Dylan Ratigan: Deployed Military Members Being Denied Housing Aid

Dylan Ratigan Show
May 13, 2011

Members of deployed military missing a deadline to apply for assistance because they are dodging bullets and improvised explosive devices. Don't you know every hypocritical Washington D.C. politician will make the most of their photo opportunities Memorial Weekend.

A message for our elected "representatives"

The only vice that cannot be forgiven is hypocrisy.

The repentance of a hypocrite is itself hypocrisy.

William Hazlitt

Minneapolis Fed. Reserve President Narayana Kocherlakota: housing market has become overly dependent on government guarantees

Federal Reserve Bank of Minneapolis

president Narayana Kocherlakota:

mortgage interest tax deduction

encourages people to take on large

amounts of debt, instead of saving.

(Mr. Kocherlakota, Barney Frank is holding...)

Star Tribune
By: Chris Serres
April 5, 2011

Federal Reserve Bank of Minneapolis president Narayana Kocherlakota criticized government intervention in the housing sector, including federal guarantees of mortgages and the home interest tax deduction, in prepared remarks given at a homeownership workshop today in Minneapolis.

Kocherlakota argued that in the wake of the financial crisis the housing market has become overly dependent on government guarantees. About 90 percent of all mortgages originated over the past two years are guaranteed by government-controlled entities such as Fannie Mae and Freddie Mac, a situation that he referred to as "not a sound long-term strategy."

"Over time, our country needs a mortgage market that returns to greater reliance on private risk-taking and private risk assessment, along with the enhanced regulatory oversight that is already in place," he said.

Kocherlakota, a first-time voting member of the policy-setting Federal Open Market Committee, also questioned the longstanding federal tax deduction of mortgage interest payments. He argued that the deduction encourages people to take on "large amounts of debt," instead of saving.

"If we truly want to encourage home ownership, we should contemplate programs that provide incentives for individuals to save and become equity holders in their homes -- and, by extension, in their communities," Kocherlakota said.

The mortgage interest deduction has become a source of controversy in recent months, as concerns about the federal debt intensify. In December, the co-chairmen of the White House's deficit-reduction commission proposed paring the mortgage-interest deduction as part of a series of proposals to rein in the federal government's swelling debt

Average U.S. Loan in Foreclosure: 537 Days Delinquent

JACKSONVILLE, Fla. - March 28, 2011 -The February Mortgage Monitor report released by Lender Processing Services (NYSE: LPS) shows that while delinquencies continue to decline, an enormous backlog of foreclosures still exists with overhang at every level. As of the end of February, foreclosure inventory levels stand at more than 30 times monthly foreclosure sales volume, indicating this backlog will continue for quite some time. Ultimately, these foreclosures will most likely reenter the market as REO properties, putting even more downward pressure on U.S. home values.

February’s data also showed a 23 percent increase in Option ARM foreclosures over the last six months, far more than any other product type. In terms of absolute numbers, Option ARM foreclosures stand at 18.8 percent, a higher level than Subprime foreclosures ever reached. In addition, deterioration continues in the Non-Agency Prime segment. Both Jumbo and Conforming Non-Agency Prime loans showed increases in foreclosures and were the only product areas with increases in delinquencies.

The data also showed that banks’ modification efforts have begun to pay off, as 22 percent of loans that were 90+ days delinquent 12 months ago are now current. Timelines continue to extend, with the average U.S. loan in foreclosure now having been delinquent for a record 537 days, and a full 30 percent of loans in foreclosure have not made a payment in over two years.

As reported in LPS' First Look release, other key results from LPS' latest Mortgage Monitor report include:

• Total U.S. loan delinquency rate: 8.8 percent
• Total U.S. foreclosure inventory rate: 4.15 percent
• Total U.S. non-current inventory: 6,856,000
• States with most non-current* loans: Florida, Nevada, Mississippi, New Jersey, Georgia
• States with fewest non-current* loans: Montana, Wyoming, Alaska, South Dakota, North Dakota

Link to additional LPS News Releases

Existing home sales (seasonally adjusted) 4.68 million with 1/3 distressed properties

33% of total sales were distressed properties. Lawrence Yun puts on his happy face and states "continuing gains in home sales are encouraging..." Maybe it's the D.C. air Mr. Yun, but 1 out of every 3 sales stemming from distressed properties and foreclosures accounting for 2/3 of the distressed sales does not strike me as encouraging.

WASHINGTON , December 22, 2010

Existing-home sales got back on an upward path in November, resuming a growth trend since bottoming in July, according to the National Association of Realtors®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million in November from 4.43 million in October, but are 27.9 percent below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit. NAR Chart

Lawrence Yun, NAR chief economist, is hopeful for 2011. “Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable,” he said.

Yun added that home buyers are responding to improved affordability conditions. “The relationship recently between mortgage interest rates, home prices and family income has been the most favorable on record for buying a home since we started measuring in 1970,” he said. “Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011.”

The national median existing-home price for all housing types was $170,600 in November, up 0.4 percent from November 2009. Distressed homes3 have been a fairly stable market share, accounting for 33 percent of sales in November; they were 34 percent in October and 33 percent in November 2009.

Foreclosures, which accounted for two-thirds of the distressed sales share, sold at a median discount of 15 percent in November, while short sales were discounted 10 percent in comparison with traditional home sales.

Total housing inventory at the end of November fell 4.0 percent to 3.71 million existing homes available for sale, which represents a 9.5-month supply at the current sales pace, down from a 10.5-month supply in October.

A parallel NAR practitioner survey shows first-time buyers purchased 32 percent of homes in November, the same as in October, but are below a 51 percent share in November 2009 from the surge to beat the initial deadline for the first-time buyer tax credit.

Investors accounted for 19 percent of transactions in November, also unchanged from October, but are up from 12 percent in November 2009; the balance of sales were to repeat buyers. All-cash sales were at 31 percent in November, up from 29 percent in October and 19 percent a year ago. “The elevated level of all-cash transactions continues to reflect tight credit market conditions,” Yun said.

Single-family home sales rose 6.7 percent to a seasonally adjusted annual rate of 4.15 million in November from 3.89 million in October, but are 27.3 percent below a surge to a 5.71 million cyclical peak in November 2009. The median existing single-family home price was $171,300 in November, which is 1.2 percent above a year ago. NAR Complete Report

Couple of grandpa facts from the NAR report

(the non-seasonally ajusted figures)

• 353,000 Nov. existing home sales (4.236 mil annualized), 444,000 less than their seasonally adjusted headline number
• Since Nov. 2009, there has only been 2 months with lesser non-seasonally adjusted home sales than Nov. 2010
• The non-seasonally adjusted figure for Nov. 2010 is actually 1.7% below the non-seasonally adjusted figure for Oct. 2010 versus the +5.6% headline number
• Single family Nov. 2010 non-seasonally adjusted came it at 316,000 or 3.792 million annualized versus the 4.150 million seasonally adjusted figure (differential of 358,000 units) NAR Single Family Only Sales
• Single family non-seasonally adjusted figure for Nov. 2010 was dead flat with Oct. 2010 versus the +6.7% seasonally adjusted headline number

Now we ae going to define home ownership based on home equity?

So what happens if you take those underwater borrowers out of the homeownership equation. It pushes the homeownership rate down to 56.6 percent, down 10 percentage points from the currently reported rate, according to CoreLogic. That rate was over 69 percent during the housing boom. Grandpa: What Planet did I just land on!!!

Diana Olick
CNBC
One of only reasons to watch CNBC
12/13/10

Just because you owe more on your mortgage than your home is worth doesn't necessarily mean that you are no longer able to afford your mortgage. For many Americans who bought their homes during the housing boom, little has changed for them financially other than what the appraiser has determined on paper.

What has changed are attitudes, and attitudes can be dangerous.

22.5 percent of U.S. borrowers were in a negative equity position on their homes at the end of Q3, according to a new report from CoreLogic.

That is actually an improvement from Q2, but only because many severely underwater homes went into foreclosure in the quarter, thereby taking them out of the pool.

The authors of the study warn that deteriorating home prices now will likely push the percentage back up in Q4.

The definition of home ownership, at least according to the Census, includes homeowners in a negative equity position, "however, homeowners in negative equity are not likely to behave similarly to homeowners with equity, because their financial interest (the equity) has disappeared and has only a small prospect of returning soon, given price trends," note CoreLogic authors.

Underwater borrowers are more likely to behave like renters, which means they're not going to invest much in home improvement. They are also more likely to walk away from their commitment, although not in the waves some had predicted.

So what happens if you take those underwater borrowers out of the homeownership equation. It pushes the homeownership rate down to 56.6 percent, down 10 percentage points from the currently reported rate, according to CoreLogic. That rate was over 69 percent during the housing boom.

The Obama Administration has been pushing lenders, Fannie Mae and Freddie Mac to write down principal on underwater mortgages, in order to put borrowers back into a positive equity position. Interestingly, the latest push is for borrowers who are current on their mortgages. They lenders argue, why should they give money voluntarily if the loans are still performing? They don't even do that very often when the loans are in trouble!

The answer is: attitudes.

The Administration is clearly concerned that more borrowers will either walk away from their commitments or stop spending money on their homes, which are usually their single largest investment.

Think about how much money you have put into your home over the years.

That lack of consumer spending has already hit the economy hard, and the more borrowers who become effectively renters, the less spending we'll see.

But is the Administration's answer, to give borrowers back a few percentage points of equity on paper, really going to fix that and change owner attitudes? No, especially since so many Americans got used to taking money OUT of their homes to pay for all those lovely upgrades.

The change has to come in real home price appreciation.

That is the only thing that is going to give homeowners that much-needed faith in the market, that confidence to stay where they are and spend, not some measly equity handout that won't amount to much and may just prompt the borrowers to put their house on the already glutted market.

And how do you get home price appreciation?

Get rid of that glut of inventory — especially the foreclosures. I'm back on my investor high horse again. Stop offering handouts to underwater borrowers who don't need them to pay their mortgages and start focusing that same money on eating up empty houses and restoring real home price appreciation through a competitive marketplace. If you help well-vetted, responsible investors buy up the properties and rent them to all the families that lost their homes, you will do a lot more good.

Slight decline in negative home equity (CoreLogic)

December 13, 2010, Santa Ana, Calif. ‒
CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, today released negative equity data indicating a third consecutive quarterly decline in negative equity for residential properties. CoreLogic reports that 10.8 million, or 22.5 percent, of all residential properties with mortgages were in negative equity at the end of the third quarter of 2010, down from 11.0 million and 23 percent in the second quarter. This is due primarily to foreclosures of severely negative equity properties rather than an increase in home values.

During this year the number of borrowers in negative equity has declined by over 500,000 borrowers. An additional 2.4 million borrowers were near negative equity with less than five percent equity in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both. CoreLogic Complete Report



The aggregate level of negative equity

declined to $744 billion, which is a

three-percent decline from Q2 2010

and a seven-percent decline from

the end of 2009 when it stood at $800 billion.

Market Still Facing Major Risks...a view from the real world

Yes, the Bulls (all five of them) continue to push the market higher on abysmal volume. The market remains in a state of denial, (what could possibly go wrong) and complacency based on the VIX is nearing a comatose reading. Comstock Partners provides a non-CNBC recap of real life, fundamental risks facing the market. Last grandpa checked, HOPE is not an investment strategy and unless one is hoping for a new bicycle, this is yet another 4 letter word that should be banned from the financial news network airways.

Thank you Comstock Partners for a dose of reality as reality has become as rare a commodity as common sense.

Market Still Facing Major Risks
by Comstock Partners

The deal between President Obama and the Republican congressional leadership is not likely to have a significant positive effect on an economy facing severe headwinds pulling in a negative direction. The key fact to remember is that we are in an economic recovery that will remain restrained by the after-effects of a major credit crisis and the need to deleverage the enormous household debt built up during the boom.

As was true for the original stimulus package, any additional spending occurring as a result of the compromise will be temporary with no sustainable follow-through once the stimulus wears off. And while the possible blip in growth is temporary, the addition to the deficit created by the package will remain with us for a long time. In the following paragraphs we cite the severe headwinds creating a drag on economic growth.

1) First and foremost is the explosion of household debt over the last 45 years, particularly the last ten. As a percentage of GDP, household debt went from 45% to 68% in the 35 years between 1965 and 2000, and then soared to 98% over the next nine years to its peak in 2009. Since the deleveraging process started the percentage dropped to 91% by September 30th. In our view the deleveraging has a long way to go. Just to get back to the level reached in 2000 (which itself was historically high), household debt would have to decline by $3.4 trillion. Since this amounts to a full 32% of personal consumer expenditures, it’s easy to see why the debt has been and will continue to be such a drag on the consumer.

2) No sustainable economic expansion has ever taken place without a strong boost from the housing sector, and this is not likely to happen anytime soon. Sales of both new and existing homes are slogging along at the bottom and prices are dropping. Inventories remain exceedingly high while the backlog of coming foreclosures is huge. If anything the new compromise package has caused mortgage interest rates to rise, putting even more of a burden on the beleaguered industry. Furthermore the mess regarding the unconstitutional (due process anyone?) legal shortcuts taken in efforts to foreclose on delinquent mortgages will be difficult to untangle and could end up getting banks in a lot of legal and financial trouble.

3) States and local governments remain in bad shape with large budget deficits leading to spending cutbacks, layoff and higher taxes. This is another potential crisis in the making in the period ahead.

4) Monetary policy is essentially impotent in the current crisis. The Fed has used all of their conventional weapons and is left with untried and untested weapons with potential unintended and unknown consequences.

5) Banks went into the 2008 credit crisis loaded with toxic assets, and, to a large extent, they still have them. While TARP was originally proposed by Treasury Secretary Paulson as a buyout of toxic assets, the program was almost immediately changed to generalized bailout. The accounting rule-makers were then pressured to do away with mark-to-market accounting, thereby papering over the problem and leaving most of the toxic assets the banks’ books, where they remain today. This is one of the reasons banks are hoarding cash and are so reluctant to lend. They know what they have.

6) Sovereign debt is another problem that has not been dealt with, and therefore doesn’t go away. While the Ireland and Portugal situations may temporarily be papered over, a number of weaker EU nations are essentially insolvent and will eventually need to have their debts restructured with severe damage to the European banks that hold their debt. This will continue to be a drag on economic growth in the EU.

7) With inflation threatening to get out of control Chinese authorities are trying to tighten monetary policy gradually to engender a soft landing. With the leading economies of the U.S. the Eurozone and Japan in such weak condition, China has been a major catalyst for global growth. Any substantial slowdown in China would therefore have a serious impact on global growth.

The stock market has recently gotten everything it wanted—-QE2, no expiration of tax cuts, additional stimulus and strong earnings reports. Still the S and P 500 is about where it was in April and has made no progress in over a month. Although the market can still break to the upside, the move off the March 2009 bottom has discounted a lot of good news while ignoring all the real pitfalls that may be ahead. In addition the market is substantially overvalued at 18 times smoothed trendline S and P 500 earnings. At this point we believe the downside risks far outweigh the potential upside rewards

Total Home Value Lost Since Market Peak hits $9 Trillion

SEATTLE, Dec. 9, 2010 /PRNewswire/ -- U.S. homes are expected to lose more than $1.7 trillion in value during 2010, which is 63 percent more than the $1 trillion lost in 2009, according to analysis of recent Zillow Real Estate Market Reports.

That brings the total value lost since the market peaked in June 2006 to $9 trillion. By comparison, from 2001 to the end of September 2010, the war in Iraq has cost $750.8 billion, according to a September report by the Congressional Research Service.

The bulk of the total value lost during 2010 was in the second half of the year. From January to June, the housing market lost $680 billion. From June to December, Zillow projects residential home value losses will top $1 trillion.

Less than one-fourth (31) of the 129 markets tracked by Zillow showed gains in total home values during 2010. Among those were the Boston metropolitan statistical area (MSA), which gained $10.8 billion in value, and the San Diego MSA, which gained $10.2 billion.

"Despite a strong start to 2010, by the end of the year homes lost more of their value in 2010 than they did in 2009," said Zillow Chief Economist Dr. Stan Humphries. "Government interventions like the homebuyer tax credit helped buoy the market during the second half of 2009 and the first half of 2010, but we saw a renewed downturn in the last half of this year. It's a testament to the nearly irresistible force of the overall market correction that government incentives can only temporarily hold back the tide, and that the market will ultimately find its natural equilibrium of supply and demand.

"Unfortunately, with foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief."

Declines in home values have led to increases in the percentage of homeowners in negative equity. At the end of 2009, 21.8 percent of single-family homeowners with mortgages were in negative equity, meaning they owed more on their mortgage than their home was worth. In the third quarter of 2010 – the last time Zillow calculated negative equity – 23.2 percent were underwater. Complete report

Consumer Confidence up however Home Prices are Falling, So Let's Go Shopping (Michael Pento)

CNBC and the market was giddy with a better than expected Consumer Confidence number that clocked in at 54.1. WOW! That must be uber good. Well...

Consumer Confidence readings during 82-83 recession were 58 to 88. During the 90-91 recession, consumer confidence readings came in between 58 to 100 and during the 2001 recession, readings were two times today's uber good number (85 to 118).

Tuesday, November 30, 2010
By: Michael Pento

Yes, we are all now fully aware that the consumer is back. Confidence is up and spending has increased. The Conference Board, a private research group, said its index of consumer confidence increased to 54.1 in November, from a revised 49.9 in October, which was first reported as 50.2.

But data released today from The S and P/ Case-Shiller Home Price Indices should dampen shoppers’ enthusiasm. The U.S. National Home Price Index fell 2% in the third quarter of 2010. On a national basis, home prices are 1.5% lower than their year ago levels and 15 out of the 20 cities measured were down over the last 12 months. On a monthly basis, 18 cities posted declines from August, compared to 15 month-on-month drops in August and just eight in the July report. Home prices are headed lower because of tight credit, high unemployment rates and a huge backlog of foreclosure properties.

On a separate note, the recent move higher in the dollar index reveals little about the true strength of our currency. The DXY is up .4% today mostly on Euro weakness. However, the price of gold surging $20 an ounce clearly illustrates the true direction of the dollar. Saying the dollar is gaining purchasing power today is akin to believing someone falling off a cliff at 90mph is actually flying, just because his buddy is dropping at 95mph and will therefore will hit the ground first.

Free money and a massive increase in government debt have managed to temporarily levitate the serotonin levels in consumers’ brains. But interest rates will soon soar either due to the free market or courtesy of the Fed. Then the party ends. If you don’t believe me ask the Greeks and the Irish how they became insolvent in a matter of a few days. It wasn’t because the amount of debt suddenly surged but because the interest payment on that debt suddenly skyrocketed.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

S&P/Case-Shiller national home price index shows a slip in home prices (Diana Olick)

The S and P/Case-Shiller national home price index shows a slip in home prices. CNBC's Diana Olick has the details.

Fact: Home prices lag home sales. It happens on the way up and on the way down. Today's S&P Case Shiller home price report just confirmed what we've seen from umpteen other reports in the past few months, that home prices are taking a double dip. We knew it would happen.

"I would guess that by the end of today I would hear lots of double-dip forecasts and a few I told you so's. Things are rotten," opines S&P's David Blitzer. Full article on Diana Olick's Blog

23 months of housing inventory (actually on the market and shadow inventory)

Inman News
11/22/10

The "shadow inventory" of homes likely to be repossessed by lenders or already in their real estate owned (REO) inventory but not yet on the market reached 2.1 million units in August, up from 1.9 million a year ago, according to the latest analysis by data aggregator CoreLogic.

Because home sales also slowed, the shadow inventory represented eight months of housing supply, up from five months a year ago, CoreLogic said.

Weak demand for housing is "significantly increasing the risk of further price declines in the housing market," said CoreLogic Chief Economist Mark Fleming -- a problem that's exacerbated "by a significant and growing shadow inventory that is likely to persist for some time" because of the length of time it takes loan servicers to liquidate properties.

Combine the 2.1 million "shadow inventory" with the 4.2 million homes that were actually on the market in August, and the total months' supply of unsold homes was 23 months -- about double the 11.6 months the National Association of Realtors estimated in September.

(CoreLogic estimates that the "visible inventory" of 4.2 million homes, which NAR's estimate was based on, represented 15 months of supply.)

A six- to seven-month supply of housing is considered a more normal balance of supply and demand.

CoreLogic estimates shadow inventory -- sometimes called pending supply -- by calculating the number of properties that are seriously delinquent (90 days or more) or in foreclosure that will, in all probability, end up REO.

Although the "roll rates" vary over time, a high percentage of 90-day delinquencies and foreclosures end up in lenders' REO inventories. CoreLogic also counts properties that are already in lenders' REO inventories, but not yet listed on a multiple listing service (MLS), as "shadow inventory."

The size of shadow inventory and its impact on housing markets is subject to much debate, in part because it's not known how quickly lenders will get those homes to market.

But Fleming said there's no escaping the conclusion that shadow inventory will weigh down price appreciation in some markets, and put more downward pressure on falling prices in others.

A large proportion of shadow inventory has not even been foreclosed on yet, Fleming said, and those houses won't enter the market all at once.

"It's not the hurricane hitting the shore, it's just a long and persistent rain, and that dampens the spirit all the way through," Fleming said.

FHA Auditors Predict Further Home Price Declines

Diana Olick
CNBC
11/16/10

The bad loans of the housing boom are still bad, but the new loans from today's tighter mortgage market are so much better that they're offsetting the trouble. That's the message from the Federal Housing Administration in its annual report to congress.  

The FHA, currently the only low down payment option around, provided access to credit for close to 40 percent of purchase mortgages in the past year.

"FHA’s study finds that since last year, the capital reserve ratio held steady, insurance claims declined significantly, and the economic value of FHA’s single-family insurance program grew by more than $1 billion, from $3.6 billion in 2009 to $4.7 billion in 2010," leads the report.

The FHA has instituted several reforms recently, raising rates, standards and prices for borrowers as well as policing FHA lenders far more stringently. Those changes will likely contribute to better performance in the future, although the FHA's report claims the 21 percent drop in insurance claims in FY 2010 came well before those changes.

The FHA, which insured $319 billion in single-family mortgages in FY 2010, second only to FY 2009's volume, is still bleeding cash from its pre-2009 book of business. "Seller-financed down payment assistance loans" which are now prohibited, "produced $6.6 billion in claims to-date and may ultimately cost FHA $13.6 billion." They are the primary reason the FHA's capital reserve ratio, which measures reserves in excess of those needed to cover projected losses over the next 30 years, sits at .50, well below its congressionally mandated threshold of two percent of all insurance-in-force. That's the bad news; the good news is that the ratio didn't mover much from .53 last year, and reserves rose, as noted above. The ratio fell because the FHA is insuring more loans now.

But here's what I find most interesting in the report about that change from .53 to .50:

The difference is primarily attributed to the use of much more conservative assumptions regarding future house price growth than were used last year, which also resulted in an $8.5 billion decrease in economic value. However, that decrease was offset by a variety of factors, including an $8.7 billion increase in value due to better credit quality, loan performance, and the premium increase implemented earlier this year.

So the auditing firm (Integrated Financial Engineering of Rockville, MD) decided that home prices would, in fact, deteriorate.

It's not like we haven't been saying that all along, but it's interesting to hear it from such an important entity projecting the future financial health of a major government agency.

Fed Reserve Governor Raskin: outlook for foreclosures remains "grim" for the next couple of years

"I believe that serious and sustained

reform is needed to address the larger

problems in mortgage servicing"

By Ros Krasny
11/12/10
(Reuters) - With no quick fix in sight for the crisis in mortgage servicing, the outlook for foreclosures remains "grim" for the next couple of years, newly appointed Federal Reserve Governor Sarah Bloom Raskin said.

"I believe that serious and sustained reform is needed to address the larger problems in mortgage servicing," Raskin said on Friday in remarks prepared for a National Consumer Law Center conference, her first public comments since confirmed to her post by the Senate in late September.

"Too many accounts of shoddy operating procedures -- lost paperwork, slow response times, and sloppy record keeping -- cast a dark shadow on this part of the industry that links mortgage borrowers and lenders," she added.

In strongly worded remarks, the former bank regulator from Maryland said the problem of "robo-signers" in mortgage servicing "shone a harsh spotlight on other long-standing procedural flaws" in the mortgage servicing industry.

"Many may view these procedural flaws as trivial, technical or inconsequential, but I consider them to be part of a deeper, systemic problem and am gravely concerned," she said.

U.S. mortgage foreclosures could be about 2.25 million in 2010 and the same number in 2011, followed by about 2 million in 2012, Raskin said.

Servicers created lean systems that were fine to handle routine aspects of the business but could not cope with a "serious down cycle". Deferred maintenance and investment by the industry on a significant scale is now coming home to roost, she said.

The Federal Reserve and other agencies are now examining foreclosures procedures at the latest banks.

When that review is finished, "we will have more information about the extent and significance of these very troubling practices, as well as an understanding of what must be done to prevent them in the future," she said.

In the meantime, certain firms have been asked to complete self assessments of policies and procedures they use for determining whether to foreclose on a residential mortgage loan.

Raskin said actions by servicers are key to the effectiveness of efforts to stabilize neighborhoods. That is especially true in poor communities at "a time of persistent decline in home values and in fragile markets already weakened by a glut of vacant and abandoned properties," she said.

332,172 Foreclosure Filings in October 2010 (same as October 2009)

IRVINE, Calif. – Nov. 11, 2010 — RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for October 2010, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 332,172 properties in October, a 4 percent decrease from the previous month and almost exactly the same total reported in October 2009. One in every 389 U.S. housing units received a foreclosure filing during the month.

“October marks the 20th consecutive month where over 300,000 U.S. homeowners received a foreclosure notice,” said James J. Saccacio, chief executive officer at RealtyTrac. “The numbers probably would have been higher except for the fallout from the recent 'robo-signing' controversy — which is the most likely reason for the 9 percent monthly drop in REOs we saw from September to October and which may result in further decreases in November.

Foreclosure Activity by Type

A total of 100,575 U.S. properties received default notices (NOD, LIS) in October, a 2 percent decrease from the previous month and a 19 percent decrease from October 2009 — the ninth straight month where default notices have decreased on a year-over-year basis.

Default notices were still up on a monthly basis in several states: Florida LIS were up 2 percent from the previous month; Ohio LIS were up 10 percent; and Illinois LIS were up 24 percent. Meanwhile, NODs decreased on a monthly basis in California (down 9 percent from the previous month), Nevada (down 17 percent), and Michigan (down 18 percent).

Foreclosure auctions (NTS, NFS) were scheduled for the first time on a total of 138,361 U.S. properties in October, a 3 percent decrease from the previous month but still a 6 percent increase from October 2009. Scheduled auctions decreased month-over-month in 26 states and the District of Columbia, while 16 states posted year-over-year decreases in scheduled auctions.

Lenders foreclosed on 93,236 U.S. properties in October, down 9 percent from the record high in the previous month but still up 21 percent from October 2009. Bank repossessions (REOs) decreased month-over month in 33 states and the District of Columbia, while 14 states posted year-over-year decreases in REOs. Including October, lenders have foreclosed on an average of more than 91,000 properties each month this year. Complete Report

Zillow: Pecentage of Homeowners Underwater Reaches New Peak

By Christine Ricciardi
Housing Wire
11/10/10
Predictions for the fourth quarter housing market continue to dim as Zillow's third quarter market report released Wednesday suggests further house price depreciation through the end of the year.

September home prices depreciated 0.4% from August and 4.3% from one year a go to a national average of $179,900, according to the report. This is the 17th consecutive quarter of home price declines.

Zillow reported that nearly two-thirds (64.2%) of homes in the U.S. lost value between the third quarter of 2009 and the third quarter of 2010, and 27.3% of home sold in September were sold for a loss.

On Tuesday Foresight Analytics said residential, commercial, and construction loan delinquencies are excepted to rise.

Delaware witnessed the most home price depreciation since 2009, down 18.5% to $174,700 in September 2010. California's home prices appreciated since 2009, up 1.9% to $337,200.

Approximately one in every 1,000 mortgaged homes in the U.S. was liquidated in September, according to Zillow, marking the highest liquidation rate the firm has recorded since it started tracking data in 1996.

The firm sees the liquidation rate remaining elevated because of an increase in negative equity rates. According to the report, the negative equity rate during the third quarter was 23.2%, up from 22.5% in the second quarter.

Foreclosure resales reached a near-peak level in September accounting for 20.1% of all sales made during the month. The peak percentage of sales attributable to foreclosure resales was in March 2009 at 20.5%.

Zillow said the firm doesn't expect home prices to hit rock bottom until the first half of 2011, but concluded that "the length and severity of the current turndown is fast approaching the length and depth of the Depression-era."

Zillow data is based on real-time mortgage quotes from lenders registered with the company. The third quarter report is available on their website and includes interactive charts and graphs broken down by state and by metropolitan statistical area.

Zillow

"The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home. This has profound implications for future demand and will be a millstone around the neck of the housing market."

Additionally, more than one-quarter (27.3 percent) of homes sold in September were sold for a loss, marking a near-peak level. Homes sold for a loss peaked in February 2010, with 27.7 percent. Zillow Complete Report

Freddie Mac costs Grandchildren Another $4.1 Billion

CEO Charles E. Halderman, Jr:

"We have helped to keep the housing finance and broader capital markets functioning smoothly, and since the beginning of 2010 have made it possible for 1.2 million American families to take advantage of historically low interest rates to buy or refinance a home."

(all for the low taxpayer investment of $63.2 billion and our

12th quarterly loss in the prior 13 quarters...sorry about that kids)

11/3/10
McLean, VA – Freddie Mac (OTC:FMCC) today reported a net loss of $2.5 billion for the quarter ended September 30, 2010, compared to a net loss of $4.7 billion for the quarter ended June 30, 2010. After the dividend payment of $1.6 billion on its senior preferred stock to the U.S. Department of the Treasury (Treasury), Freddie Mac reported a net loss attributable to common stockholders of $4.1 billion, or $1.25 per diluted common share, for the third quarter of 2010, compared to a net loss attributable to common stockholders of $6.0 billion, or $1.85 per diluted common share, for the second quarter of 2010.

The company had a net worth deficit of $58 million at September 30, 2010, compared to a net worth deficit of $1.7 billion at June 30, 2010. The deficit in net worth for the third quarter resulted from several contributing factors, including a dividend payment of $1.6 billion to Treasury, which exceeded total comprehensive income of $1.4 billion. To eliminate the third quarter net worth deficit, the Federal Housing Finance Agency (FHFA), as Conservator, will submit a request on the company's behalf to Treasury for a draw of $100 million under the Senior Preferred Stock Purchase Agreement (Purchase Agreement).

"As we near the end of 2010, the housing market remains fragile, and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties," Haldeman said. "We believe that it will be a considerable time until the housing market has a sustained recovery." Freddie "Krueger" Mac Report

Bernanke concerned about reported irregularities in foreclosure practices

“We take violations of proper procedures seriously"

Yeah...Yeah...Yeah...total confidence in you Bernanke...

Ben Bernanke (5/17/07):

“The sub prime mess is grave but largely contained.

Given the fundamental factors in place that should

support the demand for housing, we believe the effect

of the troubles in the sub prime sector on the broader

housing market will likely be limited”.

By Scott Lanman

Oct. 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the central bank and other regulators are “intensively” examining financial firms’ home-foreclosure practices and expect preliminary findings next month.

“We have been concerned about reported irregularities in foreclosure practices at a number of large financial institutions,” Bernanke said today at a housing conference in Arlington, Virginia. “We are looking intensively at the firms’ policies, procedures, and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures.”

Ally Financial’s GMAC Mortgage unit, JPMorgan Chase  and Co., and Bank of America Corp. are among loan servicers that temporarily halted foreclosures while the companies review paperwork. Court documents have showed that employees might have submitted affidavits without confirming their accuracy, a practice that state officials say could amount to fraud.

“We take violations of proper procedures seriously,” Bernanke said in the prepared text of welcoming remarks to the conference on mortgages and housing finance, hosted by the Fed and Federal Deposit Insurance Corp.

Bernanke didn’t comment on the outlook for the economy or monetary policy, eight days before the Fed meets to decide on what economists and investors expect will be a plan to boost growth by restarting large-scale securities purchases. After discussing foreclosures, he devoted much of his remarks to the Fed’s housing-market efforts, such as studies, conferences and events serving troubled borrowers.

Mortgage Distress

“More than 20 percent of borrowers owe more than their home is worth, and an additional 33 percent have equity cushions of 10 percent or less, putting them at risk should house prices decline much further,” Bernanke said. “With housing markets still weak, high levels of mortgage distress may well persist for some time to come.”

Housing markets were “weak” in September and early October, with “sluggish or declining” sales in many regions, the Fed said in its Beige Book business survey last week. There were “scattered reports of some improvement.”

“Respondents’ outlooks suggested sales and construction would remain subdued through year-end,” restrained in part by lending standards and “general economic uncertainty,” the Fed said.

Data released this month showed that builders in the U.S. began work on more homes in September than economists expected, with housing starts at a 610,000 annual rate. Still, that’s less than one-third of the record 2.3 million pace in January 2006.

 

 

Homeowners' tax benefits facing cuts?

For a commission meeting since February, they have been awful quiet!

By Kenneth R. Harney
Boston Herald
10/24/10

Could a report due Dec. 1 from a bipartisan presidential deficit-reduction commission lead to fundamental changes in the way the federal tax system treats home ownership?

For decades, the political rule in Washington has been that nobody messes with homeowners’ tax benefits - mortgage-interest deductions, capital-gains exclusions and property-tax write-offs.

That’s true even though these breaks cost the U.S. government hundreds of billions of dollars in tax revenues a year and increase the federal deficit. But now the sheer size of the country’s fiscal problems - a $1.3 trillion deficit for 2010 and a fast-mounting $13.6 trillion debt overall - could be slowly altering the equation.

Not only are some Republicans and Democrats joining in support of plans to lower the deficit through across-the-board cuts in defense spending, social programs and tax subsidies, but even leaders in the real estate industry are speaking up.

All five panelists at the opening session of the Urban Land Institute’s annual meeting this month agreed - Democrat and Republican alike - that while continuing tax-system support for housing is important, the current mix of tax incentives is costly and imbalanced. They admitted that it disproportionally favors home ownership over renting.

One panelist, former U.S. Housing and Urban Development (HUD) Secretary Henry Cisneros, privately added afterward that leaders on both sides of the political aisle increasingly believe deficits could wreck the economy within the decade.

“This is a catastrophe looming,” Cisneros said. He noted that Congressional Budget Office (CBO) estimates that public debt will hit 69 percent of gross domestic product by 2020, hobbling the country with $778 billion in annual interest payments alone.

Since leaving office, Cisneros has been in the housing development industry and is currently executive chairman of realty investment company CityView.

Though long an ardent proponent of home ownership, he now believes the real estate and housing industries must be willing to contribute their fair share to any “comprehensive long-term plan” to balance the budget.

J. Ronald Terwilliger, former CEO of giant developer Trammell Crow Residential and a contributor to some Republican campaigns, agreed that federal tax incentives for ownership should be throttled back - “a phased-in reduction” over a period of years so as not to worsen an already-strained housing market.

Steve Preston, who headed HUD toward the end of President George W. Bush’s term, suggested a “comprehensive policy” for deficit reduction, covering all economic sectors of the economy. He said that stands the best chance of gaining the broad political support needed to push serious deficit-reduction measures through a fractious Congress.

In theory at least, that’s what the National Commission on Fiscal Responsibility and Reform is supposed to deliver to President Obama six weeks from now.

The 18-member commission - co-chaired by former Republican Sen. Alan Simpson of Wyoming and former Clinton White House Chief of Staff Erskine Bowles - has been holding hearings and gathering deficit-reduction ideas since February.

Most commissioners are current members of Congress, but the group also includes representatives of private industry and labor.

Though the commission has provided no public hints of where it’s headed, analysts say it’s inevitable that the panel will propose cutbacks to tax subsidies for real estate.

Likely Targets:

• The mortgage-interest deduction, which added about $100 billion to the deficit in fiscal 2010 and more than $400 billion during the last five years
• Capital-gains exclusions for home-sale profits, which cost more than $128 billion between fiscal 2006 and 2010
• Property tax write-offs, which cost $70 billion-plus during the same period

Non CNBC News

For those with inquiring minds and a thirst that

is not quenched from CNBC kool-aid:

Trading Pennies Into $7 Billion Drives High-Frequency’s Cowboys (Bloomberg)

IMF Cuts 2011 Global Growth Prospects (WSJ)

Supreme Court Arguments Over Funeral Protests (NPR)

Sun Chips Bag to Lose Its Crunch (WSJ)

Whitney Falters in Trying to Repeat Citigroup Success (Bloomberg)

Goldman Sachs Says U.S. Economy May Be ‘Fairly Bad’ (Bloomberg)

New HUD program offers up to 24 months of mortgage assistance to unemployed (Housing Wire)

New Home Sales-2nd worst on record and down 29% year-over-year

2nd worst new home sales figure on record, 8.6 month supply of new homes coupled with a 12 month supply of existing home inventory, median price of new homes not seen since December 2003 and the U.S. Equity Market Launches nearly 2%. The Great Disconnect continues.

NEW RESIDENTIAL SALES IN AUGUST 2010

Census Bureau and Dept. of Housing and Urban Development

Sales of new single-family houses in August 2010 were at a seasonally adjusted annual rate of 288,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

This is unchanged from the revised July rate of 288,000 and is 28.9 percent below the August 2009 estimate of 405,000.

The median sales price of new houses sold in August 2010 was $204,700; the average sales price was $248,800. The seasonally adjusted estimate of new houses for sale at the end of August was 206,000. This represents a supply of 8.6 months at the current sales rate. Full Report

Alan Zibel, AP Real Estate Writer

WASHINGTON (AP) -- Sales of new homes had their second-worst month on record in August, signaling that the housing market will remain a drag on the economy.

Last month's new home sales were unchanged from a month earlier at a seasonally adjusted annual sales pace of 288,000, the Commerce Department said Friday. Sales were down by 29 percent from the same month a year earlier.

Normally the building industry powers economic recoveries. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

But housing has been at the center of this downturn and it shows no signs of recovering quickly.

The only time new home sales were slower was in May, when the sales pace was 282,000. That's the worst pace on records dating back to 1963. July's results had been the worst on record, but were adjusted upward.

High unemployment, tight credit and uncertainty about home prices have kept people from buying homes. Government tax credits boosted the market earlier in the year, but those expired in April.

The median sales price in August was $204,700. That was down 1.2 percent from a year earlier and the lowest since December 2003. AP Article