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The Norris Group Real Estate News Roundup 10/14/09

Wednesday, October 14th, 2009

Today’s News Synopsis:

Citigroup and other banks are being accountable for fraudulent loans which will cost them more than $688 million. The Mortgage Bankers Association reports that mortgage loan application volume has decreased by 1.8 percent from last week.  JP Morgan Chase has approved of trial modifications for 90 percent of its borrowers.

In The News:

DSNews – “Feds to Offer Easier Aid, Incentives for Modifications and Short Sales” (10-13-09)

“concerns have grown over whether HAMP reaches enough borrowers to make a difference in the wider housing-based economy. The MBA in particular, as well as the servicers’ advocacy group HOPE NOW, has argued that too many homeowners are – or ought to be – ineligible for HAMP modifications, and so far the government has done very little to assist that population.”

Bloomberg – “Citigroup Loans Ruled Fraudulent; Tousa Bonds Surge” (10-14-09)

“Citigroup Inc. and other lenders made fraudulent transfers when they gave Tousa Inc. secured loans six months before its bankruptcy filing, a judge ruled in a decision that may cost the banks more than $688 million. Tousa notes more than tripled.”

Housing Wire – “California Laws Get Tough on Mortgage Finance” (10-14-09)

“Senate Bill (SB) 36 regulates the licensing requirements for residential loan originators in compliance with the federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act. SB 237 requires appraisal management companies (AMCs) and appraisers register with the Office of Real Estate Appraisers and subjects appraisers to the provisions of the Real Estate Appraisers’ Licensing and Certification Law.”

Housing Wire – “JP Morgan Beats the Street, Earns $3.6bn” (10-14-09)

“JP Morgan Chase approved 262,000 new trial modifications between the Making Home Affordable Modification Program (HAMP) and its own modification program, resulting in lowered payments for 90% of borrowers with modified mortgages. In the bank’s retail financial services (RFS) division, net income was $7m, down from $57m in Q208 and $15m from Q209, due to a decrease in mortgage origination revenue, an increase in the provision for credit losses, higher non interest expense and lower loan balances, JP Morgan said.”

Housing Wire – “First American CoreLogic Creates National Fraud Database” (10-14-09)

“The National Fraud Database includes application and transaction data of more than 80m loan applications, representing 65% of all loan annual applications, aggregate fraud reports from 35 lenders and investors, with performance data history dating back to 2005.”

Mortgage Bankers Association – “MBA Releases Model Whole Loan Sale and Servicing Agreement” (10-14-09)

“The Mortgage Bankers Association (MBA) today adopted a model sale and servicing agreement it anticipates will become the standard form for industry participants to use voluntarily for whole loan purchases and sales made with an eye toward potential securitization. The Agreement was adopted yesterday by MBA’s Residential Board of Governors (RESBOG) as an MBA supported best practice.”

Mortgage Bankers Association – “Mortgage Applications Decrease in Latest MBA Weekly Survey” (10-14-09)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 9, 2009. The Market Composite Index, a measure of mortgage loan application volume, decreased 1.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.7 percent compared with the previous week.”

CNN – “Push on to expand $8,000 tax credit” (10-14-09)

“Congress is considering proposals to greatly expand a soon-to-expire $8,000 tax credit for first-time homebuyers — potentially applying it to all but the wealthiest homebuyers. Supporters say doing so would further boost home sales, stabilize housing prices and generate jobs. Opponents say extending and expanding the credit would be a waste of money and only temporarily stave off further price declines”

Bloomberg – “Bank of America to Target More Mortgage Share, Desoer Says” (10-14-09)

“Bank of America Corp., seeking to avoid a plunge in mortgage-lending profits in coming years as the business shrinks, will strive to expand its more than 20 percent market share, the head of the company’s home-loan unit said.”

Bloomberg – “GMAC’s Ally Bank Builds Deposits by Needling Rivals” (10-14-09)

“GMAC Inc., the lender that received two U.S. bailouts, has attracted $2.9 billion of new deposits and riled its rivals by offering the highest interest rates and running advertisements that portray bankers as deceptive.”

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The Norris Group Real Estate News Roundup 10/5/09

Monday, October 5th, 2009

Today’s News Synopsis:

First American CoreLogic expects about 10 percent of all U.S. mortgages to adjust within the next few years. FHA plans to reduce the maximum lending amount that seniors can receive for reverse mortgages. Consumers are claiming that Wells Fargo is guilty of cutting their credit lines for no apparent reason. Whitehouse spokesman Robert Gibbs has confirmed that president Obama is in favor of extending the first time home buyer tax credit.

In The News:

Chron - “New round of foreclosures looms in U.S.” (10-5-09)

“About 10 percent of all mortgages in this country are scheduled to adjust in the next few years, with the numbers peaking in mid- to late 2011, according to First American CoreLogic. Those loans are worth about $1 trillion, and nearly 20 percent of the borrowers who have them are already seriously behind on their monthly payments.”

San Francisco Chronicle – “Declining home values squeeze reverse mortgages” (10-5-09)

“In a letter to reverse mortgage lenders Sept. 23, FHA Commissioner David Stevens said his agency must reduce the maximum amounts seniors can receive on reverse mortgages because of a $798 million estimated deficit in the program in the coming fiscal year.”

Calculated Risk – “The Impact of the Declining Homeownership Rate” (10-5-09)

“Since about 2/3s of all households are owner occupied, an increase of 1.25 million households per year would imply an increase in homes owned of about 800K+ per year. If an additional 500K per year moved to homeownership – as indicated by the increase in the homeownership rate from 1995 to 2005 – then the U.S. would have needed 1.3 million additional owner occupied homes per year.”

Los Angeles Times – “Too many palatial homes, too few princely buyers” (10-5-09)

“Spec mansions are now amassed in some areas like rising floodwater behind a dam. A search of homes for sale built since 2007 and priced above $3 million shows 39 such properties in Newport Beach and Newport Coast, 27 in Laguna Beach, 19 in Manhattan Beach, 18 in Irvine and 11 on the Palos Verdes Peninsula.”

San Francisco Chronicle – “Wells Fargo cutting customers’ lines of credit” (10-4-09)

“This is not the first time I’ve heard from readers saying banks have cut off their credit for no apparent good reason, and sometimes without warning. Officers at the Wells Fargo branch in question said they could not comment. A corporate spokesman would not confirm that the bank had sent out letters last week, except to say the reader’s e-mail ‘isn’t accurate about the purported quantity of letters suggested.’”

Inman - “Obama backs extension of tax credit” (10-5-09)

“White House spokesman Robert Gibbs today confirmed that President Obama supports an extension of the first-time homebuyer tax credit, along with prolonging jobless benefits and health care subsidies for unemployed workers.”

Housing Wire – “FHA is Replacing Securitization in Mortgage Financing” (10-5-09)

“The collapse of the private securitization market in 2007 and retrenchment by the private mortgage insurers led to a huge funding gap in mortgage finance, especially in the higher loan-to-value (LTV) sector. That gap that is quickly being filled by Federal Housing Administration (FHA)-insured loans, according to a panel of regulators and enforcers speaking at the CRA & Fair Lending Colloquium, hosted by Wolters Kluwer Financial Services and now underway in New Orleans.”

Wall Street Journal – “A Return to Real Estate” (10-5-09)

“Individuals looking to dip their toes into real-estate securities should consider buying a mutual fund that invests both in the U.S. and abroad, says Dave Yeske, a financial planner in San Francisco. When buying risky assets like real estate, it’s best to spread your bets across companies and countries, he says.”

National Mortgage News – “Panel May Look at New FHA Net Worth Requirements” (10-5-09)

“One topic a panel titled ‘The Recent Evolution of Independent Mortgage Bankers’ may end up covering is the Federal Housing Administration’s plan for a $1 million net-worth lender requirement. Net worth may be a ‘significant’ problem for the smaller nondepository, said Tim Stern, co-founder and president of Lenders One, St. Louis, in a phone interview. He said his cooperative group, which helps mortgage bankers collectively achieve scale, also requires at least $1 million in net worth.”

Housing Wire – “IBM to Purchase Wilshire Credit from BofA” (10-5-09)

“Global IT services giant IBM (IBM: 119.75 +0.61%) is in the process of acquiring mortgage servicer Wilshire Credit Corp. from Bank of America (BAC: 16.96 +3.79%), numerous sources with knowledge of the transaction confirmed to Housing Wire over the weekend.”

Bloomberg – “General Growth Proposes $11.6 Million Bonus Pool” (10-5-09)

“General Growth Properties Inc., the second-largest shopping mall owner in the U.S., asked for court permission to pay as much as $11.6 million in incentive bonuses to 12 executives including Chief Executive Officer Adam Metz and Chief Operating Officer Thomas Nolan.”

Bloomberg - “Mortgage-Bond Prices Double From March Lows in Rally” (10-5-09)

“Typical prices for the most-senior prime-jumbo securities rose 2 cents on the dollar last week to 84 cents, according to Barclays Capital data. Similar bonds backed by Alt-A loans with a few years of fixed rates increased 2 cents to 60 cents. The jumbo bonds are up from about 75 cents three months earlier, while the Alt-A bonds have climbed from 47 cents.”

Bloomberg - “Treasury Says Three More Money Managers Receive PPIP Funding” (10-5-09)

“The U.S. Treasury Department said AllianceBernstein Holding LP, BlackRock Inc. and Wellington Management Co. have raised a combined $1.94 billion for their funds participating in the U.S. effort to buy toxic assets from banks. By getting that money from private investors, the three firms qualify for federal funds under the Public Private Investment Program. The U.S. will match the funds each money manager raised, and provide debt financing that will give them a combined purchasing power of $7.74 billion.”

Orange County Register – “Brightwater developer misses $1.7 million payment” (10-5-09)

“The troubled builder of the Brightwater development by the Bolsa Chica wetlands announced today that it skipped a $1.7 million debt payment that was due this week but is working with the lender to restructure its loans.”

Orange County Register – “Foreclosures total 4% of houses for sale” (10-5-09)

“Steve Thomas at Altera Real Estate in Aliso Viejo reports that the number of O.C. distressed properties (homes listed by agents as foreclosures or short sales) was 2,346 last week, -38 vs. two weeks earlier or a -1.6% change.”

Looking Back:

The Hope for Homeowners program gave permission to FHA to guarantee $300 billion dollars worth of 30 year, fixed rate home loans. Countrywide Financial Corp. settled fraud complaints in 11 states by cutting interest rates and borrowers’ owed amounts. The Federal Reserve boosted its auctions of cash to banks up to $900 billion.

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The Norris Group Real Estate News Roundup 10/2/09

Friday, October 2nd, 2009

Today’s News Synopsis:

Interthinx’s employment and income fraud index decreased  by 33 percent from Q2 of 2008 to Q2 of 2009. Real estate expert John Burns believes that the new short sale incentive program will be helpful in clearing up excess inventory. According to the American Bankruptcy Institute and National Bankruptcy Research Center,  U.S. consumer bankruptcies passed 1 million during the first 9 months of 2009. The U.S. government could lose nearly 80 percent of its $2.33 billion investment in CIT, should the company choose to exchange its debt.

In The News:

Housing Wire – “First American Studies Neighborhood Spread of Delinquency” (10-2-09)

“With the delinquency rates of prime and subprime mortgages trending upward across the nation, individual markets show different patterns of where those delinquencies gather within the city limits. A study by First American CoreLogic examines the spatial distribution of serious mortgage delinquencies across neighborhoods in the 30 largest US cities. Five patterns emerge from the data.”

Housing Wire – “Risk Retention May Backfire in Down Market, Says IMF” (10-2-09)

“The return of activity to private-label securitization markets will be a crucial part of economic recovery, but going forward, new measures must be put in place to ensure the markets positively contribute to financial stability and sustainable economic growth, according to the International Monetary Fund’s (IMF) Global Financial Stability Report.”

Housing Wire – “Mortgage Fraud Declines: Interthinx” (10-2-09)

“Mortgage fraud may be on the decline, according to the latest results of a quarterly index. Interthinx’s employment and income fraud index decreased 33% in Q209 from Q208, according to the latest Interthinx Mortgage Fraud Risk Report. Interthinx said the decline is due in part to lenders increased use of the Internal Revenue Service’s (IRS) 4506-T income verification form.”

Housing Wire – “$2,500 Incentive Will Spur Short Sales, Says John Burns” (10-2-09)

“A Treasury Department spokeswoman confirmed an incentive program for servicers that pursue short sales is on its way, according to John Burns Real Estate Consulting. The subsidy program will provide $1,000 to the servicer and $1,500 to the seller in each short sale transaction for a total incentive of $2,500 per short sale, the spokesperson told the consulting firm. This strategy should help ‘clear excess inventory,’ according to market commentary by John Burns Real Estate.”

Housing Wire – “2008 Mortgage Data Illustrates 31% Drop in Originations” (10-2-09)

“Mortgage lending data from 8,388 US financial institutions covered by the Home Mortgage Disclosure Act (HMDA) showed a decline in both lenders and originations in 2008 from levels seen in 2007. The data, released this week by the Federal Financial Institutions Examination Council (FFIEC), illustrate a 3% decrease in the number of reporting institutions and loans, primarily reflecting a large decline in the number of independent mortgage companies. Warehouse mortgage funding continued to dry up at the same time, a problem that led to the recently proposed legislation that aims to support and facilitate increased warehouse credit capacity for qualified lenders.”

Bloomberg – “U.S. Consumer Bankruptcies Top 1 Million, Group Says” (10-2-09)

“U.S. consumer bankruptcies rose past 1 million through the first nine months of the year, the highest since 2005 changes to bankruptcy laws. Personal bankruptcies totaled 1,046,449 for the period, according to the American Bankruptcy Institute and National Bankruptcy Research Center. For the first nine months of 2005, the figure was 1.35 million.”

Inman - “Turbulence seen for reverse mortgages” (10-2-09)

“A reverse mortgage, which is available only to those 62 and older, allows homeowners to use the equity that has built up in a residence. In effect, the homeowner gets a loan in the form of a lump sum or multiple payments. Repayment, with interest, is deferred until the owner dies, or goes into aged care, and the home is sold. Or, in a worst-case scenario, if the homeowner fails to pay property taxes or homeowners insurance.”

Reuters - “CIT debt swap could cost U.S. more than $1.8 billion” (10-2-09)

“If CIT Group (CIT.N) exchanges its debt under an offer aimed at averting a bankruptcy filing, the U.S. government could lose nearly 80 percent of its $2.33 billion investment in the troubled commercial lender. A likely $1.8 billion loss would be another black eye for the United States’ Troubled Asset Relief Program. A government official said last week that TARP has saved the financial system from collapse, but fell short of some of its other goals.”

Looking Back:

One year ago, the MBA reported that its Government Purchase Index decreased by 14.1 percent. Mark Finerman of Greenwich Capital began to raise 3 billion dollars for a fund to make senior property loans. A study from Radar Logic showed that home prices had dropped in 24 of 25 major metropolitan markets in the United States.

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The Norris Group Real Estate News Roundup 9/21/09

Monday, September 21st, 2009

Today’s News Synopsis:

The federal government plans to “tinker” with mortgage interest reporting. The $30 billion ticking time bomb of ARMs. First American estimates that California has approximately $30 billion dollars worth of bad home loans. A review of over 24 million credit files showed that people with good credit scores were more likely to ‘strategically default’. The building industry shows improvement, as Lennar Corp. expects a profitable year, despite a bad 3rd quarter.

In The News:

Los Angeles Times – “Feds plan to tinker with mortgage interest reporting” (9-20-09)

“The Government Accountability Office wants lenders to add more details about mortgages on Form 1098, which would make it easier for the IRS to determine whether taxpayers are complying with the rules.”

San Francisco Chronicle – “$30 billion home loan time bomb set for 2010″ (9-20-09)

“Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage bills. Analysts say that could unleash the next big wave of foreclosures – and home-loan data show that the risky loans were heavily used in the Bay Area.”

Los Angeles Times – “Homeowners who ‘strategically default’ on loans a growing problem” (9-20-09)

“Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to ‘strategically default’ — abruptly and intentionally pull the plug and abandon the mortgage — compared with lower-scoring borrowers.”

Bearish News – “FHA: Bailout Waiting to Happen?” (9-19-09)

“The FHA has effectively replaced sub-prime lenders who went bust. They’re under pressure to prop-up housing prices, and are insuring heaps of risky loans in an effort to do so. Their guidelines are slipping and loan-volumes are skyrocketing. Delinquencies are skyrocketing too, reaching 14.4% in the 2nd quarter of 2009, according to the NYT (borrowers at least one payment late).”

Bloomberg - “Lennar Predicts Fiscal 2010 Profit, Purchases Land” (9-21-09)

“Lennar Corp., the third-largest U.S. homebuilder, expects to turn a profit in fiscal 2010 even after reporting a wider third-quarter loss, President and Chief Executive Officer Stuart Miller said today.”

Bloomberg - “Housing Risking Relapse Confronts Bernanke Conundrum” (9-21-09)

“The Obama administration is studying whether to let a first-time home buyers’ tax credit expire as scheduled at the end of November. Bernanke and his Fed colleagues may continue talking this week about how to wind down purchases of mortgage- backed securities, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. The two programs have helped stabilize real-estate demand, with new-house sales rising 9.6 percent in July from the prior month, the most since 2005.”

Bloomberg - “Moody’s Property Index Resumes ‘Steep’ Fall in July” (9-21-09)

“The Moody’s/REAL Commercial Property Price Indices fell 5.1 percent in July from the month before, Moody’s said today in a statement. The index is down almost 39 percent from its October 2007 peak. The decline in June was 1 percent.”

Orange County Register – “Surf City’s high-end homes mirror trend: They sit” (9-21-09)

“Huntington Beach is somewhere in the middle ranges of Orange County cities in the ratio of distressed properties. Highest is Anaheim at 67.5%. Lowest is Seal Beach, at 1.5%. Other coastal neighbors: Newport Beach, 10.3%; Corona del Mar, 3.4%; Newport Coast, 9.7%.”

Orange County Register – “Buyers pay 3% premium for foreclosures” (9-21-09)

“Steve Thomas at Altera Real Estate in Aliso Viejo reports that the number of O.C. distressed properties (homes listed by agents as foreclosures or short sales) was 2,384 last week, -132 vs. two weeks earlier or a -5.2% change.”

Inman - “Facebook dos and don’ts for agents” (9-21-09)

“Regardless of which social media platform you use, your ultimate goal is to engage in conversations that lead to online friendships or that produce followers for your business. Some participants at a recent Real Estate BarCamp conference said that they don’t even mention their real estate business when they’re on Twitter and Facebook. Others mention their business only occasionally. Virtually everyone who is succeeding online agreed on this point; however, 90-95 percent of your posts should be contributing to the online conversation by helping others. Only 5-10 percent should be about what you are doing.”

Inman - “Rehabbing habitat” (9-21-09)

“While each of the 1,500 Habitat for Humanity affiliates in the United States sets its own strategies, purchasing foreclosures has been gaining traction this year. In a typical year, Habitat affiliates complete about 6,000 homes, and about 10 percent are foreclosures. This year, Seidel expects that figure to jump to as high as 25 percent.”

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98-TNG Radio – Mark Fleming 11-29-08

Friday, November 28th, 2008

Mark-Fleming

Mark Flemming

Chief Economist for First American Corelogic

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Bruce Norris is joined this week by chief economist of First American Corelogic, Mark Fleming. First American CoreLogic, Inc. is the nation’s largest provider of advanced property and ownership information, analytics, and solutions.

Mark starts by explaining what Corelogic’s Core Risk Monitor is and what it evaluates. This evaluation tool is used to forecast mortgage default risk areas. The report makes use of house price dynamic trends, economic trends, foreclosure delinquency trends and collateral risk trends. Bruce asks of those trends which is the one that causes the others to follow. Mark says the economic and house price trends are the most important. Issues with price decreases and the ability for people to pay their mortgages continue to create problems.

Bruce asks if the downturn from 1991-1997 in California is following the same model we are seeing today. Mark says it’s slightly different. Mark says in the 90s it was more a function of unemployment. This time around, the house price downward trend is causing more of a problem. The economic downturn is following.

Bruce asks if the core factors are different for different states. Mark says yes but these two primary conditions are key. Mark talks about the Midwest and how their market has changed and reacted.

Bruce asks Mark about his take on affordability and if increasing affordability means less risk. Mark says that increasing affordability means more individuals will be able to enter the market on the demand side and means that inventory will be able to stop the price slides. There are a few steps along the way to get the market really going but affordability is important.

Bruce asks about Corelogic and how much emotions play part in the economy. Mark talks about the emotions to prices and houses and how individuals don’t like to lose. Bruce talks about people and the fear of people not wanting to buy for fear of losses. Mark says that some homes become such a good deal they get back in anyway.

In Corelogic’s report in the 3rd quarter of 2007, Bruce asks how Ohio and Michigan topped the highest risk market but aren’t in this year’s report. Mark says it wasn’t that they improved, other markets got worse. In Corelogic’s 3rd report of 2008, California has 8 of the top 10 riskiest markets and did not appear in their 2007 report. Mark says the price declines got these areas on the list.

Bruce talks about the historic nature of price declines in California and how it’s the worst he’s ever seen. Mark says even nationally it’s bad. What once were the top markets are doing so poorly it’s bringing down the national numbers. California and Florida are seeing large price declines and they are two of the largest markets. Historically, housing recessions are more localized.

Bruce asks about the percentage of houses that are upside down in California. Mark says 28% of loans in California are in the negative equity position. Corelogic only recently started these evaluations so has no idea what happened in the 90s. Corelogic uses market trends and valuation models to figure out home prices and ran data for September for their most recent report they released.

Bruce asks if there are states that are in worse shape compared to California. Mark says Nevada is in the lead with 48% of homeowners owing more on their property then it is worth. The 48% includes investors and anyone with a mortgage is counted. The mortgage stock in Nevada is much younger than California. They didn’t have the time to pay down the mortgage hence the reason they are so upside down. California has many more mature loans.

Bruce asks about unemployment and how it might cause further price declines. Mark says rising unemployment will lead to more foreclosures as more people can’t afford their payments. However, when individuals are in the negative equity position, studies shows mobility decreases and will tend to look locally instead of moving out of state for jobs. Bruce brings up that California is a nonrecourse state and people will find it easier to walk. Mark says it will be interesting to watch the behavior of people in this cycle.

Bruce asks if the bailout will help stem the foreclosure situation. Mark says the more loans that are modified the better we’ll do. Bruce and Mark discuss the moral hazard of re-writing some loans but not others. Mark says this is part of the challenge for those creating these mortgage modification programs.

Bruce says the actually foreclosure data says we’re actually down in foreclosures because of SB1137. Lenders have to go through more steps in the foreclosure process now and data is very misleading at this time. Corelogic says they are ignoring the seeming improvement in foreclosure numbers because of this bottleneck.

Bruce asks if in the model if the percentage of those over encumbered include those that refinanced to get money out of the house. Mark says the report includes all mortgages. For more information, see corelogic.com.

Mark Fleming is chief economist for First American CoreLogic, America’s largest provider of advanced property and ownership information, analytics, and services. Fleming leads the risk management economics and research team, responsible for developing collateral and credit risk models—the basis of the company’s risk management product suite—through monitoring the real estate market, identifying real estate and mortgage market trends, and analyzing the data in light of demographics and the economy.

Prior to First American CoreLogic, Fleming worked for Fannie Mae, developing property valuation models designed to drive collateral assessment applications used in mortgage origination, quality control, and loss mitigation. He has published research on spatial econometrics and presented at many international conferences.

Fleming graduated from Swarthmore College with a BA in economics and holds MS and PhD degrees in agricultural and resource economics from the University of Maryland.

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