Home prices hit bottom in the first quarter, but will remain flat for the rest of this year and into next, according to a new forecast from Bank of America/Merrill Lynch.
Speaking at an American Securitization Forum conference in Washington this week, Flanagan said he expects values will increase by just 0.5% this year and 0.3% in 2013, using the Case-Shiller home price index as a benchmark.
“We have hit bottom but we are going to bounce along for a couple of years,” the managing director said.
Flanagan noted that distressed sales will continue to weigh on residential values. He estimates that 5.6 million in delinquent mortgages could be liquidated by yearend 2015. But he noted that estimate could be reduced by loan modifications and efforts to turn REO properties into rentals.
Home values should get a lift after 2013, rising 3% in 2014 and 6% in 2015, Flanagan told National Mortgage News.
“Our view is that we have actually seen a bottom in the first quarter of 2012,” said Christopher Flanagan, head of U.S. securitized research at B of A/Merrill
Is there really much of a professional difference between loan officers who work for a bank versus a nonbank? I'm not picking sides, but recent comments to this column suggest that nonbank LOs feel they are better equipped to serve the consumer – and not necessarily because they have passed the state test. (Bank LOs are immune from state testing.) Some nonbank LOs are warning their bank brethren that the bank mothership is soaking up their earnings – money that might normally go to an LO. Meanwhile, the Consumer Financial Protection Bureau is contemplating revisiting the LO compensation issue. All this leads me to believe that in time LOs working for a bank will be required to pass state testing. I'm just saying…
APR 2, 2012
The future is looking better in California as pending home sales increased in February for the second straight month, according to the state association of Realtors.After two consecutive months of declines, equity sales made up 51.1% of home sales, an increase from 49.9% in January and 44.8% a year ago.
Meanwhile, the total share of all distressed property types sold statewide decreased in February to 48.9%, down from 50.1% the prior month and from 55.2% last year.
“A lack of inventory in the bank-owned and short sale market was a contributing factor to the decline in share of distressed sales in February,” said LeFrancis Arnold, president of CAR. “In fact, REO inventory declined 24% in February from the previous year, while short sale inventory dropped 17% during the same period.”
Of the distressed properties sold statewide in January, 23% were short sales. This is down from 23.8% experienced in the previous month, but up from last February's share of 22.9%.
The share of REO sales also edged down in February to 25.2%, down from January's 25.9% and down from the 31.9% recorded in February 2011.
MAR 27, 2012 11:39am ET
Bank of America is striving to make the short sales process more efficient with a stated goal of dramatically increasing the number of these pre-foreclosure transactions this year.
Short sales are a "big focus for us," the head of B of A REO operations Hattie Sharp told a meeting of Hispanic Realtors recently. "We want to double our production from 2011.”
The nation's second largest residential servicer completed 107,000 short sales in 2011, up from 92,000 the prior year.
In a short sale the bank gives the delinquent borrower an opportunity to sell the property before it's scheduled for a foreclosure sale. However, these transactions are cumbersome and can take many months to complete.
"Everyone in the industry I know is really focused on how to fix this problem," Sharp said, so it doesn't take six months to get to closing.
She also noted that it is important to work with delinquent homeowners early in the process so they know their options and choose the best option -- whether it is a short sale, deed for lease, or deed in lieu.
Sharp made her comments at a National Association of Hispanic Real Estate Professionals conference in Washington.
MAR 27, 2012 10:01am
03/26/2012 By: Esther Cho
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Investors are making it a practice to endure through obstacles that come with the price of short sales and pursued them at a greater pace in February compared to previous months, according to the latest results of the monthly Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.
The percentage of investors buying homes climbed from 20.9 percent of all transactions in September 2011 to 24.2 percent of all transactions in February 2012, according to the survey. The investor share of short sales also rose, going from 25.9 percent to 30.6 percent during the same six-month period.
In contrast, the number of short sale purchases from homeowners has waned since September. This trend is largely driven by long-approval times from mortgage servicers and unpredictable closing dates, according to the survey.
The share of distressed properties in the market also climbed, with distressed homes as represented by the HousingPulse Distressed Property Index (DPI) reaching a near-record of 48.7 percent when using a three-month moving average. The reported figure was the second highest level ever recorded by HousingPulse and the 25th consecutive month that the DPI hovered above 40 percent.
The proportion of short sale transactions has also increased, and over the past six months the number has climbed from 17 percent to 19.8 percent, according to the survey.
Cash-for-keys is one factor that makes short sales more attractive to homeowners, with cash payments often at $3,000 or 1 percent of the home’s value, according to the survey.
One Virgina-based agent surveyed said, “Approximately 1/3 of my short sale transactions are qualified for the cash for keys program.”
Another agent in California surveyed said, “Short sales are definitely motivated by cash for keys. Typically they are receiving $3,000-5,000 on homes between $300k to $500k. I have seen $15,000 on $1 million homes.”
The survey includes about 2,500 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.
The Federal Housing Administration has revamped a little used program for refinancing underwater conventional loans, and extended its "short refinance" program until the end of 2014.
Lenders have completed only 840 short refis since FHA rolled out the program in August 2010. The main stumbling block has been the lack of a secondary market execution, according to Mark Stamm who is advising MSI Mortgage Services III, Inc., Bloomington, Ill., on growing its FHA short refi program.
In a short refi, the lender must reduce the principal amount of the mortgage debt by at least 10% to get the first lien down to a loan-to-value ratio of 97.75%-or 115% with a second mortgage.
If the loan is delinquent, a borrower can qualify by completing a three-month payment trial.
Previously, FHA required the servicer to engage in a permanent loan modification, which in many cases required a reduction of principal, to start the payment trial.
Now, the servicer can simply exercise forbearance to conduct the payment trial. "That is the most significant change" FHA made in the program, Stamm said–that and extending the program for two years.
FHA short refis can be placed into a Ginnie Mae MBS. But Ginnie Mae issuers and servicers are leery of these loans because there are so few of them, plus they're unsure how they will perform.
"We have been working on creating a secondary market," Stamm said. "This is very close to happening," he added. But this secondary market is only for MSI loans that will be originated out of a call center in Frederick, Md., and managed by MSI vice president Bob Bodell.
"We are not interested in buying loans from others," Stamm said.
National Mortgage News, Brian Collins
Single-Family Starts Down, Multifamily Jumps
Builders pulled back on the construction of single-family homes in February but forged ahead with multifamily starts, according to new government figures released Tuesday morning.
The Census Bureau reported that single-family starts fell 10% sequentially in February to a 457,000 seasonally adjusted annual rate. But multifamily construction jumped nearly 30% to a 233,000 rate in February.
A monthly survey by the National Association of Home Builders and Wells Fargo & Co. found that single-family builders remain "cautious" but they also expect to see a pick up in sales in the next six months.
"There is a sense that many local housing markets have started to move in the right direction and that the prospects of future sales are improving," said NAHB chairman Barry Rutenberg.
However, construction executives continue to complain about "persistently tight credit" for builders and home buyers.
Fed Study: Overpriced Foreclosures Hiking REO Carrying Costs
03/16/2012 By: Carrie Bay
Appraisers, lenders, and investors appear to be routinely overestimating the values of homes prior to foreclosure, especially in the weakest housing markets, according to two economists with the Federal Reserve Bank of Cleveland.
The Cleveland Fed’s Thomas Fitzpatrick and Stephan Whitaker suggest that more accurate pricing could speed the clearing of REO inventories, save lenders money by reducing the carrying costs associated with bank-owned homes, and bring greater stability to housing markets across the country.
Analyzing data from Cuyahoga County, Ohio (where Cleveland is located) the researchers found that lenders and other buyers at county foreclosure auctions tend to resell acquired properties for a fraction of what they paid at the auction.
Lenders tend to sell property out of REO for 42 percent less than the auction price, according to the Cleveland Fed economists. The pair assessed 16,012 foreclosed properties in Cuyahoga County that were taken back by the lender at foreclosure auction between 2006 and 2011. Lenders’ total losses on the pool of properties – calculated as the difference between a property’s auction reserve and the sale price at the exit from REO – amounted to $326.2 million.
In a report detailing their findings, Fitzpatrick and Whitaker contend that placing more weight on two simple property characteristics – a home’s age and its location –
would improve the accuracy of appraisals in weak housing markets.
With more precisely targeted values for homes prior to foreclosure auction, the researchers say lenders could lower their REO carrying costs in a number of measurable ways:
- Lenders could avoid taking on REO altogether by setting their auction reserves lower and allowing others to purchase more properties at auction.
- Lenders would be more likely to offer loan modifications, and not initiate foreclosures, on low-value properties.
- Identifying properties that have the least value early in the foreclosure process would facilitate their disposition to land banks or other organizations seeking to remediate blight.
The Fed economists stress that problems arising from swollen REO inventories – including costs to lenders and neighborhood blight – are compounded in weak housing markets where the supply of housing exceeds the demand for it. They say several factors combine to increase the odds that REO homes will actually cost more to maintain than lenders can expect to bring in from their sale.
For example, carrying costs are likely to be higher when you factor in securing the properties, bringing them up to local housing codes, properly maintaining them, shelling out money to cover property taxes, and marketing them for resale.
Homes entering foreclosure and lingering in REO in weak markets tend to be older and of lower quality than homes entering REO in strong markets, the researchers note. In addition, homes in weak markets are more likely to be vandalized while sitting vacant and older housing stock will typically deteriorate more rapidly. To top it off, anemic demand for housing in such markets further depresses overall housing prices.
In weak markets, Fitzpatrick and Whitaker contend that lenders may be better served by not taking properties into REO in the first place, or at least minimizing the time repossessed homes spend in REO by donating them to land banks or nonprofits.
Sales in California Up in February, Median Prices Down
03/16/2012 By: Esther Cho
Home sales in California showed signs of improvement for February compared to the previous month of January and year before in February 2011, according to data from the California Association Of Realtors (C.A.R.).
For February, sales were up 2.1 percent from January’s revised 517,120 and up 5.5 percent from the revised 500,480 sales pace recorded a year ago. The statewide sales figure represents the total number of homes sold during 2012 if sales maintained the February pace throughout the year, with adjustments for seasonal factors.
While the state followed the national trend of declining home prices, C.A.R. reported other signs are pointing towards stabilization.
“While the median home price dipped in February, the year-over-year decline was the smallest recorded since December 2010,” said C.A.R. President LeFrancis Arnold. “This
may be a signal of a possible stabilization in home prices, which should bode well for prospective buyers who have been on the sidelines waiting for prices to level out and may entice them to jump into the market.”
The statewide median price of an existing, single-family home dropped 0.6 percent to $266,660 in February compared to January’s $268,280 median price. The median price was down 1.7 percent a year ago, with a revised $271,370 median price recorded in February 2011.
The number of single-family detached homes that closed in California totaled 528,010 in February, according to information collected by C.A.R. from more than 90 local realtor associations and MLSs statewide.
“February sales posted a stronger than usual performance with sales in major metropolitan areas such as Los Angeles, Orange County, San Diego, and San Francisco all logging double-digit gains from the previous year,” said C.A.R. VP and chief economist Leslie Appleton-Young.
California’s housing inventory also declined in February, with the Unsold Inventory Index for single-homes down to 5.3 months in February, compared to a revised 5.7 months in January and down from the 7.5-month supply in February 2011. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
The median number of days it took to sell a single-family home fell to 58.9 days in February 2012, down from a revised 64.7 days for the same period a year ago
If you can't afford your mortgage payment and it's time for you to transition
to more affordable housing, the Home Affordable Foreclosure
Alternatives (HAFA) program is designed for you. HAFA provides two
options for transitioning out of your mortgage: a short sale or a Deed-in-Lieu
(DIL) of foreclosure. In a short sale, the mortgage company lets you sell your
house for an amount that falls "short" of the amount you still owe. In a DIL,
the mortgage company lets you give the title back, transferring ownership back
In either case, HAFA offers benefits that make the transition as
favorable as possible:
- You can get free advice from HUD-approved housing counselors and licensed
real estate professionals.
- Unlike conventional short sales, a HAFA short sale completely releases you
from your mortgage debt after selling the property. This means you will no
longer be responsible for the amount that falls "short" of the amount you still
owe. The deficiency is guaranteed to be waived by the servicer.
- In a HAFA short sale, your mortgage company works with you to determine an
acceptable sale price.
- HAFA has a less negative effect on your credit score than foreclosure or
conventional short sales.
- When you close, HAFA provides $3,000 in relocation assistance.
WASHINGTON--The wave of Hispanic homebuyers that was promised just before the market crashed is finally ready to storm the market, according to a new report from a group of real estate professionals dedicated to increasing ownership among Latinos.
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Hispanics filled 60% of the 2.3 million jobs added to the economy in 2011 and accounted for 53% of all home sales in last year's third quarter. And Hispanic real estate leaders say those are just short-term indicators of what's to come.
“We believe the tide is shifting,” says Mary Mancera, a spokesperson for the National Association of Hispanic Real Estate Professionals, noting that the housing sector could use the “consumer gusto” that Latinos offer.
With 20,000 members, the San Diego-based NAHREP is said to be the country's largest minority trade organization.
“Despite recent losses suffered by Hispanics during the housing crisis, young Latino families that were unaffected by foreclosure or lost home value are ready to enter the market,” says NAHREP chair Carmen Mercado. “When they do, they will have an exponential impact on housing sales.”
Several national surveys indicate that the Hispanic population, particularly renters, aspire to homeownership despite the malaise in the general economy.
And now, according to the “State of Hispanic Homeownership Report,” demographic forces are such that Latinos are ready to start to buy en masse and total owner-occupant housing units purchased will replace ownership rate as the key metric among that minority group.
“In recent years, the headlines have focused on foreclosure and wealth losses in the Hispanic community,” says Mercado, a Long Island, N.Y.-based education and diversity manager with Coldwell Banker.
“But the untold story is the growth, labor force participation, higher educational achievements and attitudes toward homeownership that are crystallizing into a trend with Latinos taking center stage as a mega-force in housing.”
The 36-page report, which was written by minority housing expert Alejandro Becerra, a former HUD official, points to numerous factors that, when taken together, show the depth of the Hispanic market:
• Population—Hispanics are responsible for most of the overall population growth over the past decade.
As an indication of the widening growth gap between whites and Latinos, the report notes that between 2000 and 2009, whites accounted for 1.1 births for every one death, whereas Hispanics recorded 8.9 births for each death.
• Consumerism—Between 2005 and 2008, the Hispanic market was responsible for more than half the real growth in the consumer economy. During that time, the $52 billion in new Hispanic spending outpaced the $40 billion in new spending by non-Hispanics.
• Workforce Participation—Latinos can be expected to account for nearly three-quarters of this decade's growth in the nation's labor force.
• Mobility—Hispanics are willing to follow the jobs and go wherever work is available.
According to the Census Bureau, between 2000 and 2010, Hispanics alone drove the population growth of Philadelphia, Phoenix, Indianapolis, Omaha and Atlanta. The group also comprised the greatest component of population increases in San Antonio, Fort Worth and El Paso, Texas, and Raleigh and Charlotte, N.C.
• Education—The number of young Hispanic adults enrolling in college grew by 349,000 in 2009-10, whereas the number of non-Hispanic whites fell by 320,000.
In 2010, 73% of young Hispanics completed high school, up from 60% in 2000. At the same time, 32% of young Hispanics enrolled in college, up from 22% 10 years earlier. To accommodate minority first-time buyers, the Hispanic real estate leaders say some changes need to be made in the nation's housing finance system. NAHREP is also calling for better access to affordable, safe mortgage products and low-priced bank owned properties
Scammers are calling homeowners, offering to help save their homes by filing an
application for them for the Keep Your Home California program, bilking the
victims of as much as $900. Applying for help from Keep Your Home
California, from phone calls to getting mortgage help, is always free.
Homeowners can call this number to get information about assistance with
mortgages: (888) 954-5337.
Freddie Sees Short Sales Rise, Will Increase Incentives
Freddie Mac reported a 16% increase in short sales last year and wants to boost the use of this foreclosure alternative by increasing the fees it pays participating servicers.
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"We plan to introduce additional incentives in 2012 designed to help more distressed borrowers avoid foreclosure through a short sale or deed in lieu of foreclosure transaction," Freddie says in its new 2011 annual report.
The GSE said its servicers completed 45,600 short sales, and 540 deed-in-lieu transactions in 2011 compared to 10,500 and 94 transactions, respectively, the year prior.
Short sale transactions involve multiple parties, and are more complex than foreclosure sales. A short sale allows the servicer to by-pass the foreclosure process, which can take 400 to 600 days. Short sales generally produce a higher recovery than a REO sale.
As of Dec. 31, Freddie held 60,500 REO properties on its books after completing 110,200 REO sales last year.
Freddie acquired 98,650 REO properties during 2011 and expects REO acquisitions will "remain elevated" this year.
Freddie has a large inventory of 414,100 seriously delinquent loans. Many of these mortgages will "likely complete the foreclosure process and transition to REO during 2012 as our servicers continue to work through foreclosure-related issues," the GSE says in its annual securities filing.
Short Sales love ‘em or hate ‘em they are here to stay. Come and align your self with Vista Funding to take advantage of the fast approaching short sale wave.
Foreclosure Report from Sean O’toole
Foreclosure Activity Continues to Fall
The "foreclosure wave" many predicted at the end of last year is beginning to look more like a drought, as foreclosure sales dropped significantly in February. Although sales to 3rd Parties, typically investors, were down month-over-month, as a percentage of all sales 3rd Parties purchased a record 37.6 percent of foreclosures, up from 20.3 percent a year earlier, and just 2.2 percent in February 2008.
Further eliminating any possibility of a foreclosure wave for months to come, was a substantial drop in new foreclosure filings in California, Nevada, and Washington. Arizona saw a modest increase in foreclosure starts, while Oregon jumped a dramatic 39.4 percent. Despite the size of the increase, it simply offset a drop in January, and showed little change in comparison to earlier months. Nevada remains far below the average number of foreclosure starts; and the dramatic changes to their foreclosure laws will likely drag out the Nevada foreclosure process for years to come.
Unlike years past, February's drop in sales was not due to the short month. Thanks to the Leap Year, California had only one less business day than usual in February (because of the Abraham Lincoln's birthday observation). The other states do not observe Lincoln's birthday, and so had the same number of business days as other months
Activity is moving laterally. However it appears that the shadow inventory is going to continue at its current balance. Setting the stage for
The new short sale programs banks are currently rolling out.
Investors are paying more for assets at the court steps. Short sales are creating better yields.