), Arizona (48 percent), Florida
(44 percent), Michigan (35 percent) and Georgia (33 percent).
These five states had a combined average 44.3 percent of the
share of negative equity, whereas the remaining states have a
combined average negative equity share of 15.3 percent. CoreLogic
included 48 million properties with a mortgage, which accounts
for over 85 percent of all mortgages in the U.S., when putting
together the report.

Short sales rising - 24% of Q4 2011 sales were foreclosures

2012-03-01T23:08:00.002-08:00

Short sales rising - 24% of Q4 2011 sales were foreclosures

During the three months that ended December 31, homes that were
either bank-owned or going through the foreclosure process
accounted for 24% of all home sales, up from 20% in the previous
quarter and down only slightly from a year earlier when
foreclosures accounted for 26% of sales, RealtyTrac said. In
total, 204,080 distressed properties were purchased during the
fourth quarter, down 2% from the year-ago quarter. For all of
2011, foreclosure-related sales were down 2% year-over year to
907,138, accounting for 23% of all home sales. "Sales of
foreclosures in the fourth quarter continued to be slowed by
questions surrounding proper foreclosure paperwork and
procedures," said Brandon Moore, chief executive officer of
RealtyTrac, referring to the delays cause by the robo-signing
scandal that broke in late 2010. "Even so, foreclosures accounted
for nearly one in every four sales during the quarter and for the
entire year." "We expect to see foreclosure-related sales
increase in 2012, particularly pre-foreclosure sales, as lenders
start to more aggressively dispose of distressed assets held up
by the mortgage servicing gridlock over the past 18 months," said
Brandon Moore, CEO of RealtyTrac.

Short sales are starting to become the preferred method for banks
to dispose of properties in default. In short sales, borrowers
who owe more on their mortgages than their homes are worth agree
with their bank to sell their homes at the lower market value. In
return, the bank agrees to absorb the loss. During the last
quarter of 2011, there were more than 88,000 short sales, up 15%
compared with a year earlier, according to RealtyTrac. Short
sales comprised 10% of all homes sold during the quarter.
Meanwhile, sales of bank-owned homes fell 12% year-over-year to
116,000, comprising 13% of all sales during the quarter. "That
trend will likely show up in more local markets in 2012 as
lenders recognize short sales as a better option for many of
their non-performing loans," said Moore. Short sales have become
a more attractive option since all parties agree on the terms,
leading to fewer legal issues, said Daren Blomquist, RealtyTrac's
director of marketing. They also offer better returns. During
the quarter, the average short sale sold for $184,221, while the
average foreclosure sold for $149,686. And banks typically don't
have to spend a mint maintaining a short sale home like they do a
foreclosure, where they have to pay more in legal fees, property
taxes, maintenance and insurance, said Blomquist.

Short sale deals also get completed more quickly. During the
fourth quarter, it took an average of 308 days, to complete a
short sale. Foreclosures, meanwhile, can take years to complete.
Quicker approvals mean fewer buyers get discouraged and withdraw
their offers. Blomquist said some banks even pre-approve prices
so deals close very fast. Short sales already outnumber REO
sales in several "bellwether markets," including Los Angeles and
Phoenix, where, in both cities, they exceeded 20% of all sales.
Some lenders have even incentivized short sales in Florida and
other hard-hit foreclosure states. They offer large cash rewards
-- as much as $35,000 -- to delinquent borrowers in return for
co-operating on these transactions. Distressed properties
continue to make up a large portion of the sales inventory in
many housing markets. In Nevada, they accounted for 56% of all
sales during the quarter, the highest percentage of any state.
California foreclosure-related sales claimed a 43% share, Georgia
39%, Arizona 38% and Michigan 33%.

Jobless claims steady

Initial claims for state unemployment benefits fell 2,000 to a
seasonally adjusted 351,000, the Labor Department said. The prior
week's figure was revised up to 353,000 from the previously
reported 351,000. Claims have been hovering near four-year lows
over the last few weeks. Economists polled by Reuters had
forecast claims unchanged at 351,000 last week. The four-week
moving average for new claims, considered a better measure of
labor market trends, dropped 5,500 to 354,000 — the lowest
level since March 2008. New applications for jobless benefits
have declined through much of February, raising hopes for a third
straight month of solid employment gains. Nonfarm employment
likely increased 200,000 last month, according to a Reuters
survey, after rising 243,000 in January. The unemployment rate is
seen holding at a three-year low of 8.3% in February. The
government will release February's employment report on March 9.
While the labor market is gaining momentum, the level of
employment is still 5.82 million from its prerecession level.

Olick - foreclosures ramp up

"Despite huge delays in foreclosure processing last year,
following the so-called 'robo-signing' paperwork scandal, sales
of foreclosed properties still managed to account for nearly one
in four home sales in the fourth quarter of 2011, up from one in
five in the previous quarter. In all of 2011, just over 907,000
homes in the foreclosure process or repossessed by lenders were
sold to third parties, according to a new report by RealtyTrac.
'We expect to see foreclosure-related sales increase in 2012,
particularly pre-foreclosure sales, as lenders start to more
aggressively dispose of distressed assets held up by the mortgage
servicing gridlock over the past 18 months,' said RealtyTrac CEO
Brandon Moore in a press release.

A pilot program by the regulator of Fannie Mae and Freddie Mac to
sell 2500 foreclosures on their books in bulk to investors
already has investors rushing to get in. Investor interest has
already been heating up lately, with some Realtors reporting
bidding wars in parts of California and Nevada, where supply fell
due to bank delays. But it's not just bank-owned (REO)
properties. 'We continued to see a shift toward pre-foreclosure
sales, or short sales, and away from REO sales in the fourth
quarter,' Moore continued. 'Nationally, pre-foreclosure sales
increased 15% from a year ago while REO sales decreased 12%.
Pre-foreclosure sales outnumbered REO sales in several bellwether
markets, including Los Angeles, Miami and Phoenix, where REO
sales had outnumbered pre-foreclosure sales a year ago.'

New streamlined programs and government incentives are helping,
as lenders begin to see short sales (selling the home for less
than the value of the mortgage) as a less costly alternative to
foreclosure. While pre-foreclosure sales are up overall, they are
way up in some of the hardest hit states, like Michigan (up
103%), Georgia (up 59%) and Arizona (up 48%). The average price
of a pre-foreclosure home in the fourth quarter of 2011 was 21%
below that of a non-foreclosure home, according to RealtyTrac.
The average discount on an REO property (foreclosure sale) was
36%. Foreclosures, however, still take about half as long to
sell, as the short sale process is lengthy at an average 318 days
to complete. California, Florida, Arizona and Nevada accounted
for more than half of all distressed sales in 2011, but their
numbers are coming down, while other states like Georgia,
Minnesota and Washington are seeing those sales increase. There
is also a huge discrepancy between states that require a judge in
the foreclosure process and states that do not. Judicial states,
like New Jersey, are still seeing huge backlogs due to the
robo-signing scandal, even as banks reached a $26 billion
settlement with state and federal governments. It takes more than
900 days on average to foreclose on a New Jersey home.

As banks now work more quickly through more than 4 million
delinquent loans and 2 million more in the foreclosure process,
foreclosure sales are likely to increase through 2012. While the
government is offering new incentives for banks to modify loans,
many mortgages simply can't be saved. Home prices continue to
fall nationally, putting more borrowers in a negative equity
position, and thereby at a higher risk of default. While the
economy is slowly improving, and jobs are coming back, analysts
say it's not enough to save the bulk of loans that are already in
trouble."

Economy "far from normal"

Federal Reserve Chairman Ben Bernanke on Wednesday offered a
tempered view of the US economy, pouring cold water on the notion
that recent upbeat signs herald a stronger recovery. Bernanke
told Congress that unless growth accelerated, the unacceptably
high US unemployment rate would not keep dropping. But he stopped
short of signaling further Fed bond buying, dashing the hopes of
some traders in financial markets who were betting on more
monetary stimulus. "The job market is far from normal," Bernanke
said. "Continued improvement ... is likely to require stronger
growth in final demand and production."

The swift decline in the US unemployment rate in recent months,
to a three-year low of 8.3% in January from 9.1% in August, has
surprised economists both within and outside the Fed, given the
economy's relatively soft performance. "The decline in the
unemployment rate over the past year has been somewhat more rapid
than might have been expected, given that the economy appears to
have been growing during that time frame at or below its
longer-term trend," Bernanke told the House of Representatives
Financial Services Committee. While the tenor of Bernanke's
remarks was dovish, the lack of a direct allusion to the
possibility of a third round of so-called quantitative easing
undercut prices for US stocks and government bonds, and hit gold
prices hard. Gold slumped more than 4%, the biggest one-day drop
this year. "Bernanke implied that the Fed was no closer to QE3
... Investors were disappointed," said Cary Leahey of Decision
Economics in New York.

Florida foreclosure streamlining closer to reality

Fourteen Democrats joined 80 Republicans in the Florida House of
Representatives on Wednesday to pass a bill aimed at streamlining
the foreclosure process. The 94-17 bipartisan vote comes after
two months of protests from a committed group of activists, many
of them foreclosure defendants who say the bill limits their
ability to defend their cases. For the bill to become law, the
Senate must pass its version by the end of session, March 9.
Supporters say the bill is necessary to put abandoned homes back
on the market and to speed up home foreclosures, which take
nearly two years on average to grind through the courts in
Florida. They propose cutting the number of court hearings from
two to one and allowing any lien holder, including homeowners'
associations, to initiate the process. It also outlines steps for
determining if a house or condo unit is vacant, clearing the path
for a lender to foreclose. Several Democrats said Rep. Kathleen
Passidomo, R-Naples, convinced them her bill actually protects
consumers. The passage was a major success for the first-term
Republican. Passidomo worked to reduce the statute of
limitations on deficiency judgments from the current five years
to one. A deficiency judgment seeks payment from a borrower for
the outstanding mortgage balance over the value of the home.

Europe is a drag on the global economy

Prospects for a strong recovery in the global economy darkened
today as sputtering factory activity in Europe overshadowed more
upbeat data from Asia, at a time when central banks are running
out of policy options and reluctant to do more. Factory activity
across Europe at best stagnated, and in Spain and Greece it
contracted sharply, according to the latest purchasing managers'
indexes. Similar reports showed China and India growing, but at a
more modest pace than in the recent past. The data comes just a
day after the European Central Bank pumped 530 billion euros of
cash into the banking system, likely its last such salvo in a
battle to bring down yields on government bond and stave off
recession. But despite another bailout for Greece and success in
lowering borrowing costs -- Spain sold 4.5 billion of government
bonds on Thursday at lower yields than previous sales -- Europe
is still casting a dark shadow over the world economy.

What is most troublesome is that several countries in the euro
zone periphery such as Greece, Spain, and to a lesser extent
Italy, are in recession, while the strongest economies - Germany
and France - are barely growing. Markit's Eurozone Manufacturing
Purchasing Managers' Index (PMI) rose to 49.0 last month from
January's 48.8, in line with a flash reading. But it has now been
below the 50 mark that divides growth from contraction since
July. It now looks all but certain the 17-member euro zone is
stuck in a mild recession. Even Germany, a top world exporter of
manufactured goods, is struggling. A Reuters poll suggested the
euro zone will remain in a mild recession until the second half
of this year.

Greece's factories are in freefall and its economic data point to
depression rather than recession. Its ailing factory sector
shrank at the fastest pace in at least 13 years just as the
country is set to be hit by another wave of austerity cuts in
return for the latest bailout cash. And in Spain, where the
government is struggling to slash its public deficit, factories
shed jobs at the fastest rate in more than two years, worsening
employment prospects in a country where already more than
one-in-five is out of work. Unemployment in the bloc rose to a
euro-era high of 10.7% in January, official data showed earlier
on Thursday. The picture was slightly better in Britain. But its
manufacturing sector grew at a slower pace than expected in
February, further evidence that the economy is vulnerable,
particularly to any more trouble in the euro zone, its main
trading partner. Yet like the ECB, which looks set to leave
policy on hold, Bank of England Governor Mervyn King indicated on
Wednesday that more stimulus in the form of additional government
bond purchases was no certainty.

$4.9 billion new mortgage business in January

Private mortgage insurers represented by the Mortgage Insurance
Companies of America wrote $4.9 billion in new business in
January, down 23% from $6.4 billion the same month a year ago.
In December, MICA wrote $5.8 billion in new business. MICA
reported its member companies - including Genworth, Mortgage
Guaranty Insurance Corp., Radian Guaranty and Republic Mortgage
Insurance Co. - had $399 billion in primary insurance in force in
January. That is down 47% from nearly $748 billion in January
2011. Many members of the organization recently posted increased
earnings in 2011. Radian earned $302.2 million in 2011, up from
a loss of $1.8 billion a year earlier. The company said the
credit quality on insured loans improved in the fourth quarter.

Genworth reported income of $107 million in the fourth quarter,
compared to a net loss of $161 million in the same period in
2010, driven in part by mortgage insurance results. Defaults
outpaced loan cures in January with MICA reporting that insurers
under its umbrella had 29,348 loan defaults insured by the
industry, down 55% from 64,687 the same month a year ago. The
organization reported 23,728 cures, down 53% from 50,820 a year
ago. About 21,904 borrowers used private mortgage insurance to
buy or refinance a home, holding steady after January's total of
21,896. Member companies received 24,097 applications, inching
down from 25,789 applications the same month a year ago.

MBA - mortgage application down

2012-02-29T13:09:00.002-08:00

MBA - mortgage application down

Mortgage applications decreased 0.3% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending February
24, 2012. This week’s results are adjusted for the Presidents
Day holiday. The Market Composite Index, a measure of mortgage
loan application volume, decreased 0.3% on a seasonally adjusted
basis from one week earlier. On an unadjusted basis, the Index
decreased 9.4% compared with the previous week. The Refinance
Index decreased 2.2% from the previous week. The seasonally
adjusted Purchase Index increased 8.2% from one week earlier. The
unadjusted Purchase Index increased 0.9% compared with the
previous week and was 4.3% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market
Index is up 0.33%. The four week moving average is down 0.96%
for the seasonally adjusted Purchase Index, while this average is
up 0.64% for the Refinance Index.

The refinance share of mortgage activity decreased to 77.9% of
total applications from 80.1% the previous week. This is the
lowest refinance share since December 2, 2011, and the first time
the measure has fallen below 80% since December 9, 2011. The
adjustable-rate mortgage (ARM) share of activity decreased to
5.0% from 5.3% of total applications from the previous week.
“Mortgage rates remained near survey lows last week, but
refinance volume fell slightly,” said Michael Fratantoni, Vice
President of Research and Economics at the Mortgage Bankers
Association. Fratantoni continued, “According to survey
participants, more than 20% of refinance applications were for
HARP loans. The HARP share of total refinance applications has
increased over the past month. Purchase application volume
increased over the week, but remains within the narrow and anemic
range of activity we have seen since the expiration of the
homebuyer tax credit in May 2010.” In January 2012, among home
purchase applications, 86.4% were for fixed-rate 30-year loans,
6.5% for 15-year fixed loans and 5.4% for ARMs. The share of
purchase applications for “other” fixed-rate mortgages with
amortization schedules other than 15 and 30-year terms was 1.7%
of all purchase applications. The share of 15-year fixed and ARM
decreased from the previous month while the 30-year fixed and
“other” fixed category shares increased from last month.

Growth up 3%, inflation up

Gross domestic product expanded at a 3% annual rate, the quickest
pace since the second quarter of 2010, the Commerce Department
said in its second estimate. That was a step up from the 2.8%
pace it reported in January. Price indexes also swelled, with
the core personal consumption expenditures (PCE) index jumping
1.3%, against an advanced reading of 1.1%. Economists polled by
Reuters had expected fourth-quarter GDP would be unrevised at a
2.8% pace. The economy grew at a 1.8% pace in the third quarter.
While the rebuilding of inventories added a hefty 1.88 percentage
points to GDP in the last quarter, the pace of accumulation was
not as fast as previously reported. Business inventories
increased $54.3 billion, instead of $56.0 billion. Excluding
inventories, the economy grew at a 1.1% rate, rather than 0.8%.
That was still a sharp step-down from the prior period's 3.2%
pace. Although business overall business spending was revised
up, investment in equipment and software was lowered to a 4.8%
growth rate from 5.2%. Export growth estimates were also
lowered, but weaker imports led to a smaller trade gap.

In addition, consumer spending — which accounts for about 70%
of US economic activity — was a touch firmer than initially
thought. Consumer spending rose at a 2.1% rate instead of 2%.
Even spending on home building was firmer than previously
estimated and investment on nonresidential structures was
modestly weak. So far data ranging from employment to
manufacturing have shown underlying strength in the economy,
reducing the need for the Federal Reserve to ease monetary policy
further by launching a third round of asset purchases or
quantitative easing. But surging gasoline prices, which have
risen 12.6% or 42 cents since the start of the year and averaged
$3.78 a gallon in the week through Monday, are clouding the
outlook. High gasoline prices helped to almost snuff out growth
early last year. However, economists believe the impact on
households this time could be mitigated somewhat by weak costs
for natural gas and a strengthening labor market.

WSJ - Senators for short sales

The best that can be said about the latest Congressional attempt
to heal the housing market is that politicians have at least
diagnosed a real problem: a glut of homes for sale. Like other
proposed top-down fixes, however, the latest Beltway brainstorm
would likely hurt more than help. Republicans Lisa Murkowski and
Scott Brown and Democrat Sherrod Brown want to speed up short
sales, which occur when a lender agrees to let a homeowner pay
off a mortgage by selling a home at a price below the outstanding
loan balance. Their bill—introduced earlier this month—would
force lenders to approve or deny short-sale offers within 75 days
or face a $1,000 fine, plus attorneys' fees. The lender could ask
for an extension only once, for 21 days. Accelerating short
sales isn't a bad idea, in and of itself. Delinquent borrowers
can offload their mortgage and find another home they can afford,
or move to an area that's cheaper. Lenders don't have to endure a
lengthy foreclosure process and risk having the property sit
unoccupied for months, if not years. Borrowers who can afford the
home can snap them up at bargain prices.

But why do the Senators want to interfere in a market that is
working? CoreLogic recorded 293,574 short sales last year, up
from 273,100 in 2010 and 64,813 in 2007. That makes sense:
Lenders want to minimize their losses as best they can and are
working through their portfolio as quickly as possible. Setting
an arbitrary timeline for short sales makes for a good political
talking point, but it might have unintended consequences. Lenders
often have to coordinate with investors and second-lien holders
to approve the deal, which takes time. They also don't want to
rush, make a mistake and expose themselves to litigation for
sloppy paperwork, especially after the recent furor over alleged
"robo-signing" abuses. Fraud is another concern, though it's
hard to get firm estimates on the extent of the problem.

Risk consultancy Interthinx estimates about $1 billion was lost
annually in deals between 2007 and 2010 when buyers resold
property for more than 20% of the original sale value within six
weeks—a red flag for fraud in a market with falling or flat
home prices. Sometimes a broker's low-ball assessment done on a
house is fraudulent; sometimes a broker conceals from the lender
the fact that a willing buyer exists for the house at a higher
price. Big banks like Wells Fargo or Bank of America can devote
resources to fighting this kind of fraud but smaller lenders may
not have the same capabilities. Try as Congress might, there's
no quick fix to the oversupply of homes that's weighing down the
housing market. Increasing the regulatory burden on lenders will
only prolong the pain.

WSJ - home prices hit new lows

Home prices fell to fresh lows in December, but economists say
that a drop in the number of homes listed for sale could help
stabilize prices in parts of the country this year. Home prices
fell by 4% last year, according to the Standard &
Poor's/Case-Shiller index that tracks 20 metro areas. Prices
dropped by 1.1% for the three-month period ending in December
compared with the same period ending in November. That was
slightly better than November's reading, when prices were down
1.3% from October. Tuesday's report is the latest evidence that
the housing market still faces a cloudy outlook after a six-year
downturn. The inventory of homes for sale has contracted,
reducing competition among sellers, according to The Wall Street
Journal's quarterly survey of housing-market conditions in 28
metro areas.

But a large potential backlog of foreclosed properties hangs over
many housing markets. Other headwinds including tight
mortgage-lending standards that show few signs of easing. "These
are times of continued, great uncertainty about home prices,"
said Robert Shiller, the Yale University economist who co-founded
the index that bears his name. "We might be on the verge of a
home recovery, but then, maybe not." Others are becoming
somewhat optimistic. Thomas Lawler, an independent housing
economist in Leesburg, Va., said the S&P/Case-Shiller index
should hit a bottom this spring. He said many analysts have
overlooked positive developments, including a dearth of new
construction and the falling share of homes selling out of
foreclosure. "You don't hear very many people talk about the
actual housing stock, and how slow it's growing," he said, while
conceding that it is "absolutely true that organic demand has yet
to show any material rebound."

Even when prices stop falling, they aren't likely to rise for
years, leaving millions of homeowners stuck in properties worth
less than what they owe. "We're looking at an L-shaped recovery,"
said Stan Humphries, chief economist at real-estate website
Zillow, who predicts another 3.7% decline in home prices for the
coming year. In most of the country, home prices aren't falling
at anywhere near their jaw-dropping pace of 2008. But only two
markets showed an increase in home prices during the fourth
quarter. In Phoenix, home prices were up by 0.8%, while Miami
reported a smaller gain of 0.2%. Detroit was the only city to
post a year-over-year gain, rising by 0.5%. Home prices in
Atlanta, meanwhile, fell by 12.8% last year, while Chicago posted
a 6.5% decline. One surprising development in many housing
markets is that the supply of homes for sale has fallen to a
five-year low. While that normally would be a sign of health,
real-estate agents say a paucity of homes is holding back sales.

At the current sales rate, it would take about four months to
sell the supply of homes on the market in Denver, Washington,
D.C., and Orange County, Calif. That level is lower, at less than
three months, in Phoenix and San Francisco, and has dropped to
just 1.9 months in Sacramento, Calif. But several markets still
face supply-demand imbalances that could keep pressure on prices.
New York's Long Island had a 13-month supply of homes at the end
of the fourth quarter. Nashville and Charlotte, N.C., had a
12-month supply, and northern New Jersey had a nearly 11-month
supply. Those numbers will rise if banks sell more foreclosed
properties as they correct deficient mortgage-handling
practices.

Unemployment for 5 years

The US economic recovery is "frustratingly slow" and it could
take four to five years to ratchet the unemployment rate down to
about 6%, from more than 8% now, a top Federal Reserve official
said yesterday. The recovery is held back by the housing market
and Europe's debt crisis among other headwinds, but monetary
policy is now appropriately positioned to eventually achieve this
"maximum employment" level, said Cleveland Fed President Sandra
Pianalto. "We do not have a good deal of concrete history for
monetary policy to fit our current circumstances, but I am
confident the Federal Reserve is making the most of its tools to
move the economy in the right direction," the Fed official said
at an economic development meeting in Westfield Center, Ohio.
Pianalto, a voter this year on the Fed's policy-setting panel, is
a moderate dove in line with Chairman Ben Bernanke's core of
policymakers who have taken aggressive action to bring down
unemployment, which stands at 8.3% after rising above 9% last
year. The US central bank in late 2008 slashed interest rates to
near zero and has since bought $2.3 trillion in long-term
securities in an unprecedented drive to spur growth and revive
the economy after the worst recession in decades.

Olick - time to buy?

"Nobody wants to catch a falling knife. It is as simple as that.
If potential buyers see continued home price erosion, they will
stay parked on the sidelines. But as with everything else in this
unique and historic housing market, perhaps the usual logic
doesn’t apply. 'Housing is one of the great investments right
now. I tell people all the time when they come up to me, they
say, 'What should I do, Mr. Trump?' I say go buy a house,' said
Donald Trump earlier today on CNBC. 'It wouldn’t be an obvious
mistake to buy a house now,' hedged Robert Shiller, barely a few
hours later. Perhaps they were just jumping off Warren
Buffett’s declaration yesterday that if he had a way to manage
them, he would buy a couple of hundred thousand single family
homes and rent them out. Housing appears to be rated a 'buy'
these days, especially among investors, who see a ripe and rising
rental market and big potential for income. But is it the right
time yet for what I call 'organic' buyers to get in? By this I
mean people buying a home to actually live in it, raise a family
in it, let the dog run around in the back yard. If prices are
still falling, couldn’t an even better deal be waiting down the
road a bit?

No. House prices will continue to fall on a national basis at
least through 2012, but you have to look past national headlines
to your local market, which is likely already recovering nicely.
The trouble with the national numbers is that they are heavily
weighted toward the lower end of the market and to the distressed
end of the market. Around 73% of homes that sold in January were
priced below $250,000, according to the National Association of
Realtors. Forty-seven% of homes sold that same month were
considered 'distressed,' which is either a foreclosure or a short
sale (where the lender allows the borrower to sell for less than
the value of the mortgage). With all the activity in these areas,
no surprise that prices skew lower. The $250,000 to $500,000
price range may now be the sweet spot for the market. Sales in
January were up in this price range, and if you have good credit,
you are within GSE and FHA loan limits in most markets.

While FHA just raised its insurance premiums, which may hurt
much-needed first-time homebuyer demand, it is still one of the
best loan products out there today, especially for those with
lower down payments. You cannot time housing any more than you
can time the stock market. True, housing moves far more slowly,
but that works to its benefit, as prices don’t rise and fall on
daily news or even on major events. Sales have clearly bottomed
in housing, and prices always lag sales. They will lag longer
this time around, no question, but they will come back. Supply
and demand will eventually win out, even after an historic crash.
If you can’t get a good mortgage now, then perhaps it’s not
your time, but if you can, waiting may not buy you much."

US conducts criminal libor probe

The US Justice Department is conducting a criminal probe into
whether the world's biggest banks manipulated a global benchmark
rate that is at the heart of a wide range of loans and
derivatives, from trillions of dollars of mortgages and bonds to
interest rate swaps , a person familiar with the matter said.
While the Justice Department's inquiry into the setting of the
London interbank offered rate, or Libor, was known, the criminal
aspect of the probe was not. A criminal inquiry underscores the
serious nature of a worldwide investigation that includes
regulators and law-enforcement agencies in the United States,
Japan, Canada and the UK. Several major global banks, including
Citigroup, HSBC, Royal Bank of Scotland and UBS, have disclosed
that they have been approached by authorities investigating how
Libor is set. No bank or trader has been criminally charged in
the Libor probes. It wasn't clear which banks or traders the
Justice Department is targeting in its criminal probe.

Fannie loses $2.4 billion, asks for $4.6 billion

Fannie Mae lost $2.4 billion in the fourth quarter and asked the
federal government for another $4.6 billion in bailouts. Fannie
earned a $73 million profit the same period the year before. The
government-sponsored enterprise reported a $16.8 billion loss for
the entire year, widening 20% from the $14 billion in losses in
2010. Fannie paid $2.6 billion in dividends to the Treasury
Department in the fourth quarter. Since entering conservatorship
in 2008, Fannie received $116 billion in bailouts through the end
of 2011 and paid back roughly $19.8 billion. A $6.1 billion
increase in lost net fair value of its assets pushed a poorer
performance in 2011. Significant declines in interest rates over
the year pushed more losses on its risk management derivatives.
Combined with Freddie Mac and Ginnie Mae, the federal government
guaranteed more than 99% of mortgage-backed securities issued
between 2009 and 2011, accounting for more than 85% of all
single-family loans.

Fourth quarter revenues declined 8% to $4.5 billion from the year
before. Revenues for the year actually increased 17% to $20.4
billion. Fannie charged off $4.7 billion in credit losses,
increasing 40% from the same quarter in the prior year. The
higher losses came from a slight increase in foreclosures. The
mortgage giant repossessed more than 47,000 homes in the last
three months of 2011, up from nearly 46,000 one year prior. The
problem loans continue to rise from the books of business
originated between 2005 and 2008. These loans cost Fannie $140
billion since 2009. Its becoming a smaller portion of the entire
portfolio, though, shrinking to 31% at the end of 2011 from 39%
the year before. "Our new single-family book now accounts for
more than half of our overall single-family guaranty book of
business," said Fannie Mae CFO Susan McFarland.

NAR - pending home sales up

2012-02-29T01:11:00.002-08:00

NAR - pending home sales up

Pending home sales are on an upward trend, which has been uneven
but meaningful since reaching a cyclical low last April, and are
well above a year ago, according to the National Association of
Realtors (NAR). The Pending Home Sales Index (PHSI), a
forward-looking indicator based on contract signings, rose 2.0%
to 97.0 in January from a downwardly revised 95.1 in December and
is 8.0% higher than January 2011 when it was 89.8. The data
reflects contracts but not closings. The January index is the
highest since April 2010 when it reached 111.3 as buyers were
rushing to take advantage of the home buyer tax credit. The PHSI
in the Northeast rose 7.6% to 78.2 in January and is 9.8% above a
year ago. In the Midwest the index declined 3.8% to 88.1 but is
10.8% higher than January 2011. Pending home sales in the South
increased 7.7% to an index of 109.1 in January and are 10.5%
above a year ago. In the West the index fell 4.4% in January to
101.9 but is 0.7% above January 2011.

Why gas prices vary across the country

The national average for regular gasoline rose to $3.70 Friday,
up 14 cents in the past week - and only about 40 cents shy of the
all-time record high of $4.11 a gallon reached in July 2008.
While many are feeling the pain at the pump, Americans are seeing
widely divergent prices depending on where they live. Why are
drivers in Fort Collins, Colorado paying a little over $3, while
those in Santa Barbara, California are seeing gas prices at $4.33
a gallon? Colorado, Montana, Utah and Wyoming have the cheapest
pump prices in the country, at about $3.21 a gallon or less on
average, while retail gasoline prices are near $4.30 a gallon in
California and are over $4 in some parts of New York. The answer
lies in the "chaos" in crude oil prices around the nation, says
OPIS energy analyst Tom Kloza. "There's never been more diversity
in crude oil prices. There's never been more diversity in
gasoline prices." The divergence in pump prices comes from the
wildly differing wholesale prices for gasoline. The wholesale
price of gasoline in the Rocky Mountains and Midwest is about 20
to 40 cents cheaper than on the East Coast, for example.

The price of the refined fuel reflects regional supply issues
that face refiners in various parts of the country, based on the
type of oil they process. Crude oil in some landlocked areas in
the Midwest — such as North Dakota, where there has been a
tremendous supply surge recently — reached about $95-$96 a
barrel Friday. For refineries that use sour crude in the Midwest,
Western Canadian Select grade of crude, a heavy grade, the price
is closer to $91 a barrel. Yet, on the East Coast, refining
capacity, and as a result gasoline supply, has been drastically
reduced in the past few months. Two refiners outside of
Philadelphia, which account for 20% of the gasoline in the
northeast have shut down. Overall US and European refinery
shutdowns have taken about 2.6 million barrels of gasoline supply
off the market since 2009, says Houston-based energy analyst Andy
Lipow.

East Coast refiners import most of crude oil from Europe and West
Africa. North Sea Brent crude prices rose have risen above $125 a
barrel. Light Louisiana sweet crude prices on the Gulf Coast
reached $130 a barrel on Friday, due to tight supplies of
European and West African crude blends. (RBOB gasoline futures
traded at the CME Group's New York Mercantile Exchange - in close
proximity to East Coast refiners and delivery terminals - also
more closely reflects the Brent crude price. March RBOB gasoline
futures rose 1% Friday to settle at a 2012 high of $3.15 a
gallon.) Wholesale oil and gasoline prices have been rising
sharply all over the country in the past few days, Kloza says.
"At this rate, it's a foregone conclusion retail prices will rise
another 5 to 15 cents a gallon this week." Retail gasoline prices
have already spiked 5 cents since Friday. At this rate, if the
surge in gasoline prices next month mirrors the month of
February, record pump prices may be in store even before the
summer driving season gets underway.

Olick - 2500 foreclosures up for bulk sale

"Barely six hours after billionaire investor Warren Buffett said
that if he could he’d like to buy 'a couple of hundred thousand
single family homes', the regulator of Fannie Mae and Freddie Mac
put about 2500 of theirs up for sale. It is the next step in the
government’s REO (bank-owned) to rent program; the plan,
announced earlier this month, is designed to help Fannie and
Freddie unload thousands of foreclosed properties weighing on
their books. Fannie Mae alone owns more than 100,000 repossessed
properties. 'This is another important milestone in our
initiative designed to reduce taxpayer losses, stabilize
neighborhoods and home values, shift to more private management
of properties, and reduce the supply of REO properties in the
marketplace,' said FHFA acting director Edward DeMarco in a press
release.

While the prequalification phase began several weeks ago,
investors can now move to the next phase, where, if accepted by
proving financial capacity and experience, they can get access to
the properties for sale. The bulk of the properties are in the
most distressed markets, such as Florida, parts of California,
Phoenix, AZ, and Las Vegas, NV. Atlanta, GA, however, has the
highest number in the mix, 572 properties making up 23% of the
total up for sale. Atlanta housing was hit hard by the recession
and high job losses. Just 17% of the properties are vacant, so
investors would largely be getting assets with existing cash
flow. As these first properties hit the market, there is no
shortage of investors ready to scoop them up. Rental demand is
still surging, and rents continue to rise, despite record high
affordability and record low mortgage rates. Nearly 47% of all
closings in January were of distressed properties, according to a
new survey from Campbell/Inside Mortgage Finance, and investors
now make up nearly a quarter of all buyers, according to the
National Association of Realtors.

As banks start to ramp up the foreclosure process again, after a
year of delays following the 'robo-signing' scandal, more
properties will be repossessed and put up for sale; investors are
flocking to the deals, largely using all cash, as they get into
increasingly competitive situations. Even owner-occupants
(non-investors) are turning more to cash, as credit is still
tight. 'Despite near record low mortgage rates, homebuyers are
finding it very advantageous in the current housing market to
shop with cash. And low returns on money deposited in banks as
well as mortgage approval hassles also are pushing homebuyers to
consider all cash transactions,' according to Campbell/IMF.
'Between last October and January, the use of cash by current
homeowners purchasing a new principal residence surged from 30.8%
to 34.1%. Critics of the bulk REO to rent program say that
giving large investors with hoards of cash bulk deals squeezes
out smaller investors who might do more improvements to the
properties and then turn around and sell them at higher prices,
thereby increasing overall home values. Investors in the FHFA
program are required to hold the properties and rent them for 'a
specified number of years,' according to the agency’s initial
announcement."

S&P Greece downgrade may be short

Standard & Poor's downgrading of Greece's long-term ratings to
'selective default' could well be short but there is a risk
Athens falls back into default later, S&P analyst Moritz Kraemer
said today. S&P cut Greece's rating on Monday, the second
ratings agency to proceed with a widely expected downgrade after
Athens announced a bond swap plan to lighten its debt burden.
"It's a distinct possibility that this will be a short default
which will be cured," Kraemer told Reuters Insider television.
"The more interesting question is not when it will be cured but
whether it will be the last one." "I think the rating coming out
of default of the Hellenic Republic will give some indication of
what the likelihood of another restructuring down the road would
be." When assessing what rating to give Greece in the future,
S&P would look at the political environment, the growth outlook
and the remaining debt stock. "We think that on all three fronts
there are huge question marks," said Kraemer.

DSNews - debt and delinquency on the decline

Real estate-related debts are on the decline, as are overall
delinquencies, according to a quarterly report from the Federal
Reserve Bank of New York. Debt maintained through mortgages and
home equity lines of credit (HELOC) declined $146 billion during
the fourth quarter of last year. Mortgages made up a majority of
the decline – $134 billion – while HELOCs made up the
remaining $12 billion. Mortgage debt is now 11% below its peak,
while HELOC debt is now 11.7% below its peak. Also in the fourth
quarter, the delinquency rate on consumer debt was reduced from
10% to 9.8%. About $1.12 trillion of the total $11.53 trillion
in consumer debt was delinquent. About $824 billion in debt was
seriously delinquent (90 or more days past due). While overall
delinquency declined, about 2.2% of mortgage loans became
delinquent in the last quarter of the year.

Foreclosures increased 9.5% over the quarter as 289,000 homes
received foreclosure filings. However, the foreclosure rate is
still 35.3% below the level recorded in the fourth quarter of
2010. Also, despite the rise in foreclosure filings, the rate of
loans that became seriously delinquent declined, corresponding
with a rising cure rate, which reached 27.2% at the end of last
year. “Overall it appears that delinquency rates are
stabilizing at levels that remain significantly higher than
pre-crisis levels,” said Andrew Haughwout, VP and economist at
the Federal Reserve Bank of New York.

FHA to raise premiums

The Federal Housing Administration (FHA) will raise mortgage
insurance premiums this April in order to repair the health of
its emergency fund. The FHA upfront mortgage insurance premium
will increase to 1.75% from 1% of the base home loan amount. This
will apply regardless of the term or loan-to-value ratio
beginning in April. The annual mortgage insurance premium will
increase by 10 basis points for loans under the $625,500 limit
beginning April 1 and by 35 bps for home loans above that amount
starting in June, the FHA said Monday. Authority for these raises
come under the payroll tax cut extension agreed to last fall.
The FHA said the changes will boost the Mutual Mortgage Insurance
Fund by $1 billion. The UFMIP can still be financed into the
mortgage. The increase to the upfront premium will cost new
borrowers roughly $5 more per month. Reverse mortgages and
borrowers in special loan programs would be exempt from the
changes, according to the FHA.

Last week at the Mortgage Bankers Association servicing
conference in Orlando, FHA Commissioner Carol Galante said there
would be upcoming insurance premium changes for the streamline
refinance program. An FHA spokesman said these changes would be
included in a letter to lenders due soon. The MMI fund slipped
below the Congressionally mandated 2% threshold in 2008, and in
slipped to 0.2% last year. According to an analysis of President
Obama's budget, the fund could have declined further in 2013 and
possibly needed a bailout from the Treasury Department. Nearly $1
billion in revenue from settlements with mortgage servicers
announced in the last few weeks will also keep the fund from
needing assistance, according to FHA. "After careful analysis of
the market and the health of the MMI fund, we have determined
that it is appropriate to increase mortgage insurance premiums in
order to help protect our capital reserves and to continue
encouraging the return of private capital to the housing market,"
Galante said. "These modest increases are one of several measures
we are taking towards meeting the Congressionally mandated 2%
reserve threshold, while allowing FHA to remain a valuable option
for low- to moderate-income borrowers."

2012 - the year of the short sale?

2012-02-29T01:09:00.000-08:00

2012 - the year of the short sale?

By Tom Tryon: "Here is the real-time tale of two real estate
markets. One market is depressed and distressed. Property
values are down. Since mid-2006, residential values in Florida
have declined by 51%. Hundreds of thousands of properties have
been, or are, in foreclosure and huge numbers of homes have been
repossessed. Consider these statewide numbers, presented by
analyst Jack McCabe during last week's Herald-Tribune Hot Topics
forum:

- 150,000 residential properties in Florida have been
repossessed, and are owned, by banks.

- 371,000 foreclosure cases are open in courts.

- 530,000 residential mortgage loans are at least 90 days past
due and in default.

- 265,000 homeowners have not made a mortgage payment in more
than two years.

- 1 million residences are in some form "distressed," whether in
foreclosure, owned by banks or in default.

- 46% of mortgages "under water" - in other words, the debt
exceeds the current market value of the residential property.

Add this number - 809, the average number of days to process a
foreclosure in Florida - and it's easier to understand why
so-called short sales, in which owners and mortgage holders sell
at steep losses, are viewed as advantageous options and positive
movements in the total market. The overriding question posed
during the forum was: Will 2012 be the Year of the Short Sale?
The answer, expressed by the overwhelming consensus of McCabe,
the guest speaker, the panel - Michael Braga and Harold Bubil of
the Herald-Tribune; attorneys Nancy Cason and Tom Avrutis - and
audience was: Yes. There was one caveat: 2013 might be the
Second Year of the Short Sale. That's because the volume of
pending foreclosures — and the imminent threat of even more,
could make it impossible to clear this "shadow inventory" from
the real estate market. There was widespread agreement among the
150 people — analysts, lawyers, bankers, real estate agents and
developers — who attended the forum that more lenders are
warming to short sales, despite the bottom-line effects of
writing off losses. What's more, the homeowners in financial
peril are overcoming the psychological hurdles - and coming to
terms with the financial implications of - short sales.

The real estate market is so complex that it's impossible to
cover in a multi-day symposium, much less a 90-minute forum. But
I took away two simple points: 1) The current market is like a
summer day in Florida: Dark and cloudy during one part of the
day, with scattered sunshine and the possibility of bright days
ahead; 2) It's no wonder my wife and I have stayed in the same
home for 25 years; real estate makes my head spin."

Oil prices on the way up

Oil prices are poised to gain for the third straight week,
undermining global equity market sentiment and threatening the
fragile economic recovery. A CNBC poll of analysts and traders
showed 12 out of 16 respondents, or 75%, expect oil prices to
rise this week. Three believe prices will fall and one expects no
change. Though the bulls comprise the overwhelming majority, many
are lightening long positions, or bets that prices will rise, as
they believe the recent rally is showing signs of fatigue. "You
have to trade from the buy side but I would be reducing my long
positions ahead of the weekend," said Tom James, Chairman &
Co-Founder, Navitas Resources, in an email on Thursday. "The
fundamentals in the physical market don't support the current
short term price." James added that he was looking to add long
positions on any pullback in Brent crude to $115. "Target for the
year is now $150 on longer term basis for Brent."

Numerous respondents this week are warning higher retail gasoline
prices could threaten the fragile economic recovery in the US
David Kotok, chairman and chief investment officer, of Cumberland
Advisors said an additional penny a gallon on gasoline translates
roughly to a $1.4 billion decrease in US annual spending power.
The average US price of gasoline jumped 18 cents a gallon in the
past two weeks to $3.69 on Feb. 24, according to the nationwide
Lundberg Survey, Reuters reported. But supplies of fuel remained
plentiful in most of the country, the survey found. At $4.24 a
gallon, San Diego had the highest average price for regular
unleaded gasoline on Feb. 24, while the lowest price was $3.07 a
gallon in Denver. Some believe gasoline prices may average $4.50
a gallon or as high as $5.00, damaging demand ahead of the peak
summer driving season.

Olick - builders say good market trumps energy prices

"Sales of newly built homes are still stumbling along at
historically low levels, but builders claim they are beginning to
see the light at the end of a very long tunnel. Sales may not be
surging back, but in some of the better local economies, buyer
interest is. We saw it at open houses over the President's Day
weekend, and it's starting to show up on line even more
dramatically. Virginia-based NewHomesGuide.com, the website of
New Homes Guide magazine, saw a 46% jump in unique visitors from
December 2011 to January 2012 and a 47% jump from one year ago.
Page views were up 59%. 'We always see a seasonal jump in
January,' said Publisher, Leslie Stritmatter in a press release,
'but the increases from the same period last year show this to be
a much more significant bounce. I'm very hopeful that this is a
sign of consumer confidence returning to the markets.' Consumer
sentiment is improving. 'Right now the improving labor market
trumped rising gasoline prices in influencing confidence, which
is good in that new jobs and wages can help cushion the blow of
an ever rising cost of living,' says analyst Peter Boockvar at
Miller Tabak.

When it comes to housing, the same may be true of high
affordability, improving employment, better confidence,
record-low mortgage rates and lower-priced homes; they all trump
rising gasoline prices. 'We don't think there's going to be a
big impact from gas prices because we have so many forces taking
us to recovery,' says Richard Kettler of Kettler/Forlines Homes.
Kettler says they have seen a substantial increase recently in
the number of visits to his homes, which largely straddle the
suburbs and exurbs of Washington, DC. 'The attitude of the home
buyer is much better, they're more excited,' he adds. He also
notes there is now suddenly more interest in larger homes, not
McMansions, but moving from the 2 thousand square foot range to
3000. Higher gas prices may not hit buyer demand overall, but
they will affect some choices. 'We are more sensitive today
because of the economic scenario we are still recovering from,'
says Mark Fleming, chief economist at CoreLogic. 'From a housing
perspective, this impacts the exurban communities, as an
increased cost of living will reduce demand to buy homes, and
these are the same communities hit the hardest by the housing
crash anyway.' A study by the Federal Reserve in 2010 found that
a 10% increase in gas prices reduces home construction by 10%
after four years in locations with a long average commute time,
compared with other locations.

The effect of higher gas prices on home buyers will depend on how
long the spike lasts. If consumers think it's temporary, they
won't factor it as much into their decision. There are, however,
continuing obstacles to the new home market. Sales are still
barely above where they were last year, and last year was the
worst on record for the nation's builders. This despite all the
stimulus in the market. And as I'm writing this, Mr. Kettler
just came out of his office, grumbling that one of his sales is
being held up by an appraisal that came in too low."

Debt ceiling fight on the way

Remember the bitter debt ceiling debate in Washington last
summer? Well, another showdown could be in the offing sooner
than planned. The deal cut this summer to end the debt ceiling
standoff provided for a $2.1 trillion increase in the country's
legal borrowing limit, which now stands at $16.394 trillion. At
the time, it was estimated that such an increase could carry the
Treasury Department safely beyond the contentious presidential
election season and into early 2013. But now that Congress has
extended the payroll tax cut, emergency unemployment benefits and
the so-called Medicare doc fix -- only some of which was paid for
- there is a greater chance that US borrowing could reach the
debt ceiling sooner. Treasury Secretary Tim Geithner recently
told lawmakers that even with passage of the payroll tax bill -
which will add an estimated $101 billion to deficits in fiscal
year 2012 -- he doesn't expect the debt limit to be reached
"until quite late in the year." That's a hair past the Nov. 6
election but smack dab in the middle of the fiscal firefight that
Congress is expected to have over the expiring Bush tax cuts.

Meanwhile, the Bipartisan Policy Center, which analyzed projected
monthly deficits and other factors that could play a role in
Treasury's borrowing, now projects that the debt ceiling could be
hit between late November 2012 and early January 2013. Of
course, if need be, the Center notes that Treasury could still
avert a US default by employing "extraordinary measures" -- such
as suspending investments in federal retirement funds. So even
if Treasury is at risk of hitting the ceiling at the end of
November, it's possible that its moves could take the risk of
default off the table until early 2013. Keep in mind, though,
that these estimates assume nothing material changes between now
and the end of the year to increase federal borrowing. But if
there are any surprises along the way -- such as a slowdown in
the economic recovery that puts a crimp in federal revenue, or
more unpaid-for legislation -- the debt ceiling could be hit
before Election Day, said longtime political observer Norm
Ornstein, a resident fellow at the American Enterprise Institute.
Either way, the presidential election, the pending expiration of
the Bush tax cuts and the debt ceiling are a combustible mix. And
it's impossible to predict the endgame for any of them yet. Much
will depend on when the ceiling is breached and who wins the
election, Ornstein said.

Florida's "category 5" foreclosure problem

Already facing overloaded dockets of criminal and civil cases,
Florida's court system is getting hit by a deluge of foreclosures
that could tie up the state's legal system for years to come,
according to nationally prominent lawyer. "It's Florida's
Category 5 foreclosure hurricane," said Kendall Coffey, a legal
expert and author of "Foreclosures in Florida," a book he
discussed during a Space Coast Tiger Bay Club dinner in Cocoa
Beach. "Collateral damage can be seen in every sector of life,"
he said. "The collapsing real estate market inflicted waves of
unemployment, massive losses in the financial and real estate
industries, and an untold human cost for the families forced out
of homes auctioned at public sales. The mortgage meltdown has
also battered local governments with a deteriorating tax base."
There are 368,000 pending home foreclosures in the state, and
that number could double by 2016, Coffey said. "In contrast to
most states that employ abbreviated processes for deeding the
mortgaged property back to the lender, every foreclosure action
in Florida is a lawsuit governed by the same rules for pleadings
and court hearings that apply to other civil litigation," said
Coffey, who added the average foreclosure in Florida takes 806
days. "We're not just going to hand it over to the lender."

"Foreclosures in Florida" details aspects of Florida law along
with legal and practical strategies for lenders and borrowers
embroiled in default issues, work-outs and litigation over
troubled mortgage loans. Coffey is partner in the Coffey
Burlington law firm in Miami and has a home in Brevard County.
He's a former US attorney, legal analyst for the CNN, MSNBC and
Fox networks and author. He was among the lawyers representing Al
Gore during the 2000 presidential election recount dispute. His
latest book, "Spinning the Law," looks at the art of trying cases
in the court of public opinion. The foreclosure crisis that
began with skyrocketing default notices in 2006 has engulfed the
nation, but hit Florida especially hard. Half of state's homes
are "underwater," meaning owners owe more on their mortgages than
their home is worth. The state's real estate driven economy is
generating floodtides of litigation and has spawned an industry
of foreclosure defense lawyers who rely on overwhelmed court
dockets to stave off foreclosure and keep clients in their homes,
Coffey said. "Florida still has and will have one of the slowest
rates of foreclosure in the country," he said. How will the
consumer fare? "Ultimately," Coffey said, "homeowners will lose
a contested foreclosure in the overwhelming majority of cases."

More buyers paying with cash

Even more American homebuyers are paying cash to acquire homes,
according to a new survey from Campbell/Inside Mortgage Finance.
The group's HousingPulse Tracking Survey said between October and
January, the number of homeowners purchasing residences with cash
grew from 30.8% to 34.1%. This trend is occurring at a time when
mortgage rates are holding low. The survey noted that all-cash
buyers are getting discounts of approximately 10%. Homebuyers
who turned to cash purchases are doing so because of the slow
underwriting process late appraisals and long-wait times when
dealing with certain loans, the report said. "It is taking about
60 days to close a non-troubled FHA loan. About 30 days longer
than usually a year ago," an agent in Florida told the survey
team. To release its report, the Campbell/Inside Mortgage
Finance HousingPulse Tracking survey interviewed 2,500 real
estate agents across the country.