It Is Taking Longer to Sell a Home in November: Redfin

The median number of days a property for sale has remained on the market increased to 34 in November from 31 in October, according to a Redfin study of 23 markets.

The percentage of homes which entered contract within two weeks of being placed on the market remained in the area of 27% during the same time frame.
Nearly half the homes listed in San Jose during November entered into contract within two weeks and the median time a property is listed for is just 12 days.
Philadelphia is at the other end of the spectrum, with only 7% of homes going into contract within two weeks of listing, up from 6% in October. Homes here are on the market for a median of 71 days, up from 69 days in October.
Homes listed for sale in Boston are spending 25% fewer days on the market. The median time on market for a Boston for sale property is 42 days, down from 55% for October.
Redfin previously found that there were 7% fewer potential buyers seeking house tours in November versus October.

Pending Sales of U.S. Existing Homes Rise Less Than Forecast

Contracts to purchase previously owned U.S. homes rose less than forecast in November, indicating higher borrowing costs are holding back the recovery in residential real estate.
A gauge of pending home sales increased 0.2 percent, the first gain in six months, after a 1.2 percent drop in October that was larger than initially reported, the National Association of Realtors said today in Washington. The median projection in a Bloomberg survey of economists called for a 1 percent advance.
Higher mortgage rates, tight lending standards and price increases driven by a limited supply of homes for sale are discouraging some prospective buyers. Further gains in hiring, household wealth and consumer confidence would help boost the housing recovery and give greater momentum to the economy.
“Next year we think housing is going to continue to grow at a fairly solid pace,” said Daniel Silver, an economist at JPMorgan Chase & Co. in New York. “You have a story of things getting better in the economy, better job growth, driving the numbers.”
Estimates in the Bloomberg survey of 30 economists ranged from a decline of 1 percent to an advance of 5 percent.
Stocks were little changed as the Standard & Poor’s 500 Index headed toward its biggest annual gain since 1997. The S&P 500 fell less than 0.1 percent to 1,840.69 at 11:13 a.m. in New York.

Year Ago

Purchases dropped 4 percent from the year prior on an unadjusted basis after a 2.7 percent decrease in the 12 months ended in October, the NAR reported.
The pending sales index was 101.7 on a seasonally-adjusted basis. A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the Realtors group.
Two of four regions showed a decrease from October, with pending home sales in the Northeast dropping 2.7 percent and the Midwest falling 3.1 percent. Pending sales rose 2.3 percent in the South and 1.8 percent in the West.
Economists consider pending home sales a leading indicator because they track contract signings. Existing-home sales are tabulated when a contract closes, usually a month or two later.
Purchases of previously owned homes dropped 4.3 percent to a 4.9 million annual rate in November, the lowest level of the year, the National Association of Realtors reported earlier this month. Nonetheless, the NAR projects 2013 will be the best year for the industry since 2006, with an estimated 5.1 million transactions.

‘Cyclical Low’

“We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014,” NAR chief economist Lawrence Yun said in a statement.
New-home sales were close to a five-year high in November as builders responded to pent-up demand unleashed by employment gains and record stock prices.
The S&P/Case-Shiller national home-price gauge rose 11.2 percent in the third quarter from the same period in 2012, the biggest year-over-year advance since the first three months of 2006. Its index of property prices in 20 U.S. cities, set for release tomorrow, probably increased 13.5 percent in October from a year earlier, according to a Bloomberg survey.
Higher mortgage rates are also reducing affordability. The average rate for a 30-year, fixed mortgage was 4.48 percent in the week ended Dec. 26, up from 3.35 percent a year earlier. In August, the rate reached a two-year high of 4.58 percent.

Slower Growth

After two years of rapid-fire growth, the housing market shows signs of returning to normal, said Budge Huskey, president and chief executive officer of Coldwell Banker LLC, a real estate services firm in Madison, New Jersey.
“We’ve been picking up slack, that’s why the pace has been so torrid,” Huskey said in an interview. “Going forward, when we start to take a look at year-over-year gains and activity, it’s going to appear far more boring, which is not a bad thing.”
Investors and speculators who contributed to the run-up in property values in recent years are becoming a less-important factor in the market, Huskey said.
“We’re getting on the right track,” he said. “We’re now getting to a real estate environment that’s more about the fundamentals and less about these external factors that are artificially shaping the recovery.”

Ending extension for federal unemployment triggers housing concerns

News that the federal government has decided to forego an extension of long-term benefits for the unemployed prompted the California Employment Development Department (EDD) to fire off a warning notice to impacted workers.
The news affects housing mildly since many of these workers also carry mortgage debt that is now at risk without the continuation of the unemployment lifeline. In just California, the EDD says more than 220,000 long-term unemployed citizens have been notified that they will lose the federally funded extended benefits in two weeks unless lawmakers renew the extensions.
"Though the decision to renew the unemployment benefit extensions is in the hand of Congress and the President, the EDD is warning our customers that, if no further action is taken in Washington D.C., their federal extension benefits will end on Dec. 28," said Sharon Hilliard, EDD’s chief deputy director.
The development prompted the organization, Keep Your Home California, to remind homeowners that it offers 12 months of mortgage assistance under the Unemployment Mortgage Assistance Program.
"To qualify for our unemployment program, you have to receive benefits within the last 30 days," said Diane Richardson, program director for Keep Your Home California. "We have made a concerted effort to make sure homeowners receiving benefits make that call before the end of January."
Richardson says the group can pay as much as $3,000 a month to help an unemployed California borrower who applies for the program. Keep Your Home California has a partnership with the California EDD office, which sent out a special mailer advising impacted unemployment beneficiaries of some of the mortgage assistance available to them.

$500 Billion Drop in Fannie/Freddy/Ginnie MBS Insurance- AKA- less lending

The headwinds of rising interesting rates and the end of the refinancing wave could reduce agency MBS issuance by more than 30% next year.

 

Gross Fannie Mae, Freddie Mac and Ginnie Mae MBS issuance will total more than $1 trillion in 2014, down over $500 billion from 2013, MBS strategists at Bank of America Merrill Lynch are forecasting.
“That forecast is aligned with our forecast for total originations of about $1.2 trillion," Mortgage Bankers Association chief economist Mike Fratantoni told NMN.
The interest rate on the 10-year Treasury note rose above 3% on Thursday. The yield on the 10-year Treasury could reach 3.75% by yearend 2014 as the Federal Reserve proceeds with tapering and purchases fewer and fewer U.S. Treasury and agency mortgage-backed securities, accord to the MBS strategists.
“Assuming a linear taper for the Fed, its net MBS purchases in 2014 could total $240 billion,” down from $480 billion in 2013, according to a Dec. 20 BAML “Securitization Weekly” report.
Homebuilders are optimistic about the outlook for 2014, but they remained concerned about tight credit and recent declines in mortgage purchase applications, the MBS strategists noted. “As a result, we continue to think that, due to persistence of a tight mortgage credit regime, mortgage purchase volume is more likely to surprise on the downside in 2014.”
December is generally a slow time of year for buying a home. Yet purchase mortgage applications are “continuing to run more than 10% below last year’s pace,” Fratantoni said.

Happy Holidays

2013 has been an enchanted year.  On this Holiday Season, The HomeLiberty Team extends to you and your family a joyous and wonderful holiday season.  We look forward to working with you in 2014.

New Home Sales Fall

New home sales slipped 2% in November after an 18% jump in the month prior as higher prices may be sidelining some potential buyers.

The Census Bureau reported Tuesday that sales of newly constructed homes fell to a 464,000 seasonally adjusted annual rate in November from a 474,000 rate in October.
Tuesday’s report shows that new single-family home sales are up 17% from a year ago.
“The slight drop of new home sales in November from the month prior is no cause for alarm as the market remains near a five-year high in sales,” says Quicken Loans vice president Bill Banfield.
However, the inventory of new homes for sale remains tight.
The government report shows there were just 169,000 new homes on the market as of Nov. 30, which represents a 3.1-month supply at that the current sales pace. At the end of October, there were 179,000 new homes for sale and builders completed construction on 11,000 homes in November.
Yet demand for new homes is strong and it’s pushing up prices, according to economists at IHS Global Insight. The average price hit $340,000 in November, up 17% from a year ago.
“Increased buyer traffic and low inventories combined to lift the average sales price to its highest recorded value,” the Global Insight economists said.
The Census Bureau recently reported that single-family starts in November jumped to the highest level since March 2008.

AllRegs Provides Financial Education for Consumers

AllRegs is offering mortgage lenders and consumers financial education courses to help them meet requirements set forth by the Consumer Financial Protection Bureau.

As part of best practices, a mortgage lender should be supporting consumers with understanding the path to homeownership, as well as providing knowledge with regard to maintaining a home throughout the length of the mortgage.
To support this ideology, AllRegs is now providing online training that any lender can make available to their consumers, members, borrowers and potential borrowers. This homeownership training curriculum can seamlessly be accessed by users through a lender’s website.
All courses are approximately one hour, with over 22 titles to choose from including how to make and stick to a budget, the impact of credit scores, defining the industry players that homeowners will meet, and the mortgage process itself.
In addition, consumers can be made aware of how to avoid predatory scams and learn about their consumer rights.
“Financial education is a key component of any lender program to support the consumer’s protection in financial decisions,” says Dan Thoms, executive vice president of AllRegs, based in Eagan, Minn. “Lenders can now seize the opportunity to provide this turnkey financial education to their consumers and meet CFPB requirements.”

MGIC’s November Cures Outpace New Delinquencies

Normally, delinquencies increase this time of year because of holiday spending, S.A. Ibrahim, the CEO of competitor Radian Group noted in an interview a couple of months ago.
The mortgage insurer started the month with 109,629 loans in its inventory of delinquent loans. It received 8,012 new notices of delinquency in November.
However, 8,429 delinquent loans cured during the month. In addition, MGIC paid claims on 2,553 and rescinded or denied coverage on an additional 146 loans.
Furthermore, because of the settlement with Bank of America, another 1,846 loans originated by Countrywide were removed from the inventory. This brought the inventory down to 104,637 on Nov. 30. On the same day one year earlier, there were 143,153 loans in the delinquent inventory.
MGIC’s primary new insurance written during November was $2.2 billion, excluding Home Affordable Refinance Program loans. This is down from $2.4 billion in October, but similar to the NIW volume for November 2012.
Radian Guaranty had $3 billion of NIW in November, down from $3.5 billion in October and $3.84 billion in November 2012.
Its delinquent inventory started the month with 63,874 loans and the company received 4,501 new notices.
But cures took 3,793 loans out of the inventory along with paid claims on 1,747 loans. Radian denied or rescinded coverage on 279 loans, bringing the inventory to 62,556. One year prior it was at 92,770 loans.
Last week both MGIC and Radian got buy recommendations from Goldman Sachs.
The most recent data for the Mortgage Insurance Cos. of America, the trade group MGIC and Radian make up two-thirds of the membership, is for October. During the month, the group’s members did NIW of $8.7 billion, including HARP loans, down from September’s $9.6 billion and October 2012’s $11.5 billion.
However, the cure/default ratio was 93.9%, an improvement over 82.7% in September.

Citigroup, Wells Fargo Sued by Los Angeles for Discriminatory Lending

The city filed complaints against both banks yesterday in federal court in Los Angeles. Citigroup and Wells Fargo have been engaged in discriminatory lending to minority borrowers since at least 2004, which placed the borrowers in loans they couldn’t afford and caused a high number of foreclosures in minority neighborhoods, Los Angeles said.
The fact that the two banks’ foreclosures are so “disproportionately concentrated in minority neighborhoods is not the product of random events,” according to the complaints. It reflects and is fully consistent with the banks’ “practice of targeting minority neighborhoods and customers for discriminatory practices and predatory pricing and products.”
Homeowners in the second-largest U.S. city lost about $78.8 billion in home values as the result of 200,000 foreclosures from 2008 through 2012, the city said, citing a report by Alliance of Californians for Community Empowerment and the California Reinvestment Coalition. The lost property tax revenue to the city has been $481 million, according to the complaints.
Liz Fogarty, a spokeswoman for New York-based Citigroup, said the lawsuit is without merit.
“Citi is proud of our efforts to make sure our lending standards are fair to all of our customers,” Fogarty said in an emailed statement. “Citi considers each applicant by the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis.”
Tom Goyda, a spokesman for San Francisco-based Wells Fargo, said the accusations are baseless.
“Wells Fargo is deeply disappointed by the city attorney’s decision to file a meritless lawsuit rather than collaborate together to help borrowers and homeowners in Los Angeles,” Goyda said in an emailed statement. “Wells Fargo has been a part of Southern California for over a century and we are proud of our record as a fair and responsible lender.”

Citigroup, Wells Fargo Sued by Los Angeles for Discriminatory Lending

The city filed complaints against both banks yesterday in federal court in Los Angeles. Citigroup and Wells Fargo have been engaged in discriminatory lending to minority borrowers since at least 2004, which placed the borrowers in loans they couldn’t afford and caused a high number of foreclosures in minority neighborhoods, Los Angeles said.
The fact that the two banks’ foreclosures are so “disproportionately concentrated in minority neighborhoods is not the product of random events,” according to the complaints. It reflects and is fully consistent with the banks’ “practice of targeting minority neighborhoods and customers for discriminatory practices and predatory pricing and products.”
Homeowners in the second-largest U.S. city lost about $78.8 billion in home values as the result of 200,000 foreclosures from 2008 through 2012, the city said, citing a report by Alliance of Californians for Community Empowerment and the California Reinvestment Coalition. The lost property tax revenue to the city has been $481 million, according to the complaints.
Liz Fogarty, a spokeswoman for New York-based Citigroup, said the lawsuit is without merit.
“Citi is proud of our efforts to make sure our lending standards are fair to all of our customers,” Fogarty said in an emailed statement. “Citi considers each applicant by the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis.”
Tom Goyda, a spokesman for San Francisco-based Wells Fargo, said the accusations are baseless.
“Wells Fargo is deeply disappointed by the city attorney’s decision to file a meritless lawsuit rather than collaborate together to help borrowers and homeowners in Los Angeles,” Goyda said in an emailed statement. “Wells Fargo has been a part of Southern California for over a century and we are proud of our record as a fair and responsible lender.”

ACLU Sues FHFA over Limiting Eminent Domain

The subprime mortgage meltdown resulted in more than four million homeowners already foreclosed upon and nearly 11 million borrowers are currently underwater. Communities with large African-American and Latino populations, such as Richmond, Calif., and Irvington, N.J., have been particularly hard hit.
That is why Richmond has adopted a plan to use eminent domain to purchase securitized underwater mortgages so it can re-issue new mortgages for the homeowners on terms that reflect the current value of their properties. If the owners of the securities refuse to sell at fair market prices, the city proposes to use eminent domain to buy them in order to lower a borrower’s monthly mortgage payments.
“If eminent domain can be used in blighted neighborhoods to seize property that will be turned over to private developers, then eminent domain should also be available to help homeowners stay in their homes and to stabilize neighborhoods,” said Rachel Goodman, staff attorney with the ACLU’s Racial Justice Program.
But the FHFA has threatened legal action against Richmond and any other city that uses eminent domain to reduce mortgage principals and denying credit to people seeking mortgages in hard hit communities. The American Civil Liberties Union and the Center for Popular Democracy want the FHFA to provide details about its relationship with the financial industry on this issue, according to the lawsuit.
Community groups in October filed a FOIA seeking information about the FHFA’s exchanges with banks and financial institutions regarding eminent domain, but the agency never responded which led to this lawsuit.
“Struggling families need options, not threats,” says Ady Barkan, staff attorney with the Center for Popular Democracy. “As cities explore solutions that can work for them, the FHFA should be encouraging programs to end the foreclosure crisis, reduce debt, and rebuild our economy, not clamping down on them.”
An FHFA spokeswoman declined comment on the pending litigation.
The Secretary of the Treasury has called for FHFA to permit the entities it oversees to use targeted principal reduction in their loan modification programs. The Congressional Budget Office estimated that this program could save taxpayers $2.8 billion.
While both homeowners and taxpayers would benefit from a program of principal reduction, the FHFA has declined to implement a principal reduction program on loans owned by Fannie Mae or Freddie Mac.
“The FHFA has taken an aggressive stance on this issue in a way that has harmed minority communities. The public deserves to know why,” says Linda Lye, staff attorney with the ACLU of Northern California.

How Can We Have a REAL Real Estate Recovery, when mortgage applications are falling and values are rising? Who is buying these homes, and what are their intentions?

Mortgage applications tumbled during the week ending Nov. 29, sinking 12.8% from the last report, the Mortgage Bankers Association said Wednesday.
Similarly, the refinance index also dropped 18%, hitting its lowest level since the beginning of September 2013.
The purchase index dipped 4% from the previous week after recording a slight fall in the last update.
Overall, the refinance share of mortgage activity fell again and now represents 63% of all applications filed, down from 66% a week ago.
The 30-year, fixed-rate mortgage with a conforming loan limit increased to 4.51% from 4.48%, while the 30-year, FRM with a jumbo loan balance edged up to 4.49% from 4.48%.
Furthermore, the 30-year, FHA rate escalated to 4.17% from 4.14%, and the 15-year FRM rose from 3.52% last week to 3.56%.
Meanwhile, the average contract interest rate for a 5/1 ARM fell to 3.09% from 3.18%.

Senators warn HUD, Treasury about lingering eminent domain proposals

The eminent domain controversy in Richmond, Calif., continues with several senators publicly asking housing regulators to push back at any proposal that would allow municipalities to offer principal write-downs to underwater borrowers by acquiring their mortgages through eminent domain.  
So what prompted the strongly worded letter four senators mailed to Department of Housing and Urban Development Secretary Shaun Donovan and Treasury Secretary Jack Lew?
The answer apparently is an eminent domain rescue plan that reached a little too far for the senators' liking.
The city of Richmond, Calif., has gone as far as mailing letters to mortgage holders, asking them if the city can buy out their interests in underwater mortgages at a discount.
In the same letter, the city reportedly threatens to take over the mortgages using eminent domain if a deal is not reached.

This particular action prompted the letter from the senators advising Donovan and Lew that the Obama administration has been relatively silent on the issue and should give the mortgage market back-up.

While the senators noted the Federal Housing Finance Agency (FHFA) has publicly voiced its opposition to eminent domain, saying it could “negatively affect the extension of credit to borrowers seeking to become homeowners," the senators believe the Obama administration "has been largely silent on the subject."
The four senators, Pat Toomey (R-Pa.), John Boozman (R-Ark.), Mark Begich (D-AK) and Heidi Heitkamp (D-ND), told Lew and Donovan they want more answers from the Obama administration after a HUD representative told them the housing agency is monitoring the situation, but failed to specify what actions need to be taken.
Fearing eminent domain in Richmond will send shock waves through the housing market, the senators warned regulators of a dire impact on the entire mortgage lending space if eminent domain fully takes root.
To address the issue, the senators want HUD to use its existing authority to prevent the FHA from insuring mortgages on any properties affected by an eminent domain proposal.

Home Values to Rise Only 2.7% by October 2014

Home values have fallen in two consecutive months for the first time since October 2011, according to Zillow data.
The Zillow Home Value Index through October is $162,800, a slight 0.1% drop from the previous month. And even though home price appreciation was up 5.2% on a yearly basis, this represents a much slower pace than the 7% figure that was seen over the summer.
“The months-long period of annual home value appreciation rates in the 6 and 7% range was great while it lasted but we knew it would not continue indefinitely,” said Stan Humphries, chief economist at Zillow. “The slowdown we’ve seen these past few months was expected, and is largely welcome news for a market still struggling to find its natural balance.”
Out of the 388 metropolitan statistical areas covered by Zillow, half experienced monthly home value depreciation in October from September. Among the 30 largest markets Zillow tracks, 10 exhibited a month-over-month drop in home prices, while two more were flat.
Over the next year, national home values are forecasted to increase just 2.7%, which is approximately half the current pace, Zillow says. The biggest declines are projected to occur in St. Louis (down 1.5%), Philadelphia (drop of 0.9%), and New York (decline of 0.7%).
Meanwhile, renting a housing unit continues to be costly in October as it went up from the month before and a year ago by 0.2% and 2.3%, respectively.
“The conditions that led to the robust appreciation experienced earlier this year, including historically low mortgage interest rates, high affordability, low inventory and high demand, are waning,” Humphries says. “In their place, we’re beginning to see more inventory and rising mortgage rates, which will lead to further normalization in the market going forward.”

REO and Foreclosure Sales Rise as Short Sales Fall

After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction and bank-owned sales.

During October, short sales represented 5.3% of the more than 5.6 million annualized pace of residential sales, according to data from RealtyTrac. This is a 6.3% decline from the previous month and an 11.2% drop from a year ago. The states that had the highest percentage of short sales during October were Nevada (14.2%), Florida (13.6%), Maryland (8.2%), Michigan (6.7%), and Illinois (6.2%).
Meanwhile, foreclosure auction sales to third-parties accounted for 2.5% of all sales, which is nearly double the amount from last October.
REO sales, which were 9.6% of the overall total, increased on a monthly and yearly basis too, from 8.9% and 9.4%, respectively. Markets where bank-owned sales represented at least 20% of its single-family homes, condominiums and townhomes sold include Stockton, Calif., Las Vegas, Cleveland and Riverside, Calif.
“The combination of rapidly rising home prices—along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home—means short sales are becoming less favorable for lenders,” said Daren Blomquist, vice president at RealtyTrac.
In October 2012, only 33.9% of all residential sales were cash sales. But this October, they represent 44.2% of the monthly sales, with Florida, Nevada, Georgia, South Carolina, North Carolina, Michigan, Illinois and Ohio all having a higher percentage than the national average.
However, institutional investor purchases are down dramatically in October to 6.8% from 12.1% the prior month and 9.7% a year ago.
The national median sales price of all residential properties was $170,000 in October, RealtyTrac says, up 6% from a year earlier. Meanwhile, a foreclosure or REO housing unit sold for a median price of $110,000

New lending rules set to raise the cost of borrowing: S&P

Analysts prep for extended foreclosure timelines, fewer loan modifications

The January launch of the ability-to-repay rule and the associated qualified-mortgage definition will raise the overall cost of originating home loans, with borrowers taking the brunt of the financial hit, Standard & Poor’s Rating Services said Tuesday.

A few things won’t change, credit analyst Jack Kahan with S&P noted, but the new rules will increase expenses, extend foreclosure timelines and prompt servicers to select the foreclosure option over loan modifications and deeds-in-lieu of foreclosure in future circumstances.

S&P, which looked deeply into how the January launch of the rules will impact mortgage finance, warned that more borrowers are going to have a hard time accessing mortgage credit. And when they do, it will take longer and cost more in some cases.
While originators and aggregators are expected to continue in their origination of non-agency loans using existing credit standards, some originators are going to insist on limiting their risk to only loans that meet the qualified mortgage's 'safe-harbor standard', to ensure the underlying underwriting standards shield the company from litigation risk.

So who will be most impacted by the rules?
S&P says borrowers wanting interest-only products are likely to experience a slowdown in the borrowing process. And, under new underwriting standards, a very specific class of borrowers — those with high net-worth and non-wage incomes — may find it takes a bit more work to get through the originations process in 2014.
The end result will be a market where some lenders have no choice but to originate a few non-QM loans.
Raj Date, a former Consumer Financial Protection Bureau official, recognized room in the non-QM space earlier this year and launched Fenway Summer, a firm that hopes to offer lending solutions to borrowers who fall outside QM.
But no matter how firms respond, the January shift is going to have some impact.
Any expenses related to the changes will be passed onto borrowers, nullifying the basic principal of protecting homeowners from unexpected losses, S&P said when analyzing the slew of new rules.
Prices are expected to go up to cover new processes completed by originators in the underwriting process, the ratings firm said.
"Ironically, originators will need to watch these costs carefully, as they may increase points and fees, which will determine whether a loan can be considered a QM," S&P concluded.

LPS: Foreclosure inventory hits lowest level since 2008

The foreclosure inventory rate is down almost 30% from last year and 26% from the beginning of 2013 as the housing market stabilizes and fewer homes fall into a state of distress, Lender Processing Services (LPS) said Friday.
The company's First Look Mortgage Report from LPS found that the loan delinquency rate fell 2.8% from the prior report to 6.28% in October.
Additionally, after 18 months of continuous decline, the inventory tumbled to its lowest level since the end of 2008 and fell to 1.28 million loans, or just 2.54% of currently active mortgages.
In its mortgage report, LPS took a closer look at loan level data from its database, examining 70% of the overall mortgage market.   
Meanwhile, year-over-year delinquencies dropped 10.69% from October 2012.
The total foreclosure pre-sale inventory rate continued to mend and hit 2.54%, declining 3.23% month-over-month and 29.61% year-over-year.
A spokesperson for LPS noted that while delinquencies are down 2.8% from last month they are not quite at the lows witnessed back in April (6.21%), May (6.08%) or August (6.20%), but they are heading in that direction.
Furthermore, the number of properties 30 or more days past due dipped to 3.152 million, while the number of properties 90 or more days late fell slightly to 1.283 million.
As a whole, the total pipeline of delinquent loans or properties in foreclosure hit 4.43 million.
"Looking at the state-by-state breakdown, Mississippi has overtaken Florida in terms of the largest population of non-current loans, at 15.1% (which correlates to a delinquency rate of 13% - the highest in the nation by far - and a 2.1% foreclosure rate),” LPS added.
Mississippi, Florida, New Jersey, New York and Louisiana are the states with the highest percentage of non-current loans.
On the other end of the spectrum, Colorado, Montana, South Dakota, Arkansas and North Dakota ranked as the states with the lowest percentage of non-current mortgages.

Monday Morning Cup of Coffee: MBS tapering by Christmas is possible, but unlikely

Monday Morning Cup of Coffee is a quick look at the news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.
Some market analysts say all they want for Christmas is a tapering of the Federal Reserve's asset purchases, while others remain uncertain about the issue.
But as CNBC reports, the week ahead could provide a few clues as to the Fed's current position.
The big question is whether the Fed is ready to begin winding down its monthly Treasury and mortgage-backed securities purchases by the end of this year. Past reports suggest it’s unlikely, but CNBC is not ruling out the possibility just yet. Some analysts are even wondering if a December taper is coming, the news agency says.
The answer to that question – or at least a hint of what's to come – could arrive as early as this week even with job numbers still well below preferred levels.
In the days ahead, the markets will hear from Fed Chair Ben Bernanke, who speaks Tuesday in a prelude to the Federal Open Market Committee meeting minutes on Wednesday. If QE tapering is to begin in 2013, those two events could reveal the Fed’s next steps or at least provide investors some clues.
Fitch Ratings is offering bond investors a look at one area of housing that generally remains somewhat off the radar screen. Bonds backed by military housing remain suprisingly stable as occupancy levels hold steady against the backdrop of strong turnover, a recent report from Fitch Ratings finds.
The research firm says "adequate project operations and alignment between currently appropriated basic housing allowances and underwriting projections have created a stable environment."
Housing unit turnover is currently higher than expected, Fitch noted, but average occupancy remains at 95.6%.
Everything is more expensive in San Francisco. But, if you think you can save money by renting instead of buying, think again.
High demand combined with a low housing supply has led to frequent surges in rent within the Northern California metro.
One couple interviewed by the San Francisco-Chronicle is about to watch their monthly rent double from $2,000 a month to $4,000. This steep climb occurred after the couple's landlord obtained an exemption from rent-control regulations. Now the couple – like many others – is having to move from the place they've called home for several years. They only have a few months to find a new rental in the housing-challenged area.
The Volcker Rule enacted by Congress in 2010 to ensure banks separate their trading and depository activities was supposed to be rolled out by this year, but regulators tweaking the rule have yet to finalize it.
What’s holding it up? The National Journal says it’s not the complexity of the rule, but the structure of the prudential regulators themselves.
Apparently, the big issue is the regulators taxed with working together on the Volcker provisions are struggling to come up with a final strategy and rule.
The rule has already missed a few deadlines, and the 2013 deadline may suffer the same fate, the publication suggested.
Nevertheless, a busy week is in store for the housing market, with two key reports coming out in the next few days. The National Association of Homebuilders Housing Market Index is scheduled for release on Monday, followed by the existing home sales report on Wednesday. Click here to access the HousingWire U.S. Economic Calendar.
No additional banks failed in the U.S. last week, according to data from the Federal Deposit Insurance Corp.

Application Volume Down 2%, Likely to Fall Further

Mortgage application volume is likely to fall even further than the nearly 2% it did during the week of Nov. 8, an industry participant comments.

The rate spike which took place last Friday means application volume for this current week will be horrendous, says Brent Nyitray, director of capital markets at iServe Residential Lending. Interest rates have remained at those high levels since then. The 30-year fixed-rate mortgage gained 17 basis points in the week ended Nov. 12 to 4.22%, according to Zillow Mortgage Marketplace.
Friday’s rate movement was a result of the strong employment numbers reported that day, coming on top of stronger-than-expected growth in the gross domestic product reported on Thursday, says Zillow chief economist Stan Humphries as well as HSH.com vice president Keith Gumbinger.
HSH.com’s data have rates 11 basis points higher as of the afternoon of Nov. 12 over the previous week.
Refinance applications declined 2% from the previous week, while purchase applications were down 1% on a seasonally adjusted basis, according to the Mortgage Bankers Association. Purchase applications were down 6% on an unadjusted basis for the same week one year ago.
Refis made up 66% of applications submitted during the week.
The average contract rate for the 30-year conforming FRM (MBA defines this as a loan with a balance of $417,500 or under) for the survey period is 4.44%, a gain of 12 basis points from the previous week. Federal Housing Administration-insured loans had an average contract rate for the week of 4.16%, an increase of nine basis points.
The rate for the jumbo 30-year FRM is up 11 basis points to 4.48% and the rate for the 15-year FRM is up eight basis points to 3.52%.
The average contract rate for the 5/1 adjustable-rate mortgage increased three basis points to 3.11%. ARMs made up just 7% of the week’s applications.

A Real Recovery Will Not Happen Until Mortgage Backed Securities Are Reformed

Loss severities for mortgage bonds continue to sluggishly improve even as home prices make gains, Fitch Ratings reported this week.
Home prices grew roughly 14% nationally, and even as much as 30% locally in states such as California.
However, loss severities have only improved 5% since the fourth quarter of 2011. While investors in residential mortgage-backed securities may have been hoping to benefit from rising prices during the liquidation process, liquidation timelines are growing, offsetting the potential for larger gains.
"Longer timelines translate to higher servicer advancing and property maintenance costs, which cut into the higher liquidation proceeds afforded by the home price environment," said Fitch director Sean Nelson.
He added, "On average, distressed loans that liquidated in third quarter-2013 hadn’t made a payment in 32 months. This is nearly twice as long as the average liquidation timeline in 2008."
The increasing focus by servicers on loan modifications and other alternatives to foreclosure continues to reduce the number of liquidations. Nonetheless, it has also contributed to higher severities on loans considered for — but not ultimately received — a foreclosure alternative as a result of additional time required.
Consequently, a rapid improvement in loss severities isn’t expected in the short term as timelines continue to increase.
The average liquidation timelines reached 32 months in the third-quarter, which is more than twice as long as average timelines during the housing heyday.
However, lower severities for loans that are currently performing may default in the future.
Interestingly enough, timelines for loan remaining in foreclosure or real estate-owned properties reached an all-time high in the third quarter, increasing at a faster rate in 2013 than in any prior year.
For instance, 32% of seriously delinquent loans have not made a payment for more than four years, up from 7% at the start of 2012, Fitch noted.
"As the inventory of distressed properties declines to a more manageable level, timelines are expected to improve," Nelson said.
He continued, "Lower loan-to-value ratios and shorter liquidation timelines should lead to meaningfully lower severities for loans that liquidate two to three years from now."

Home Appreciation to Slow in 2014: Zillow

Housing economists and real estate investment and market strategists are forecasting U.S. home value appreciation to slow down not only in 2014, but the next five years too, according to a Zillow survey.

Home prices are expected to end 2013 up nearly 7% year-over-year before slowing down considerably through 2018. The 108 survey respondents are predicting appreciation rates to be about 4% in 2014, and eventually fall to 3.4% in five years.   
National home values could exceed their May 2007 peak by the first quarter of 2018, the survey says based on current expectations for home price appreciation, as well as surpass the $200,000 threshold by the end of that same year.
“The housing market has seen a period of unsustainable, breakneck appreciation, and some cooling off is both welcome and expected,” said Stan Humphries, chief economist for Zillow. “Rising mortgage rates, diminished investor demand and slowly rising inventory will all contribute to the slowdown of appreciation.”
Most panelists (58%) also said they would like to see the federal government maintain a considerable role in the mortgage market. Only 8% of those surveyed said the government should have a “non-existent” role in the conforming market.
The federal government accounted for 50% of all new mortgage originations at the beginning of the 21st century, but now backs approximately 90%, says Terry Loebs, founder of Pulsenomics LLC, an independent research and consulting firm that conducted the home expectations survey on behalf of Zillow.
Survey respondents said they would like to see the government support 35% of mortgage loans going forward, which is roughly the level that was seen in 2006.
“Policy discussions centered on reforming the nation’s housing finance system have only just begun,” Humphries said. “How much mortgages will end up costing average consumers, and the continued availability of traditional mortgage products like the 30-year fixed rate mortgage, are among the critical issues currently at stake for consumers in these debates.”

A preliminary count of FHA single-family originations in September shows a 30% drop in endorsements from the prior month

Federal Housing Administration lenders originated 68,500 single-family loans in September, according to the Obama administration’s Housing Scorecard that was released Friday. Purchase mortgage transactions comprised 72% of September FHA loan production.
Friday’s report shows purchase mortgage transactions comprised 49,500 of originations and 38,500 involved first-time homebuyers.
FHA lenders originated 97,700 loans, according to the FHA Production Report released last month. August loan production was down just 4% from July. Purchase loan endorsements totaled 63,800 in August.

Fannie and Freddie’s Strong Earnings Mask Struggling Housing Market

Over the past year, Fannie Mae and Freddie Mac have been giant refinancing machines generating huge profits that have been flowing into the U.S. Treasury.

These profits have allowed Freddie to finally reach a point where it can pay back all the assistance it has received from the federal government since it was placed in conservatorship in September 2008. Fannie is only one quarter away from reaching the same milestone.
But this emphasis on refinancing has left the housing market in a “rut,” according to Jim Carr, a former Fannie executive and currently a senior fellow at the Center for American Progress.
It is only “marginally performing” in terms of serving homebuyers, Carr told NMN. He blames this on high fees and tight credit standards.
“It is time to change leadership at the Federal Housing Finance Agency and appoint a person who can focus on homeownership and provide credit to first-time homeowners,” he said. Edward DeMarco is the acting director of the FHFA.
Mortgage Bankers Association president and chief executive David Stevens also is concerned about the lack of emphasis on the purchase market and the fact that DeMarco is still talking about raising loan fees and lowering loan limits.
“The direction of this GSE market is not supportive of creating a robust housing market recovery,” Stevens said in an interview.
The strong earnings reports released by Fannie and Freddie on Thursday show the conservatorship phase for the GSEs is over, Carr said. “It is no longer needed to protect taxpayers,” he said. Until Congress passes GSE legislation, the FHFA could take administrative actions to improve access to credit.
The MBA chief executive noted that Fannie and Freddie's turnaround is really based on a no-doc refinance program called HARP, the Federal Reserve's low interest rate policies and government guarantees.
Meanwhile, the GSEs are producing massive profits for the Treasury Department while the housing market is struggling. “The real work of addressing the purchase market recovery has been lost in all of this,” Stevens says.

Scramble To Exit Housing Market Peaks With "American Homes 4 Rent" IPO Pricing At 44% Discount

Two months ago we first observed the scramble by various hedge funds, in this case Blue Mountain, to take advantage of the peak sentiment in housing, and specifically rental housing (which just hit an all time high as reported previously) by rushing to capitalize on recent investments and dump exposure to the witless public.

Specifically, we envisioned the then just announced IPO of the aptly named American Homes 4 Rent (yes, with a "4" not "for"), also known as AMH, which however came at precisely the wrong time for the market: just as mortgage rates were soaring and Colony American Homes postponed its own parallel IPO. Two months later, with the market about to pass 1700 and fears about the housing market put back in the shelf despite a glaringly obvious collapse in mortgage demand, these IPOs are back and with a vengeance, although now reflecting a far more subdued, tapered if you will, view about the house leasing sector. Not surprisingly, AMH priced overnight, selling 44.1 million shares at a price at the bottom of the $16-18 range to raise a total of $706 million: a 44% discount to the $1.25 billion suggested in the prospectus filed back in June.

So much for the housing bubble.

This is what we wrote in June:

After the close today, another rental REIT, the hilariously named American Homes 4 Rent also scrambled to file its own IPO prospectus, realizing the game is almost up.  And while we will let readers delve into the financials of the massively unprofitable rental REIT on their own (S-11 link here), the firm which has already invested $2.5 billion to purchase some 14,210 properties across the US, which in an ideal world would generate an average of $15,755 in cash rent per property (and a solid 9% cap rate if only on paper) suddenly also appears very worried about the rate compression between its assets and liabilities and can't seem to wait to cash out.

But what is most curious about the AH4R IPO is that it was only in November of last year that none other than Blue Mountain - the hedge fund located on the fifth floor of the JPM HQ best known for first raping then rescuing the JPM London Whale: one wonders just how much Andrew Feldstein might have overheard at the 48th Street Starbucks but we digress) invested over $70 million in the rental company. Six months later it is perfectly happy to be classified as a "selling shareholder."

Translation: the hedge funds that bought in barely six months ago into what everyone knew would be the easiest and most levered wave to ride the accelerated housing bubble, are now rushing to get out before the emperor's lack of clothes is obvious for all to see. If they can that is: for those who are forced to pull their IPOs, the sad housing reality summarized so aptly by Carrington is about to unfold.

Two months later the game is up, and those same hedge funds, while profitable, are willing to eat a 44% drop in their initially hoped for returns in just a two month period. From Bloomberg:

American Homes 4 Rent, based in Agoura Hills, California, sold 44.1 million shares for $16 each, according to data compiled by Bloomberg, after offering them for $16 to $18. The shares will start trading today, listed on the New York Stock Exchange under the symbol AMH.

The company, with almost 18,000 properties, is the second-largest in the U.S. homes-for-rent market, after Blackstone (BX) Group LP, and is going public at a time when investors are cooling on the fledgling industry. American Homes 4 Rent raised almost 44 percent less than the $1.25 billion amount estimated in an initial propectus by the company in June.

While American Homes 4 Rent has the benefit of strong leadership under Hughes and a diverse portfolio, it’s uncertain whether single-family owners can make money over the long term on par with other types of landlords, Dave Bragg, an analyst at Green Street Advisors Inc., said this week before the IPO. The two other REITs that have gone public -- Silver Bay (SBY) Realty Trust Corp. and American Residential Properties Inc.  -- are trading below their offering price.

Shares of other public single-family rental REITs have fallen as the companies have failed to show a profit, in part because they are acquiring houses faster than they can fill them with tenants. Silver Bay, based in Minnetonka, Minnesota, began trading in December at $18.50 a share and closed yesterday at $16.09. American Residential Properties of Scottsdale, Arizona, went public in May at $21 and has fallen to $17.54.

This Is Further Proof That The Banks Are Holding Back Inventory- Thus The Price Rise Is Artificial

 

Dutch-owned ING is continuing to dissolve non-insurance related assets as part of its bailout agreement with the government of the Netherlands. The latest announcement deals with the offloading of Alt-A mortgages in the United States. According to an article in the New York Times, the portfolio of mortgage securities, originally valued at 24 billion euros, or about $33 billion, will be sold at an expected $500 million profit for the Dutch government.
Of course, market participants offer some more perspective. The current value of the portfolio is now about 6.4 billion euros or approximately $8.8 billion. Nonetheless, the paper will be welcome to the market.
"We think the unwinding of the portfolio will be welcomed by the non-agency market as it will help relieve the lack of supply," said Greg Reiter, Head of RMBS Research at Wells Fargo Securities.
Adjustable rate mortgages slip in popularity in an environment of rising interest rates. But even so, the Motley Fool says, it can be a great mortgage product.
"The adjustable-rate mortgage, or ARM, may be the best option -- depending on your circumstances," writes Patrick Morris.
"The ARM is a curious one, as it often carries the lowest rate, yet it represented only 4.4% and 6.5% of all mortgages originated in 2009 and 2010 (the most recent years for which the data is available)," he adds.
Over to housing stories, Crain's New York Business ran an article harping on the lack of political action on rising housing costs in the big apple. but offered hope that a new regime may address it head on.
In that market, the less people make, the more they usually have to pay from their incomes for lodging. The issue may make or break the next candidate for mayor, the article points out.
"To keep this housing in good condition and create incentives for owners to keep it affordable for the long term, the next mayor should continue to use his housing agencies to offer low-cost loans and tax incentives to owners for capital repairs and energy-efficiency upgrades that will tamp down operating expenses and rent increases," the article states.
California seems to be doing well on the opposite end of the scale. Several private, high-end multifamily complexes aren't even finished with construction in San Francisco, yet they're already approaching half occupancy. Additionally, The Wall Street Journal talks about the national trend of building with only renters in mind.
For private apartment builders, it's the good times. San Fran is being flooded with young techies with great jobs. Three bedrooms can go into the $5,000 a month range, according to the San Francisco Gate. They may be flush with cash, but that won't equal more room to spread one's wings.
"They and many others moving into Upper Market may be downsizing quite a bit. Units measure as small as 450 square feet - 'teeny-weeny floor plans,' as one real estate blog described them," the article states.
Banks will have to do more to show greater survivability in harsh economic times according to an article in Bloomberg.
The stress test for 2014 will have to show reduced counterparty risk and cushion from large losses in business loans.
"The Fed is using the tests -- based on hypothetical adverse conditions and not forecasts -- to encourage the 30 biggest banks to build capital cushions against economic turmoil," the article states. "Twelve banks will be subject to the capital review for the first time."
The Federal Deposit Insurance Corp. closed no banks going into the weekend.

DeMarco's Job Is Safe- For Now!!!

A procedural vote designed to get Rep. Mel Watt, D-N.C., thrust quickly into the head job at the Federal Housing Finance Agency failed on the Senate floor this morning.
The failed cloture vote initiated by Democratic leaders in the Senate suggests that while Watt’s nomination is not dead, it has been significantly derailed.
If Democrats had obtained the 60-vote threshold in the procedural vote this morning, Watt most likely would have obtained full Senate confirmation within a week, Compass Point Research & Trading said. Achieving that threshold would have meant the Congressman could have obtained the FHFA spot with a simple 51 votes – a simple barrier with Democrats and like-minded Indepedents already set to give him 55 votes, analysts with Compass Point explained.

However, that was not the case. Senate Majority Leader Harry Reid, D-N.V., pushed for cloture to prevent a filibuster and procedural delays. With that vote failing this morning, Watt’s fight for the FHFA leadership post is now much more difficult. Reid's procedural vote failed by four votes, with a final 56-to-42 vote count.
"We do not believe that Senate Majority Leader Reid’s (D-NC) most recent nomination push will end if Rep. Watt’s nomination does not clear the 60-vote threshold today, but it will surely be a body blow to the effort," Compass Point said. "One way or the other, following today’s vote attention is going to quickly turn to Janet Yellen’s nomination to head the Federal Reserve as the Senate Banking Committee is expected to hold its hearing on the nomination as early as November 14."
As for what happens to the Watt vote, it’s likely to go idle for a while since it may be difficult for the administration to make a big public push for Watt ahead of his Feb. 28 filing deadline for his congressional reelection campaign, Compass Point said.
Watt went into the hearing with opposition against him.
While Watt had the backing of the Mortgage Bankers Association, conservative groups like Club for Growth released statements advising Senators to vote against cloture on the Watt nomination.
 "Congressman Mel Watt is not at issue – the policies he will pursue as head of FHFA are," said Club for Growth President Chris Chocola. "Mel Watt will almost certainly pursue a write-down of mortgage debt, which is a massive taxpayer-subsidized bailout that would create a massive moral hazard."
"Make no mistake – a vote for cloture on Mel Watt is simply a vote for a massive taxpayer-funded bailout, and the Club for Growth will treat it as such on our Congressional scorecard," added Chocola.
If Watt had obtained 60 votes this morning, his nomination would have been smooth sailing, and it’s likely he would have had the post as early as next week.
If cloture had been secured, he could have easily obtained the seat with 51 votes.
Today’s vote throws off that momentum.
Analysts with Barclays Securitized Products Research see a few possibilities from this point forward. Sen. Reid can either bring the confirmation up for another vote if Republican support surfaces, or the White House can nominate someone else such as Mark Zandi, chief economist for Moody’s Analytics, whose name has been flown around for some time now.
Other options include a White House recess appointment to make Watt director at the end of the Congressional session in December, or a decision from the administration to elevate one of Ed DeMarco’s current deputies to the position, Barclays noted.

Mortgage Banker's Association Sees Taper

t may be sunny in Washington D.C., the site of the Mortgage Bankers Association 100th Annual Convention & Expo, but predictions by the host's economists on mortgage originations turned very gloomy during a group breakfast with the press.

The MBA told journalists over plates of eggs, bacon and sausage that it would revise upwards its predictions for 2013 mortgage originations to $1.7 trillion from $1.6 trillion.

But the good news ended there.

The $1.08 billion in refinances will drop to $463 billion in 2014. The purchase originations will only rise from $661 billion to $723 billion, according to data provided by the MBA.

The MBA believes rates will keep pushing upward, going well above 5%, and remain that way through 2015. This will place downward pressure on refinances, leaving a gap that purchase mortgage originations can't fill.

"The mortgage market is tapering, even if the Federal Reserve is not," said MBA chief economist Jay Brinkman, in reference to the Fed buying large volumes of mortgage-backed securities. "If the Fed continues the pace of $40 billion a month, they will be buying in excess of 50% of every mortgage in the country."
The news comes amid reports that the Federal Reserve would do better holding these mortgages to maturity rather than selling. However, it is widely predicted the Fed will sell early next year, in order to reduce its record balance sheet of nearly $4 trillion.

Michael Fratantoni, vice president of single-family research and policy, said jobs remain a concern, and that not having one is a primary reason Americans aren't buying homes. And, the numbers may not be telling the whole story.
People have effectively stopped looking for work in many cases, it's the "discouraged worker" phenomenon," Fratantoni said. "You won't see a huge re-entry of people into the job market."

Families Blocked By Investors From Buying Homes- Repost from Bloomberg

Institutional purchases accounted for 14 percent of sales, according to a report today from RealtyTrac. That was the highest share since the real estate data firm began in 2011 to track transactions by that group, which it defines as buyers of 10 or more homes a year. All-cash sales rose to 49 percent from 40 percent in August and 30 percent a year earlier, a sign that rising mortgage rates since May have kept some people out of the market and that smaller investors are stepping up purchases.
“Both investors and traditional buyers are trying to snap up cheap homes before prices go higher, but the investors have the advantage of paying cash and not having to go through a convoluted mortgage process,” said Michael Hanson, a former Federal Reserve economist now working for Bank of America Corp. in New York. “People are being bid out of some markets because of investor demand.”
Wall Street’s influence on the residential real estate market is growing as the biggest investors, Blackstone Group LP (BX) and American Homes 4 Rent (AMH), have together bought about 60,000 homes across the country to benefit from low prices and rental demand from millions of former home owners who have lost properties through foreclosures.
The homeownership rate declined to 65 percent in the first half of this year from a peak of 69.2 percent in June 2004. The level is expected to stabilize at about 63 percent, adding more than 2 million households to the rental population, according to Morgan Stanley analyst Haendel St. Juste.

Pendulum Swings

Families are still able to live in single-family homes with a yard for their kids to play in, said Daren Blomquist, a RealtyTrac vice president. However, they’re sending their money to investor-landlords, rather than paying off a mortgage.
“The pendulum is swinging too far from the direction we saw during the run-up to the mortgage crisis,” Blomquist said in an interview. “Then, we tried to make everyone an owner. Now, we have people who have the income to pay a mortgage and have the desire to own a home who are stuck being renters.”
Blackstone has led hedge funds, private-equity firms and real estate investment trusts raising about $20 billion to purchase as many as 200,000 homes to rent after home prices plunged 35 percent from the 2006 peak.

Mortgage Rates

The ability of investors and cash buyers to outbid traditional home purchasers has grown after a spike in mortgages rates that began in May. The average fixed rate for a 30-year home loan jumped almost a percentage point to a two-year high of 4.58 percent in mid-October, according to data from Freddie Mac.
The average rate for a 30-year fixed mortgage dropped to 4.13 percent this week. It’s risen from 3.35 percent in May.
“There’s a tremendous pressure on inventory in the areas that are being dominated by investors,” said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage website. “People end up wanting to buy a home, but they can’t. All the homes have been converted into rentals.”
Daryl Dennis spends his days helping investors do that. A general contractor for Waypoint Homes, an Oakland, California-based real estate fund that buys more than 50 homes a month in the metro Atlanta market, Dennis oversees plumbers, painters and landscapers on about 20 single-family projects a month.
“The investors are ruling the market,” said Dennis, interviewed by phone while on the job at a project in Canton, Georgia, outside Atlanta. “The little guy can’t win if he’s up against a deep-pocket investor.”

Biggest Chance

The biggest chance for profit comes from buying bank-owned properties that often are sold in bulk, Dennis said. About 10 percent of September sales nationwide were properties that had been repossessed in foreclosures, according to the RealtyTrac report.
Las Vegas had the highest share of those sales, at 21 percent. In the California cities of Riverside and San Bernardino the share was 20 percent of the market, in Cleveland it was 19 percent and in Phoenix it was 18 percent, according to the report.
Atlanta was the top market for institutional investors, who accounted for 29 percent of all home purchases there in September, according to the RealtyTrac report. Las Vegas was second at 27 percent, followed by St. Louis at 25 percent, Jacksonville, Florida, at 23 percent, and Charlotte, North Carolina at 17 percent.

Flipping Houses

Adam Luesse is an investor in St. Louis who paid cash for five houses he turned into rentals. He also buys properties to renovate and resell at a profit, called flipping. He planned to list his latest flip, a two-bedroom home on the west side of the city, for sale today for $140,000.
“When financing became difficult, that pushed the entire lower tier of buyers into rentals,” Luesse said. “They either don’t have the down payment or they don’t have the credit score.”
Nationally, the median monthly rent was at an all-time high of $735 in the second quarter, according to U.S. government data. The rental vacancy rate, which measures the number of empty units, fell to 8.2 percent, the lowest since the first quarter of 2001.
The median price of a distressed residential property, meaning a property in foreclosure or a home already seized by a bank, was $112,000 in September, a discount of 41 percent from the $189,000 median price of a non-distressed property, according to the RealtyTrac report.

Foreclosed Properties

About 49 percent of homes were bought with cash, up from 40 percent in August and 30 percent a year earlier, the report said.
Investor demand for foreclosed homes has driven up prices at a pace not seen since the boom that ended in mid-2006. The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent in July from a year earlier, the biggest advance since February 2006.
While real estate values nationally are still 21 percent below their peak, investors’ mass purchases are helping push up values in cities hardest hit by the property crash, with a 27.5 percent surge in Las Vegas and gains of 18.5 percent in Atlanta in July from a year earlier.
“The housing market is tilting in favor of deep-pocket institutional investors, especially in cities that were hard-hit with foreclosures,” said RealtyTrac’s Blomquist “These guys will pay as much as they need to get a property and that’s squeezing out families looking for a home to live in.”

Pending home sales fall on declining home affordability

 

The number of real estate contracts signed and recorded declined 5.6% from August to September, as home affordability receded under the influence of higher mortgage rates, home prices and consumer uncertainty, the National Association of Realtors concluded Monday.

The NAR Pending Home Sales Index – a barometer of real estate contract signings – fell from an index score of 107.6 in August to 101.6 in September. It also declined 1.2% from year ago levels when the index hovered at 102.8.
This is the lowest index level reached since December of last year, and NAR is blaming the influence of declining home affordability, lower consumer confidence and a government shutdown that shook up both construction activity and home sales.
"Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity," said Lawrence Yun, NAR’s chief economist. "In addition, government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases."
The numbers suggest a lackluster fourth quarter, with Yun saying for the first time in 29 months pending home sales failed to come in above year ago levels.
"This tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014," he said. "Even so, ongoing inventory shortages will continue to lift home prices, though at a slower single-digit growth rate next year."
Regionally, the pending home sales index fell the most in the Northeast, declining 9.6% to an index score of 76.7. The Midwest index declined 8.3% to 102.3, but remained 5.7% above year ago levels. The South also saw sales slip 0.4% to an index score of 116.2 even though the index is still 2% above year ago levels.
The West sales index fell 9% in September to an index score of 97.3, also down 9.8% from a year earlier.
However, 2013 was a solid year for home sales overall. Numbers recorded in the first part of the year will make 2013 a high performing 12-month period overall.
NAR says total existing-home sales will end up 10% higher when compared to 2012 levels, with 5.1 million sales expected. This could even hold heading into 2014, the latest NAR report says.

Meanwhile, the national median existing-home price is expected to rise 11% to 11.5% for all of 2013, while experiencing a moderate 5% to 6% gain next year.

GSE's report 21.5% drop in purchases from August

The government-sponsored enterprise reports purchases of single-family and multifamily loans totaled $28 billion in September, down 21.5% from August.
Single-family refinancings totaled $16 billion or 62% of all mortgage purchases in September. In August, Freddie purchased or guaranteed $21 billion in refinancing.
Freddie says “relief refinancings” comprised 39% of the $16 billion in refis in September. During the first half of this year, HARP refis made up 56% of relief refinancings.
The GSE purchased $1 billion in multifamily loans in September, which brings the total for the first nine months of this year up to $19 billion.
The GSE also reports that the serious delinquency rate on its single-family guaranty portfolio continued to decline.
The percentage of loans that are 90 days or more past due fell to 2.54% in September, down 6 basis points from August. A year ago, Freddie had a 3.2% serious delinquency rate.

Half of Foreclosed Homes Occupied

Foreclosure sounds like the end of the line, but actual eviction can take months or years -- even after the bank has repossessed a home.

RealtyTrac estimates that 47% of the nation's foreclosed homes are currently occupied. The percentage actually tops 60% in some hot housing markets, like Miami and Los Angeles.

Those still living in repossessed homes include both former owners and renters. Either way, their time in the homes is mortgage and rent free.
To arrive at its estimate, RealtyTrac compared its database of foreclosed homes with postal records showing whether mail was still being collected and whether change-of-address forms had been filed.
Even when occupants leave voluntarily, old owners typically take about two months to vacate.
With renters, it can take a year or more. "If someone has a bona fide rental agreement, we have to abide by that," said Amy Bonitatibus, a spokeswoman for JP Morgan Chase.
Related: California city's drastic foreclosure remedy
One issue, according to Wells Fargo spokesman Tom Goyda, is that the eviction process can take months as it winds through the legal process. The timing varies widely based on local laws and the backlog of cases in individual courts.
Goyda said the bank has been trying to speed up the process by offering cash to prompt occupants to leave.

 

Flashback: Shiller calls the housing crash

In addition, some states, like Alabama and Utah, have so-called redemption periods of up to a year during which former owners can get their home back if they can find the means to pay off their mortgages.
Related: Surprising foreclosure hotspots
And banks may be in no rush to kick people out. They will take their time in markets with a lot of homes for sale and depressed prices. Plus, letting homeowners stick around can help protect homes from abuse.
"Although one thinks lenders take losses by not moving evictions forward, they're still faring better by keeping the properties occupied," said Pauliana Lara of the Consumer Action Law Group in Los Angeles, which works with homeowners to fight foreclosures. "Many foreclosed homes get vandalized or squatters move in."

Single-Family Recovery Is ‘Uneven and Below Par’

Overall, housing starts remain at low levels compared to the two previous decades. “In fact, they are hovering around the levels seen during the low point of the recession in the early 1990’s—a time when the U.S. population was about 20% below where it stands today,” according to the researchers Daniel Hartley and Kyle Fee.
They note that construction of new single-family units “remains quite low, while construction of multifamily units is back near its average in the late 1990s and early 2000s.”
This divergence may reflect the overhang of foreclosed homes on the market, which is constraining single-family building activity.
It also could reflect the “permanent impact of the financial crisis” as people choose between renting and owning. “Some potential homebuyers now realize that rental properties may be a more appropriate housing option for their circumstances. Moreover, underwriting standards have risen, which will delay home purchases for younger families and for individuals with blemished credit records,” the authors say.
Their paper is entitled “Housing Recovery: How Far Have We Come?”

Minorities Treading Water On Mortgage Credit- Recent News

Minorities are treading water at well below their percentage of the population as far as getting mortgages is concerned.

Home Mortgage Data Act data for 2012 from the Federal Financial Institutions Examination Council show $354 billion in home loans was extended to Hispanics, African-Americans, Asian-Americans, American Indians and Native Hawaiians. Total mortgage volume for the whole industry came to $2.1 trillion, a hefty 50% increase from $1.4 trillion in HMDA lending in 2011.

The 16.6% minority share was roughly equal to 2011’s share of 17%. This kind of share is representative of the past several years. In 2011, for example, the share was 16.7%.

Minority lending must be somewhat higher, since there is no requirement to self-identify by race on mortgage applications, and many do not. More than $300 billion in mortgages, or about 15%, was not associated with any race.

But even if you assume all the unidentified loans were to minorities (extremely unlikely), that would still be less than their percentage of the population (one third, and growing).

Breaking it down, Asians got the biggest dollar volume of loans, at $165 billion. Hispanics followed, at $109 million. African-Americans received $65 billion in home finance. American Indians got $7.5 billion, just edging out Native Hawaiians, at $7.4 billion.

Hispanics made a big dollar gain last year from 2011, when the total was $74 billion. That’s $35 billion more, or just about 50%. Native Hawaiians made a big percentage jump from the year before, when $4.6 billion was funded. That’s more than a 50% boost.

Wells Fargo ran a clean sweep of the minority categories. Its $50 billion in loans to minorities represented some 15% of all institutions’ volume (more than 7,000 reported HMDA data last year). No other lender made even half as much dollar volume of mortgages last year.

Wells made $24 billion in mortgages to Asians last year, according to the HMDA data. It extended $15 billion in credit to Hispanics, $9 billion to African-Americans, $1 billion to American Indians, and $900 million to Native Hawaiians.

The bottom line here could be relief that loans to minorities haven’t retreated further in an era of tight mortgage credit. But they certainly haven’t gone forward much, either.

Fed Is Fretting Over Tapering

Minutes from the Federal Reserve’s most recent Federal Open Market Committee meeting suggest key monetary policymakers spent their last gathering pulled in different directions, whipsawed back and forth between the reality of employment growth and the expectations of investors.
Still, at the time, most members thought tapering would end by the close of 2013.
"Most Fed officials still expected to begin tapering before year end and to halt it completely by mid-2014," analysts with Capital Economics said. However, economic data weakened leading up to the meeting, changing the mood a bit.
The minutes, which are from the Sept. 17-18, show a clear divide between FOMC members. A dominant majority decided not to taper the Fed’s monthly purchases of mortgage-backed securities and Treasurys after experiencing months of rising mortgage rates and a general slowing in the housing economy as the market inched toward expectations of a Fed tapering in September.
The housing market's stall combined with improving - but hardly impressive - employment data prompted Fed officials to delay tapering once again. But the full board was not in agreement.
As always some members opposed the FOMC’s decision not to announce some tapering of asset purchases. Other members pushed for a small tapering on the grounds that a failure to taper in September could send a message of pessimism to a market already anticipating some pullback in quantitative easing.
Another FOMC subgroup supported limited tapering, with the recommendation that the Fed carve back Treasury purchases first.
It’s clear when reviewing the minutes that rising mortgage rates over the summer spooked FOMC members, causing them to turn cold on their QE clawback plans.
"Several participants judged that overall financial conditions had tightened notably over the past few months, as seen most importantly in the rise in mortgage rates," the FOMC minutes stated. "While acknowledging that it was too early to assess the effects of such an increase, they expressed concerns that tighter financial conditions might weigh on the recovery in the housing sector."
Other members of the FOMC pointed to higher equity prices and loosening lending standards as signs of improving financial conditions and justification for some tapering.
Housing remained a top concern, with the Fed cognizant of how MBS tapering could impact the overall housing sector.
Some members expressed concern that "an announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signaling the committee's willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy."
The minutes also show a Fed fretting over how its communications play out in public.
"With many outside observers expecting a decision to reduce purchases at this meeting, some participants emphasized a need to clearly communicate the rationale behind any decision not to do so, in order to avoid conveying a message of pessimism regarding the economic outlook or to reinforce the distinction between decisions concerning the pace of purchases and those concerning the federal funds rate," the minutes stated.

Fannie Mae Updated Underwriting for Short Sales and Foreclosure

Fannie Mae is updating its automated underwriting system so that lenders can report when troubled borrowers completed a preforeclosure sale so they aren’t treated as if they went through foreclosure when they apply for a new mortgage.

Under Fannie guidelines, a borrower that completes a short sale or deed-in-lieu transaction can be eligible for a new loan after two years. In cases where a servicer forecloses on a borrower, they are not eligible for seven years.
Starting Nov. 16, Desktop Underwriter will “offer lenders the ability to instruct DU to disregard the foreclosure information after validating the preforeclosure sale with the borrower,” according to Fannie Mae senior vice president Stephen Pawlowski.
When a borrower completes a short sale, the credit report often reflects a foreclosure and a preforeclosure sale. Currently, DU records it as a foreclosure, which means the borrower has to wait seven years to qualify for a Fannie mortgage.
“By making this change to DU in November, lenders will have the opportunity to get a DU recommendation based on actual foreclosure/preforeclosure credit history and with the appropriate waiting period applied,” Pawlowski said in a FM Commentary.

Vampire REO's and the fake inventory picture

RealtyTrac has identified two threats that are harming housing recovery efforts right now: vampire REOs and zombie foreclosures.
According to the Irvine, Calif.-based data firm, about 47% of bank-owned homes across the country are still occupied by the previous owner who was foreclosed on by their lender, deemed to be vampire REOs.
These properties often will look like normal, nondistressed homes. But in reality, they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these types of homes to try to recoup their losses on soured loans.
Houston, which has a total REO inventory of 6,582 homes, has the highest percentage of vampire REOs with 65%, RealtyTrac said.
Another metropolitan area that has a large volume of vampire bank-owned inventory is Miami. Here, vampire REOs account for 64% of the city’s REO inventory of 30,868 assets.
Meanwhile, other notable markets in which vampire REOs are larger than 50% of the city’s bank-owned inventory levels include Los Angeles (61% of its 12,992 REOs), Cincinnati (57% out of 5,398), Cleveland (52% out of 5,523), Philadelphia (52% of the 4,881 bank-owned housing units), Riverside, Calif. (52% of 10,801 REOs), Dallas (51% out of 6,676) and Orlando (half of its 12,614 total REO inventory).
RealtyTrac also said homes that are still deteriorating through the foreclosure process but have been vacated by the homeowner—known as zombie foreclosures—make up 20% of its database. Often, these homes are not maintained properly and represent a threat to the quality of the surrounding neighborhood, therefore causing property values to fall in markets where these assets sit.
Additionally, the homeowner who left the property may not be aware that he or she is still responsible for property taxes and any other expenses that come with homeownership, leaving them in an even tougher financial spot when they discover this reality.
Cities where zombie foreclosure inventory is greater than 25% of the total amount of properties in foreclosure are St. Louis, Indianapolis, Jacksonville, Las Vegas, and the Florida markets of Palm Bay, Tampa, Lakeland, Fort Myers and Sarasota.
“These threats to the housing market can be bargain opportunities for proactive buyers and investors,” RealtyTrac said. “Zombie foreclosures represent a prime opportunity for a short sale that helps the homeowner, the neighborhood and even the hesitant-to-foreclose bank in the process; while vampire bank-owned homes represent imminent inventory that you can act on before other buyers and investors are aware of it.
The following data is based only on 220,000 out of the total 525,000 REOs nationwide that RealtyTrac shows as active.

Detroit Is Turning A Corner- According to Clear Capital

Detroit’s struggles during the latest financial crisis and housing meltdown has been an ongoing issue for a long time, but Clear Capital data suggest the city is turning the corner.

According to the real estate asset valuation and collateral risk assessment provider’s September Home Data Index Market Report, Detroit was named the second highest performing metropolitan market behind only San Francisco.
In September, Detroit home prices saw quarterly and yearly growth of 4.3% and 23.3%, respectively, therefore bringing the median home price to $107,500. Comparatively, the national median home price is $215,000.
Through September, Detroit home prices are still down 64.5% from peak values, whereas San Francisco is only 28.2% below its peak.
“Strong performances in San Francisco and Detroit remind us that in a dynamic market, the only constant is change,” said Alex Villacorta, vice president of research and analytics at Clear Capital. “As demand calibrates to local economic environments, markets will start to find their natural equilibriums with moderating gains ahead,” that should invite new markets, such as Detroit, “to share the spotlight as their recoveries continue to evolve.”
Villacorta noted that Detroit’s struggle with relatively high REO saturation over the last several years delayed recovery. But low price points and REO saturation improvements now are driving gains.
Over the last four years, REO saturation in Detroit has been cut in half, but it still remains relatively high at 31.7%. Furthermore, the Truckee, Calif.-based data firm said that since March, the saturation rate for the Motor City has fallen by 11.5 percentage points.
As metro Detroit and its dilapidated housing market starts to emerge from years of a full-blown crisis several local and national organizations are gathering to contemplate the validity of past and future economic development strategies.
And For the first time the National Alliance of Community Economic Development Associations is not holding its annual summit in Washington, but in Detroit from Oct. 2-4.
NACEDA’s 7th Annual Summit brings to Michigan national experts in financial empowerment, housing development, land banks and land trusts, community benefit agreements, and place-making who will meet with local community leaders to discuss future community development options.
After filing for bankruptcy earlier this year city officials are concentrating on new solutions. The summit’s logo reads: “With necessity comes ingenuity!”
Speakers include Matt Cullen, president and CEO of Rock Ventures, the subsidiary of Quicken Loans that has invested more than a $1 billion in revitalizing Detroit. Rock Ventures moved 10,000 employees to Detroit's urban core and recruited 100 companies to join them.
Since Detroit’s low-income neighborhoods were the hardest hit by the city’s downfall and continue to face major challenges, Sheila Crowley, president and CEO of the National Low Income Housing Coalition, will share with the audience NLIHC’s expertise as one of the leading supporters of the United for Homes campaign, whose stated goal is to reform the Mortgage Interest Deduction, achieve a fairer tax policy and increase the efficiency of the National Housing Trust Fund.
Also in attendance will be the commissioner of New York City’s department of consumer affairs, Jonathan Mintz, who is credited for launching the Office of Financial Empowerment, a local coalition designed to help leverage the power of municipal government to reduce poverty while promoting long-term financial stability and asset building.
Mintz is expected to offer insights about how to maximize city government-based financial empowerment initiatives.
Up to 100 economic development professionals from across the U.S. are also expected to attend.