September Housing Report
In Riverside County:
Notice of Defaults-Over the last 120 days=14998
Notice of Trustee Sales Currently Scheduled=14575
Actual Trustee Sale-Over the last 120 days=7518
In San Bernardino County:
Notice of Defaults-Over the last 120 days=12044
Notice of Trustee Sales Currently Scheduled=11685
Actual Trustee Sale-Over the last 120 days=6258
Commercial, Apartments, Industrial, Agriculture & Land/ last 120 days
Riv. NOD=507 NOS=235 Sale=282 (The largest number is land)
SB. NOD=395 NOS=181 Sale=262 (The largest number is land)Source, Foreclosure Radar
This data is available for your specific area. In addition, municipalities may obtain all pertinent information, including updated contact information on any home within their city limits which may be of interest to them. This is of course a valuable resource for any property management company or code enforcement department.
Where Are All The Foreclosures?
The number of foreclosures before and after the announcement and implementation of the TARP program are startling and undisputable. RealtyTrac just reported that July 2008 to July 2009, foreclosures filings are up 18%. The promise of tax payer support for poor choices has obviously caused the banking industry to stop foreclosing. Why should they take an actual loss and then have to raise millions or billions to stay solvent? If they simply hold onto the assets and leave them on their books at a phantom value, they do not have to raise capital and we can postpone today’s challenges while we consider other issues as a Country. This expert is concerned about the buildup of inventory and the individual homeowner who may be struggling and is figuring out that it may be better to just stop making payments and wait to see what happens. This wait and see attitude is crippling our economy worse than if we were to set proper expectations and assist those in need with a soft landing approach. http://www.reuters.com/article/ousivMolt/idUSTRE5890VR20090910?pageNumber=2&virtualBrandChannel=0
Consider the second home industry. Boomers, who had purchased lots, or second homes in the Southwest, can no longer move due to a lack of value in their current home. Their plans are now on hold. In fact, there has been an increase in defaults on second homes as those who needed to sell their home in order to afford to move to their retirement homes have begun to tire of making two payments. Despite what industry leaders are saying in public forums, the fact of the matter is that we are once again building up another bubble. This is not MIT stuff. This is so simple, it’s unnerving. Filings of defaults and trustee sales have continued to go through the roof and yet actual foreclosures have dropped significantly. The need for modifications continues to climb to record numbers. Almost 5million are in some form of serious delinquency and that number is predicted to go to 13 million in the next four years by the Center for Responsible Lending, yet the industry has only helped a few hundred thousand to date. The demand is outpacing the actual modifications by such a large margin as to cause concern among many who track this data. The drop in foreclosures defies logic. Numbers simply do not lie. This issue will need to be addressed and addressed soon.
Here are a few fast facts from the Center of Responsible Lending;
*Number of homes lost to foreclosure, 1.5 million plus. (Through 08)
*Number of homes predicted to be foreclosed in the next four years, 13 million
*Homeowners late on their mortgage, 1 in 10.
*Homeowners in a negative equity position, 1 in 5.
*Property value lost due to nearby foreclosures, 502 billion. (2009)
If we assist with soft landing opportunities, such as short sales and deed in lieu foreclosure negotiations, we will be much better off. To do otherwise is only postponing the inevitable and not allowing those who have been sidelined for years, to take part in the American dream of homeownership. The expectations and vetting process of who qualifies for a modification and who does not must be made public by the decision makers. Every HUD counselor as well as those in the private sector should be able to go on-line and view that which is being viewed by the representative of the servicer/lender attempting to make a decision. This has been the industry standard since inception on the origination side of the business and it is exactly what is needed today for modifications. Open and transparent communication between all parties would go a long way to empowering the over worked and under paid HUD counselors and offer true hope for those who are simply waiting for an answer.
Allowing those who are struggling, to continue to place their lives on hold while holding out for hope, hurts everyone from the homeowner, to the sidelined buyer, to the County and City in which these parties reside.
What Happens If We Must “Mark-To-Market?”
The stress test seemed to accomplish one thing for sure; it slowed the rate of foreclosures down. In California, according to Foreclosure Radar, 72% of all foreclosures are voluntarily being postponed by the lenders. I talked about this a lot in my August Report you can read by clicking here; http://www.trulia.com/blog/chris_sorensen/
The concern that we must all watch out for is what happens if the assets being given one value while in the banks possession, becomes an actual loss when it is marked down to the real market value? Here is one educated opinion from National Mortgage News;
“The fair value of loans held by the nation’s largest commercial banks continues to decline, indicating that credit markets have not yet turned around and raising serious questions about the effectiveness of the government’s efforts to help the industry through the credit crisis. Among the banks that were stress-tested by the government in May, the difference between carrying values and fair values grew 14.4% from Dec. 31 to June 30 - to $164.4 billion. Observers said the data shows that it is getting even more difficult to find buyers for stressed loans and that banks’ efforts to jettison bad assets could be delayed. And if the Financial Accounting Standards Board advances a sweeping mark-to-market proposal, some banks might have to raise more capital to close their valuation gaps. “It is clearly a sign of stress that surprises me,” said Tim Yeager, a finance professor at the University of Arkansas and a former economist at the St. Louis Federal Reserve Bank. “I thought by now that we would have turned the corner, but things seem to be getting worse.”
Fact: The number of homes purchased in the IE between 2004 and 2007 were 359K.
Fact: We have the highest affordability in the IE in recent memory at 79%.
Fact: Bankruptcy filings in Riverside were up 82% from Jan to June over 08 same time.
Fact: 14+% unemployment in the IE and almost 10% in the US.
We may need to brace and prepare for a prolonged recovery. All of the experts keep pushing back their date of recovery, over and over again. I have been reporting that it will not come until 2012 for over a year now. When it does turn around, it will be robust. I believe the homeowners need to take this into consideration when making a decision as to whether they should stay or go! With recidivism on modifications still close to 50% as I wrote earlier, lenders would be better off negotiating short sales or deed in lieu options instead of note modifications. Soft landing approaches and educating homeowners how to avoid being scammed by a future landlord is something I believe we all need to focus on as well.
The FDIC ‘s watchlist grew to 416 banks in the second quarter .
FDIC Chairman Sheila Bair said this, …” The banking industry, too, can look forward to better times ahead. But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry’s bottom line.”
Here is the actual Press Release: http://www.fdic.gov/news/news/press/2009/pr09153.html
Negative Interest Rates in Sweden?
Sweden has actually gone negative on their interest rates! Sweden’s Riksbank became the first Central Bank in the World to introduce negative interest rates to encourage banks to lend. Others are watching closely. Bank of England’s Mervyn King has hinted he may follow suit to avoid a liquidity trap in the UK. Many in the G-20 recall Japans issues with respect to liquidity and wish to avoid this trap. It will be interesting to see what tools we use to stimulate lending. After all without lending, banks can’t make money! I like the idea of nudging them to do what they need to.
A Financial Global Tax?
Since many financial firms operate globally and avoid taxes as such, this could help shrink the influence and instability that comes from financial firms that seem to operate with impunity today.
Please support Elizabeth Warren of the Congressional Oversight Panel.
http://en.wikipedia.org/wiki/Elizabeth_Warren
http://www.ft.com/cms/s/0/08943b5a-926a-11de-b63b-00144feabdc0.html?nclick_check=1
Breaking Even Is Great News Today! The OTS actually had neutral news and that’s good.
Please read the Press Release from the Office of Thrift Supervision;
http://www.ots.treas.gov/?p=PressReleases&ContentRecord_id=576a1dfd-1e0b-8562-eb4e-20aae54f7f54
Good News From HUD. Housing Sales Are Up by 9.6% In July. Down 13.4% from Last Year.
http://www.census.gov/const/newressales.pdf
Reuters is reporting that AIG’s new CEO Robert Benmosche continues to impress many.
Benmosche reached out to AIG’s old CEO Maurice “Hank” Greenberg and asked for advice. This move is yet another sign that the US Taxpayers investment may finally have the leader it needs to right this ship. Benmosche’s approach of slowing things down and avoiding fire selling assets is pleasing investors. AIG stock is up 27%.
“Some, who had been there before, shouldn’t have been put in that spot. In my judgment, they did not have the breadth, intellect or experience necessary. Bob (Benmosche) has all of that.” Greenberg, Hank
In my opinion this is significant. If AIG can get righted and make an announcement that they are paying back the US Taxpayer, this will be yet another reason our GNP output will exceed expectation and bolster confidence which will lead to job growth.
Support Local Community Banks
With all the bank failures happening and the bigger banks making record profits, the smaller banks are left scratching their heads wondering why no one seems to care.
Here is what Simon Johnson from MIT Sloan Business School recently wrote; “Many smaller banks are getting squeezed – as reflected in the latest news on the FDIC’s “danger/sick list”. The smaller banks really do not seem to understand how they have been done in by the big banks – if they did get it, they’d be up on Capitol Hill and all over the media arguing strenuously for much tougher controls on bad big bank behavior. The lack of leadership among non-large banks is remarkable. “ He went on to report a disturbing fact; “The WSJ today has the data: borrowing costs for large banks are now lower than for small banks. This is, of course, a direct reflection of the government’s firefighting/firesetting strategy: unlimited cheap resources for large big banks; for small banks, not so much.”
More Regulation (Of the financial sector) Will Not Hurt Innovation.
I believe Volcker Said It Best. “He scoffed at the notion that clamping down on banks, hedge funds, and other players would stifle ‘innovation.’ The only innovation that real people cared about for the previous twenty or thirty years, he said, was ‘the automatic teller machine.’”
Who is Paul Volcker? Here you go:
http://en.wikipedia.org/wiki/Paul_Volcker
RESPA! Builders, Real Estate Brokers and Lenders Should Re-Think Their Past Practices.
Here is a direct quote from RESPA; “It is illegal under RESPA for anyone to pay or receive a fee, kickback or anything of value because they agree to refer settlement service business to a particular person or organization.”
Here is my question, why is this so hard for the industry to follow? They hire an attorney and come up with loopholes in this law in order to pay “rent”, “marketing fees”, “management fees”, etc. You name it; they have come up with it.
HELP Certification will help, but a change in attitude of the professionals is what is truly needed. Just say no to the “arrangements” and focus solely on what is in the best interest of the client, period.
It Sure Seems Like A Plot.
Many of us in the know recognize what is happening in the non-bank, banking industry and it is getting worse. Why should you care?, because you’re going to pay more for money for loans. Here is an industry insider warning those of us who educate and those who are in the business to lend money, need to heed this warning and convince you to call your Congressman. No one seems to be fighting for the little guy who is now being squeezed out of the business.
“…By making banks pay more for federal deposit insurance coverage the FDIC can raise additional funds. If a bank is forced to pay more for insurance coverage it stands to reason it will pay depositors less in terms of yield. In other words, the consumer is really footing the bill. And the consumer is footing the bill for higher origination costs because just four lenders - Wells Fargo, Bank of America, Chase and Citigroup - have (presently) a cartel-like lock on the business. Or is it just my imagination? Here’s a question: Why should any of these four be involved in warehouse lending? (Warehouse lending increases competition) If they choke off credit to nonbank lenders (by not stepping up their warehouse lending) all those customers might wind up in the branches of the cartel. It would be nice if Congress held a hearing on the mortgage cartel but they’re too busy finding ways to put nonbank lenders and brokers out of business. Too big to fail rules the land. Competition is dead…” Paul Muolo
Brokers, who once ruled the industry representing the borrower, are continuing to originate fewer and fewer loans. Brokers accounted for just 14.9% of originations in the first quarter of 2009. In short, this is not good for the consumer and the blame being laid at their feet for the banking ills, is unfounded. It is naïve to believe that these large banks that provided the wholesale channels and the wholesale product mix were completely taken by surprise to learn that the “Stated Income/Stated Asset and No Income/No Asset programs encouraged fraud. Further, to believe that they did not have any ability to manage their own underwriting staff that made the decision on the loan request is laughable. It defies logic to believe that the bank who created the programs, marketed them aggressively through wholesale channels, underwrote the Brokers submission and made the final decision on the loan request, is now blameless and crying foul about those nasty Brokers who took advantage of all.
With TARP and other government bailout programs, there seems to be no need to worry about paying for poor choices by moving forward on foreclosures. This seems to be coming at the expense of the tax payer, the community banks and the local communities which rely on sales tax revenue generated by a normal economy and foreclosure process. Buyers who buy in this market will run down to their local stores and purchase items for their new home. Those who had to move into a rental would do the same. Doing nothing hurts us all.
This Falls Under The Category Of, IT’S ABOUT TIME!
California’s implementation of the SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act) should happen in the next few weeks, according to the California Mortgage Bankers Association. For an active California loan broker this means they will have to be licensed as an individual - no longer can they use a company license and act as a loan officer of a company licensee…
If They Were Too Big To Fail, Why Are We Making Them Bigger?
Wells Fargo, BofA, Citi & Chase have gained additional market share with lower borrowing cost at tax payers’ expense. During this same time period, they have increased their fees and jumped head on into the pay day loan business and reduced available credit. The FDIC now has 400 plus community banks on their list to fail. Maybe we don’t need all of them, but limiting the ability of a few companies to monopolize our financial system may not be a bad move. Chase, BofA and Citi now issue one of every two mortgages and about two of every three credit cards. Please read:
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/27/AR2009082704193.html
Many Have Asked Where Were The Rating Companies In All Of This.
It turns out; they were getting paid by the companies they were rating. The accusations being that the better the rating, the bigger the contract you got. Not good. This just in:
A judge refused to dismiss a class-action lawsuit brought against Moody’s Investors Service (MCO), Standard & Poor’s (MHP) and Morgan Stanley (MS). The two ratings agencies had argued that investors couldn’t sue over deceptive ratings of private-placement notes because those opinions are protected by free-speech rights. However, the judge said First Amendment rights don’t apply in this case because the firm’s comments were distributed to a select group of investors and not to the general public. The ruling could affect Fitch Group and other rating agencies that have made similar claims.
Commercial Sector Continues To Struggle
Delinquency rates are continuing to increase for all commercial/multifamily mortgage investor groups, according to the most recent Commercial/Multifamily Delinquency Report from the Mortgage Bankers Association. Between the first and second quarters, the 30-plus day delinquency rate on loans held in commercial mortgage-backed securities rose 2.04 percentage points to 3.89%. The 60-plus day delinquency rate on loans held in life company portfolios rose 0.03 percentage points to 0.15%. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.17 percentage points to 0.51%. The 90-plus day delinquency rate on multifamily loans held or insured by Freddie Mac rose 0.02 percentage points to 0.11%. The 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.64 percentage points to 2.92%. “Lower levels of employment, the pullback by consumers and other aspects of the slowdown translated into a difficult operating environment for many income-producing properties. That in turn has led to increased stress on the loans those properties support,” MBA-Woodwell
RESPA, Title 12, Section 2605(e) Familiar? You Will Be!
This is a discussion which could take five pages. Don’t worry! The critical message is this; This is a new way for the public to be separated from their last remaining funds. In most cases it is a scam, perpetrated against those who are desperate after their modification has been denied. That’s not to say all inquiries are fraudulent and that there are not some very legitimate reasons to request the lender to “proof the note”, but this is the exception and not the rule.
http://www.scribd.com/doc/11903044/Respa-Letter
This can also fall under the category of be careful what you wish for. I have heard of cases in which the tables have been turned against a borrower in which, upon the inquiry they requested, it was proved they committed loan fraud. Not the turn of events they were hoping for.
As with any state or federal law, there will be those who will take the information I have provided here and attempt to “sell” it for one to three thousand dollars. No need, it’s free. However, I do not believe in attempting to “hang” the lender on a technicality. The reason I am bringing this up is because I continue to hear about it more and more from consumers who tell me they are being asked to attempt this for a fee. Just like the modification game, if it sounds too good to be true…
Consumers, Realtors & Lenders, This Is Must Know News from Herman Thordsen
A REMINDER ABOUT TRUTH-IN-LENDING LAWS, REG Z, HIGHER COST MORTGAGE LOANS AND ADVERTISING RATES TO AVOID LITIGATION
FACTS
Remember there are restrictions on the new “Section 35 loans.” These are the “higher priced mortgage loans” as opposed to the Section 32 high cost/high fee loans. As of July 30, 2009 early disclosures are required for any closed end extension of credit secured by the dwelling of a consumer excluding time-shares. The dwelling must be subject to RESPA. The Higher Priced Loan regulations are all effective Oct. 1, 2009. (tilman1.01[5])
The early disclosures must be delivered or placed in the mail within three business days after the creditor receives the consumer’s loan application and it must occur at least seven business days before loan consummation. The disclosure must state in conspicuous type size and format:
“You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”
Variable Rate Loans: Payment schedule must be labeled, “Payment Schedule Payments Will Vary Based on interest Rate Changes.” Type size and format are controlled.
Redisclosure of APR is required if it becomes inaccurate by more than ¼ of 1%.
No upfront charges on higher priced mortgage loans allowed other than reasonable credit report fee until creditor gives initial early disclosures. This includes no collecting of appraisal fee in any form whatsoever until the disclosures are given.
On HELOCs, even brokers must comply with the new advertising rules (tilman4.08, 226.16, .24). May only display terms that advertiser can offer or arrange now or in the future. Advertising that includes certain trigger words may require further disclosures.
There is of course more to this and for industry leaders this is old news. However, consumers need to be aware of their rights and Realtors need to be aware of possible delays in closings which could occur without proper disclosure done upfront.
The Treasury Is Pushing Short Sales
I will send an updated report on this shortly. In brief, the Treasury is looking to sign up vendors who specialize in this difficult transaction. Short sales typically net the lenders more money than all other choices. This is going to be one way to help move this inventory which is building up.
The industry has picked up steam on the modifications and is now on track to start 500,000 modifications by Nov. 1 as “requested” by the President. The last thing the industry wants in for Barney Frank to make good on his threat to attach another Bankruptcy Cram Down provision in the new regulatory reform bill.
Bigger Is Better!
At least if it is planned out well. I’m referring to counseling. I have been working hard to get the powers that be to agree to a list of “best practices” that we can all agree on when it comes to counseling the public. If speaking to 300 about Foreclosure Preventions is good, why isn’t 3000 better? Our elected leaders and economic development department heads, I’m sure, have asked the same question. A concerted effort, well organized, with lender and HUD counselors working together with the public agencies that have been impacted, is overdue.
Here are the issues that need to be addressed, regardless of who is teaching the public;
1. Explain what is happening in the market and offer well researched predictions so the public may make informed decisions about their future.
2. Explain what a note modification is and equally important, what it is not. Teach what is required to meet a modification request and who, legally, can perform a modification. Understanding ratios and how a lender must determine your ability and willingness to repay the debt.
3. Teach about modification scams, including RESPA Title 12 inquires.
4. Teach on the most recent changes and explain the benefits of those changes. What new programs have been unveiled that may benefit the public in their attempts to save their home.
5. Teach the public about Anti Deficiency protection, recourse vs. non-recourse, IRS Form 982, when to file your paperwork. 1099-A vs. 1099-C. Did the lender mark yes in box 5 claiming you are personally responsible?
6. Bankruptcy vs. Insolvency and when one should sit with their tax professional, or tax attorney. Hint; FIRST, before any other action.
7. Short Sale, vs. Deed in Lieu, vs. Voluntary Foreclosure. Key points in negotiations
8. Credit impacts. What are they and when will I be able to buy again.
9. Becoming a tenant again. How to avoid a landlord who is not making their payments. Understanding the Protecting Tenants At Foreclosure Protection Act of 2009.
10. Keeping great records and how to document your circumstances to help you today and into the future.
11. Understanding property taxes. Prop 13 and Prop 8. The Community Facilities Act of 1982, better known as Mello-Roos.
12. Creating a plan for your future. Creating hope for tomorrow and reminding the public that they are not in this alone is a message that all need to hear.
The order may be changed, but the message needs to be provided. Setting proper expectations and limiting the number of individuals who attempt to obtain a modification is needed in mass. Unless and until there is a complete turnaround in the number of modifications being completed, we will find ourselves with a stagnant economy and a fearful public. A five minute conversation, with a knowledgeable professional, could help determine, that based on a borrowers given circumstance, they simply do not qualify. False hope can be worse than a direct dialog with one who must consider alternative solutions.
USA HELP, Inc. is a non-profit funded by the County of Riverside and the IEERC, as well as other public agencies wishing to provide the most detailed and up to date information to the public and the public employees. We are here to serve and we will make our program available to any group, large or small, at no cost to the public.
USA HELP; “Consumer Protection through Education”
This report has been prepared by Chris Sorensen, President and Founder of HELP. The opinions expressed are his own and all information contained in this report is deemed reliable but not guaranteed. Custom information for individual communities can be made available.
www.freehomeownershiphelp.org
Chris Miscellaneous
