Recent Articles
Dec 21, 2009 | No Comments | Sean Mills
A ’shadow’ inventory of properties close to foreclosure or seized but not yet for sale has been growing.
A supply of 1.7 million homes headed for sale because of foreclosure or delinquency looms over the nation’s housing market, which could dampen progress toward recovery should the Obama administration fail in its efforts to aid struggling homeowners, [...]
A ’shadow’ inventory of properties close to foreclosure or seized but not yet for sale has been growing.
A supply of 1.7 million homes headed for sale because of foreclosure or delinquency looms over the nation’s housing market, which could dampen progress toward recovery should the Obama administration fail in its efforts to aid struggling homeowners, researchers said.
A variety of measures to keep discounted bank-owned properties off the market — including moratoriums on foreclosures by major lenders and federal initiatives aimed at keeping people in their homes with mortgage payments they can afford — has helped increase a backlog of so-called shadow inventory 55% in the year ended Sept. 30, according to a report released Thursday by First American CoreLogic, a Santa Ana-based real estate research firm.
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Dec 15, 2009 | No Comments | Sean Mills
PALMDALE, Calif. — Schoolteacher Shana Richey misses the playroom she decorated with Glamour Girl decals for her daughters. Fireman Jay Fernandez misses the custom putting green he installed in his backyard.
But ever since they quit paying their mortgages and walked away from their homes, they’ve discovered that giving up on the American dream has its [...]
PALMDALE, Calif. — Schoolteacher Shana Richey misses the playroom she decorated with Glamour Girl decals for her daughters. Fireman Jay Fernandez misses the custom putting green he installed in his backyard.
But ever since they quit paying their mortgages and walked away from their homes, they’ve discovered that giving up on the American dream has its benefits.
Both now live on the 3100 block of Club Rancho Drive in Palmdale, where a terrible housing market lets them rent luxurious homes — one with a pool for the kids, the other with a golf-course view — for a fraction of their former monthly payments.
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Dec 13, 2009 | No Comments | Sean Mills
Earlier this week I received an email from Ilene at Phil’s Stock World about her interview with a Commercial Real Estate Developer.
Ilene writes “Hi Mish, I thought you might find this interesting, and perhaps want to use some or all of it. I know my interviewee well, and his thoughts in this area have been [...]
Earlier this week I received an email from Ilene at Phil’s Stock World about her interview with a Commercial Real Estate Developer.
Ilene writes “Hi Mish, I thought you might find this interesting, and perhaps want to use some or all of it. I know my interviewee well, and his thoughts in this area have been consistently correct.”
With that backdrop here are a few excerpts from Interview with a Commercial Real Estate Developer about the CRE Industry.
Mr. Solomon (name changed) is a CRE veteran with 40 years of experience developing commercial real estate in 15 states and has kindly agreed to be interviewed about the current conditions in the CRE market.
Ilene: What are you seeing in the CRE market now?
Mr. Solomon: CRE is undergoing deleveraging with the rest of the economy, debts are being reduced or going into default. Large numbers of projects are not cash flowing and will have to be liquidated, or ownership will have to be transferred. Concurrently, there’s an oversupply caused by the same ill advised financing that led to the overbuilding.
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Dec 10, 2009 | No Comments | Sean Mills
After months of waiting, opportunity investors are finally getting a break. Over the past 12 months, defaults on CMBS loans have jumped from less than 1% to nearly 9%. Overwhelmed with the sheer number of troubled securitized loans falling into their laps, many special servicers are opting to sell or liquidate the notes and underlying [...]
After months of waiting, opportunity investors are finally getting a break. Over the past 12 months, defaults on CMBS loans have jumped from less than 1% to nearly 9%. Overwhelmed with the sheer number of troubled securitized loans falling into their laps, many special servicers are opting to sell or liquidate the notes and underlying properties rather than work with borrowers to keep distressed loans alive.
“When it comes to the investor community, we’re hearing there’s more and more meaningful engagement with special servicers as they continue to get overwhelmed and are clearly electing sale/liquidation strategies,” commented Dave Warmund, a vice president for Trepp LLC, during a webinar titled “Distressed CRE Debt: Where are the Opportunities?” The presentation was delivered to an audience of investors and media on Tuesday.
Trepp bases its research on mortgage and property performance of more than 80,000 CMBS loans representing approximately 100,000 properties with an outstanding balance of more than $800 billion. The New York-based provider of CMBS and commercial mortgage information was selected by the Federal Reserve Bank of New York as a collateral monitor for CMBS as part of the Term Asset-Backed Securities Loan Facility (TALF) in June.
To dispose of troubled loans, special servicers now favor liquidation strategies that include foreclosure, bankruptcy, REO, deed in lieu of foreclosure and note sales. Over the past 60 days, there has been an 18.3% increase in such strategies, representing 1,387 loans, up from 1,172.
Meanwhile, over the same period strategies that focus on working with borrowers to cure distressed loans, including modification, resolution, extension and discounted payoff have increased by only 4.9% to 812 loans, up from 774.
To identify where future loans in distress will originate, Warmund advises investors to look at the underlying debt-service coverage of loans as well as net operating income (NOI).
“Regardless of whether loans are performing or not, there are 9,000 to 10,000 loans that have debt-service coverage under 1.0, or marginal coverage, many of which are not yet delinquent,” Warmund explains. Moreover, there are almost 4,800 loans backed by assets with deteriorating NOI that have experienced 20% to 50% decreases in cash flow. “This represents a large pool of loans that will provide opportunity for distressed asset buyers,” he says.
Prospective buyers of distressed assets also will benefit as the dollar volume of loans that are experiencing changes in credit quality continues to grow, according to Trepp. In November, for instance, $15.6 billion worth of CMBS loans were categorized as having deteriorating delinquencies, and another $14.8 billion were placed on a watch list. At the same time, some $9.1 billion in loans were sent to special servicing and another $3.4 billion had appraisal reductions.
By property type, the greatest likelihood of opportunity for distressed buying can be found in the hotel and multifamily sectors. At the end of November, 17.3% of all CMBS-backed hotels and 13% of multifamily properties were in special servicing. In contrast, just 4.9% of office properties backed by CMBS loans had been turned over to special servicing, although that sector makes up 30.2% of all CMBS loans.
Over the past two months, the Mountain region has recorded the biggest rise in the delinquency rate (10.4%), followed by the East South Central region (7.2%) and the West South Central region (6.6%).
Despite the distressed asset concentrations in specific regions or markets, trouble knows no geographic boundaries. “Because of the granularity cheap drugs online of the data at the loan and property level,” Warmund notes, “there are likely opportunities in virtually any market.”
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Dec 2, 2009 | No Comments | Sean Mills
Amid rising foreclosures and falling home prices, the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements, all in an effort to reduce risk to its $685 billion mortgage portfolio.
According to a recently released actuarial study, FHA’s secondary reserves have fallen [...]
Amid rising foreclosures and falling home prices, the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements, all in an effort to reduce risk to its $685 billion mortgage portfolio.
According to a recently released actuarial study, FHA’s secondary reserves have fallen below the required two percent level, to 0.53 percent of total insurance-in-force.
While FHA Commissioner David Stevens said in an interview on CNBC following that release that the FHA would not need additional federal funding to meet its loan online prescription medications losses, he added that FHA will be looking for new ways to reduce risk.
Those steps will include raising minimum borrower FICO scores, possibly requiring larger downpayments, and reducing the maximum permissible seller concession from six percent currently to three percent.
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Nov 25, 2009 | No Comments | Sean Mills
I skipped the MBA market index earlier …
The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey
The Market Composite Index, a measure of mortgage loan application volume, decreased 4.5 percent on a seasonally adjusted basis from one week earlier. …
The Refinance Index decreased 9.5 percent from the previous week and the seasonally adjusted Purchase [...]
I skipped the MBA market index earlier …
The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey
The Market Composite Index, a measure of mortgage loan application volume, decreased 4.5 percent on a seasonally adjusted basis from one week earlier. …
The Refinance Index decreased 9.5 percent from the previous week and the seasonally adjusted Purchase Index increased 9.6 percent from one week earlier.
…
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.82 percent from 4.83 percent, with points increasing to 1.19 from 1.18 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
Note: This is the lowest contract interest rate since mid-May.
Click on graph for larger image in new window.
This graph shows the MBA Purchase Index and four week moving average since 2002.
In the past, the MBA index was predictive of future sales, but it has been questionable canada pharmacy for some time. The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007 even though activity was actually declining.
Recently there has been a substantial number of cash buyers, so the MBA index missed the strength of the recent existing home sales increase. Still the recent plunge in the 4 week moving average of the purchase index is probably worth watching.
Source Article
Nov 20, 2009 | No Comments | Sean Mills
We’ve been saying it all along: Jobs jobs jobs. Without one, you simply can’t pay your mortgage. And that’s exactly what the Mortgage Bankers Association said in its Quarterly Delinquency Survey today: “Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP.”
So [...]
We’ve been saying it all along: Jobs jobs jobs. Without one, you simply can’t pay your mortgage. And that’s exactly what the Mortgage Bankers Association said in its Quarterly Delinquency Survey today: “Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP.”
So while you may think the economy is improving a bit, that doesn’t mean that the foreclosure crisis is improving.
But what about that government’s Home Affordable Modification Program (HAMP) which is supposedly helping hundreds of thousands of borrowers to avoid foreclosure? Well it is, but it’s not keeping pace with the problem.
The MBA reports that in Q3 the seasonally adjusted delinquency rate rose to 9.64 percent of all loans outstanding, up 40 basis points from Q2. Loans in the foreclosure process rose to 4.47 percent, up 17 basis points from Q2. Add it up and 14.41% of all loans in the U.S. are either delinquent or in foreclosures. Do I really need to tell you that that’s a new record?
Now for a few caveats. Many the loans that are in the modification trial period under HAMP (which is supposed to be three months) are listed in the 90-day+ delinquency bucket, so it’s quite possible that those loans will not go into foreclosure. However, the increase in the overall delinquency rate was driven by prime, fixed-rate loans, and those are loans that are far harder to modify. Why? Because they’re not delinquent due to some reset or faulty loan product or bad underwriting, they’re going bad because the borrower has lost his/her job and has no income. The bank can try to wait it out a few months to see if the job situation changes, but it’s likely that loan is going to fail, period.
Should I get started on the FHA now? You know I have to. Here’s the MBA’s work:
The foreclosure rate on FHA loans also increased, despite having a large increase in the number of FHA-insured loans outstanding. The number of FHA loans outstanding has increased by about 1.1 million over the last year. This increase in the denominator depresses the delinquency and foreclosure percentages. If we assume these newly-originated loans are not the ones defaulting and remove the big denominator increase from the calculation results, the foreclosure rate would be 1.76 percent rather than 1.31 percent reported.
So just go back to 10th grade math. You would think that if there were so many more FHA loans in the total pool that even if the delinquencies bumped up a bit, the percentage share would decrease. Not so, because a whole lot of FHA loans are going bad.
“Yesterday’s subprime is today’s FHA,” said Toll Brothers [TOL 19.99 
-0.52 (-2.54%) 
] CEO Bob Toll at a UBS home builder conference in New York. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.” And that from the luxury home builder.
One more thing from the MBA:
The number of loans 90 days or more past due or in foreclosure is now a little over 4 million as compared with 3.9 million new and previously occupied homes currently for sale, although there is likely some overlap between the two numbers. The ultimate resolution of these seriously delinquent loans will put added pressure on the hardest hit sections of the country.
Yes, four states (CA, NV, AZ, FL) continue to bear the brunt of the crisis, accounting for 43 percent of total U.S. foreclosures. 25 percent of all loans in Florida are in trouble. But the problem is spreading, especially in the Carolinas and Georgia and in states you might not expect like Utah.
I’d feel a little better about it if I had any idea whatsoever how many of the loans in the government’s trial modification program are actually performing well with the new payments, but alas we still have nothing from the Treasury Department on that. I put in yet another request yesterday for an interview with the HAMP czar, Michael Barr, but was once again declined.
I realize it may be too soon to tell how many loans have gone into permanent modifications because excess paperwork is dragging out the process and lenders are offering extensions, but by now Treasury must know at least how many borrowers in the program have missed a payment and, under the supposed rules, been disqualified. If that number is small, great! Just tell us, because the way things are going right now, a double-dip in housing is seeming less and less like a purchase drugs online theory and more like the status quo.
Source Article
Nov 20, 2009 | No Comments | Sean Mills
Renting costs in Southern California fell at an annual rate for the first time in 14 years, according to the freshest Bureau cheap drugs no prescription of Labor Statistics’ Consumer Price Index.
Local renters’ costs fell 0.1% last month vs. October 2008. Last such SoCal decline? A similar size drop in November 1995.
Renters weren’t the [...]
Renting costs in Southern California fell at an annual rate for the first time in 14 years, according to the freshest Bureau cheap drugs no prescription of Labor Statistics’ Consumer Price Index.
Local renters’ costs fell 0.1% last month vs. October 2008. Last such SoCal decline? A similar size drop in November 1995.
Renters weren’t the only housing winners in the CPI report:
- Homeowners equivalent inflation rate (purchase costs not included), fell at an 0.7% annual rate in October. That’s biggest SoCal drop since June 1995.
- Household energy costs in SoCal fell at an 0.7% annual rate in October.Actually, that’s the smallest drop in a string of declines that dates to last November.
- Household furnishings and operations fell at an 2.5% annual rate in October. That’s biggest SoCal drop since April 2008.
- Overall, SoCal housing inflation fell at an 0.6% annual rate in October — fourth consecutive drop and biggest since June 1983.
- As for the big picture, SoCal total inflation rate for all goods and services fell at an 0.4% annual rate in October. It’s the eighth consecutive drop — but that smallest in that string.
Nov 19, 2009 | No Comments | Sean Mills
On the MBA conference call concerning the “Q3 2009 National Delinquency Survey”, MBA Chief Economist Jay Brinkmann said this morning:
The problem is moving to prime loans, including fixed rate prime loans, and also FHA loans. “We are seeing the first hit on the weaker prime fixed borrowers.”
Remember the delinquency rate includes loans in modification (something [...]
On the MBA conference call concerning the “Q3 2009 National Delinquency Survey”, MBA Chief Economist Jay Brinkmann said this morning:
The problem is moving to prime loans, including fixed rate prime loans, and also FHA loans. “We are seeing the first hit on the weaker prime fixed borrowers.”
Remember the delinquency rate includes loans in modification (something to remember – especially for the 90 day delinquent loans).
MBA expects unemployment rate to peak in Q1 or Q2 2010, and delinquencies to peak sometime after the unemployment rate peaks.
Brinkmann expects foreclosures to possibly peak in 2011 (last quarter he said late 2010). He changed the forecast for two reasons: he expects unemployment to stay fairly high, and he thinks the prime borrowers will hang on before defaulting, and all the foreclosure moratoria will delay foreclosures – a longer trailing effect than usual.
Note: Many more questions this time!
A few graphs …
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Nov 11, 2009 | No Comments | Sean Mills
The Obama administration said Tuesday that its mortgage-modification program has enrolled one in five eligible homeowners, a sign the effort is gathering momentum after a slow start. But so far few of those trial modifications are turning into permanent fixes.
The Making Home Affordable program has begun trial modifications for more than 650,000 borrowers since it [...]
The Obama administration said Tuesday that its mortgage-modification program has enrolled one in five eligible homeowners, a sign the effort is gathering momentum after a slow start. But so far few of those trial modifications are turning into permanent fixes.
The Making Home Affordable program has begun trial modifications for more than 650,000 borrowers since it was launched in February, according to data released Tuesday by the Treasury Department. That amounts to 20% of those eligible for the program. More than 217,000 trial modifications, or roughly one-third, were under way in just two states: California and Florida.
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