FHA to Toughen Mortgage Rules in Lenders Crackdown

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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Negative Equity Report for Q3

Nov 25, 2009 | No Comments | Sean Mills

Here is the Q3 negative equity report from First American CoreLogic mentioned last night. From the report:
Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgage than their homes are worth.
Data Highlights
Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity [...]

Here is the Q3 negative equity report from First American CoreLogic mentioned last night. From the report:

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgage than their homes are worth.

Data Highlights

Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity as of September, 2009. An additional 2.3 million mortgages were approaching negative equity, meaning they had less than five percent equity. Together negative equity and near negative equity mortgages account for nearly 28 percent of all residential properties with a mortgage nationwide.

The distribution of negative equity is heavily concentrated in five states: Nevada (65 percent), which had the highest percentage negative equity, followed by Arizona (48 percent), Florida (45 percent), Michigan (37 percent) and California (35 percent). Among the top five states, the average negative equity share was 40 percent, compared to 14 percent for the remaining states. In numerical terms, California (2.4 million) and Florida (2.0 million) had the largest number of negative equity mortgages accounting for 4.4 million or 42 percent of all negative equity loans

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Despite Government Aid, Foreclosure Crisis is Not Improving

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.

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SoCal rent costs fall, 1st dip in 14 years

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.

With F.H.A. Help, Easy Loans in Expensive Areas

Nov 20, 2009 | No Comments | Sean Mills

SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.

Policy changes in insurance, while introduced on a temporary basis, are becoming so popular that they could prove difficult to undo.

Back to Business
Risky IncentivesThis series examines the battles taking place to reshape [...]

SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.

MBA Forecasts Foreclosures to Peak in 2011

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:

Housing Leads the Economy, Existing Home Sales are Irrelevant

Nov 18, 2009 | No Comments | Sean Mills

After reading some of the commentary regarding the housing starts report this morning, it might be useful to reiterate these three points:
Residential investment is the best leading indicator for the economy.

Residential investment is reported quarterly by the Bureau of Economic Analysis (BEA) as part of the GDP report. We can also use monthly housing starts [...]

After reading some of the commentary regarding the housing starts report this morning, it might be useful to reiterate these three points:

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Mortgage Program Gathers Steam After Slow Start

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.

Foreclosures Continue to Put a Damper on Home Prices

Nov 11, 2009 | No Comments | Sean Mills

Funny thing is there is still a massive log jam of NOD/auction homes not making it to the market nor are they going back to the lenders.  The % of postponed auction properties ranges from 91-95% depending on the city and county here in most southern California markets.  How it will loosen up or when [...]

Funny thing is there is still a massive log jam of NOD/auction homes not making it to the market nor are they going back to the lenders.  The % of postponed auction properties ranges from 91-95% depending on the city and county here in most southern California markets.  How it will loosen up or when it will loosen up is anyone’s guess.  There is a lot of speculation with individual and group investors buying to flip which makes me think “hey is that how we got here in the first place?”  Unemployment at record levels, job loss still topping the daily news stories, national healthcare plan proposed..hey it is a great time to speculate.-Sean

Home prices continued to decline across the nation as sales of heavily discounted foreclosed properties weighed down the market.

Median prices of existing homes fell in 123 of 153 metropolitan areas during the third quarter compared with a year earlier, according to the National Association of Realtors. The national median price was $177,900, down 11.2% from the third quarter of 2008.

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Distressed Sales: Sacramento as Example

Nov 9, 2009 | No Comments | Sean Mills

Note: The Sacramento Association of REALTORS® is now breaking out monthly resales by equity sales (conventional resales), and distressed sales (Short sales and REO sales). I’m following this series as an example to see changes in the mix in a former bubble area.
Click on graph for larger image in new window.
UPDATE: percentages corrected.
Here is [...]

Note: The Sacramento Association of REALTORS® is now breaking out monthly resales by equity sales (conventional resales), and distressed sales (Short sales and REO sales). I’m following this series as an example to see changes in the mix in a former bubble area.

Click on graph for larger image in new window.

UPDATE: percentages corrected.

Here is the October data.

They started breaking out REO sales last year, but this is only the fifth monthly report with short sales. About 63.2 percent of all resales (single family homes and condos) were distressed sales in October.

cheap online pharmacy 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” src=”http://1.bp.blogspot.com/_pMscxxELHEg/Svh9KdndruI/AAAAAAAAGwU/zvwgd82SM2M/s320/SacramentoOct2.jpg” border=”0″ alt=”Distressed Sales” /> The second graph shows the mix for the last four months. REO sales declined, but short sales and conventional sales were up. It will be interesting to see if foreclosure resales pick up later this year – or early next year – when the early trial modifications period is over.

Total sales in October were off 17.5% compared to October 2008; the fifth month in a row with declining YoY sales.

On financing, over half the sales were either all cash (24.6%) or FHA loans (28.9%), suggesting most of the activity in distressed former bubble areas like Sacramento is first-time home buyers using government-insured FHA loans (and taking advantage of the tax credit), and investors paying cash.

This is a local market still in distress.

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